Wayne Root: ‘California Nightmare: Why California leads the nation in deficit, debt and out-migration’

By Wayne Root
RootForAmerica.com

The latest reports are out- and there’s good news and bad news for California. The good news is that California leads the nation. The bad news is that California leads the nation in deficit, debt and the amount of residents escaping to other states. The Mamas and Papas are rolling over in their graves. The California Dreamin’ of the 1960’s has morphed into the California Nightmare.

My new book “The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gambling & Tax Cuts” is about the fact that liberal fiscal policies, government expansion, government employee unions, and government over-spending have all combined to bankrupt America. Examining the economic crisis occurring at this moment in America’s largest state proves the point of my new book beyond a shadow of a doubt. “The People’s Republic of California” experiment is Exhibit A that liberal “tax and spend” fiscal policy is a terrible failure. It is an experiment gone bad. VERY bad.

California is the perfect test tube baby- the state is arguably the most liberal, big spending, big government state in the entire United States of America. After decades of spending like there was no limit to taxpayers’ money, California is mired in a deep economic crisis- poised to turn into economic Armageddon. The reality is that the state of California is bankrupt. Actually the state is far beyond bankrupt- what do you call “so bankrupt, there is no amount of money available anywhere in the world to pay off our debts”? California is so bankrupt that bankruptcy attorneys have no words to describe the depths of this disaster. Let’s just call it “Bankruptcy squared.”

This is a lesson for the rest of America about what happens when you spend too much and tax too much. How much has California spent? The state has an expected budget deficit of at least $41.8 billion over the next two years. That’s a bigger deficit than any state EVER. That’s a bigger deficit than most countries. Yet since Governor Arnold Schwarzenegger’s election in 2003, spending has increased by a staggering 40%. The actual dollar increase was $41 billion, to a total of $144.8 billion annually under the Governator. That’s called “whistling past the graveyard.”

Here are the facts, plain and simple:

*California leads the country in spending on government employees.

*California spends twice as much as the national average on education (with dismal results).

*California spends almost $200 million per year on free college educations for illegal immigrants (no that’s not a typo).

*California has the most draconian anti-business rules and regulations in the nation. That forces businesses to spend too much. The result is that California is the most costly place in America to do business (according to the Milken Institute’s business cost index).

*California is heaven for trial lawyers and hell for small businesses. That could be why so many major employers have left the state (according to Investor’s Business Daily).

*California has the second highest income tax rates in all of America. And it is among the nation’s leaders in virtually every tax category possible- income taxes, business taxes, sales taxes, property taxes, taxes on real estate transactions, taxes on stock transactions, capital gains taxes, workers compensation taxes, the list is endless.

The results:
*Over the next 18 months, California is facing (according to the Governor) a budget deficit of over $40 billion dollars- and that may prove to be conservative.

*California is reduced to begging the federal government for a bailout. There is no other solution on the table. But one year after a federal bailout, the state would undoubtedly be $20 billion (or more) in debt again.

*California has been given the lowest bond ratings of any state in America (soon no one will dare to loan a penny to California). That little problem costs California’s taxpayers millions of wasted dollars per year in increased interest costs.

*In the 1970’s California led the nation in job growth. Since 2000, California’s job growth is 20% lower than the nation. But it’s not just any jobs that California is losing. According to the California Manufacturers and Technology Association, the state has lost 440,000 high-wage jobs.

*California’s unemployment rate is now the 3rd highest in the nation.

*In the 1970’s California was among the nation’s leaders in population growth. Last year, over 144,000 more people left California than moved in. That led the nation. This was the 4th straight year of out-migration. Why is that important? As more and more high-income and high-net worth individuals move out, homes will drop in value, small businesses will fail (as they lose customers), and taxes will rise on the remaining citizens (to replace the taxes no longer paid by those who have escaped).

Do you get the picture? The proof is in the pudding- big government spending leads to economic disaster. When your state (or country) is run by government employee unions; teachers unions; trial lawyer unions (The Bar Association); auto unions (who demand billion dollar bailouts from politicians they supported); lobbyists; and special interests; the result is financial Armageddon. California is Exhibit A.

Governor Arnold Schwarzenegger should stand by a Washington D.C. freeway exit with a sign that says, “Broke. Need $40 BB handout. Will NOT work for food. We will spend it as soon as you give it to us- plus 20%. See you tomorrow.”

There is no way out for California, short of bankruptcy. The problem of course is California Dreamin. What I mean by that is that Californians live in a liberal, bleeding-heart, utopian dream world. It sounds like a nice thing to pay government employees huge salaries and pensions, as well as lifetime health benefits (as much as 60% higher than similar jobs in the private sector). It sounds nice to mandate a “living minimum wage.” It sounds nice to enforce tough rules and regulations on business. It sounds nice to offer generous welfare benefits to the poor. It sounds nice to spend lots of money on the homeless. It sounds nice to let anyone sue his or her employer for virtually anything. It sounds nice to make it virtually impossible for business owners to fire an employee. It sounds nice to mandate fines for whatever government thinks is beneficial for society (recycling, carbon taxes, greenhouse gases). It sounds nice to spend more money on education “to benefit the children.” It sounds nice to offer free breakfast and lunch (as well as courses taught in Spanish) to poor students at public schools- even if they’re here illegally. It sounds nice to pay for the college education of illegal immigrants. It sounds nice to defend animal rights. It sounds nice to ban offshore oil drilling. All of that sounds like “the right thing to do.” But in the real world, with real consequences, it is a dramatic failure.

The lesson here is that “nice” may sound nice in theory. It might work out well in some kind of utopian dream state. But in the real world “nice” doesn’t pay the bills. “Nice” doesn’t pay a budget in the real world. All the liberal do-gooding in the world only leads to one thing: the bankruptcy of your state and a massive exodus of taxpayers. Nice has turned the California Dream into a Nightmare.

Is this a problem (as liberal “tax and spend” politicians claim) of too little taxation in California? Not with the second highest income tax rates in the country. California even imposes an additional “millionaires” tax surcharge on the highest incomes. The result is that the wealthy pay huge taxes in California. The top 1% of the California population pays 50% of the income taxes. The top 14% of taxpayers (those earning $100,000 or more) paid 83% of the income taxes in California (the latest 2005 figures). Could there be a connection between these numbers and the mass exodus of productive people (like me) out of the state? I escaped to Nevada a decade ago for these very same reasons. The California Nightmare of big government, big taxes and big spending drove me away. My loss has cost California dearly- in the way of millions of dollars of lost tax revenues to the state. But in the real world that’s what happens when you choose to treat the people who create the jobs and pay the taxes badly- they choose to leave. The result: California gets none of my money.

The California economic model proves once and for all that taxes are not too low. The out-of- control deficit in California has nothing to do with taxes. California has a spending addiction. It just doesn’t matter what the tax rates are. Whatever tax revenues flow into government coiffeurs, the spendthrift politicians and bureaucrats in California find a way to spend it all- and then some. The actual total is irrelevant. Give them $1.00, and California politicians will spend $1.50. But raise taxes and give them $2.00 (thereby bankrupting small businesses and forcing them to flee your state) and they’ll spend $3.00. There’s always some “worthy” new government program to spend it all on. When you give billions of dollars of tax revenues to a government bureaucrat looking to keep a job for life, or a career politician looking to keep his or her job for life, they will find a way to spend it all- plus 20%.

How do we stop the insanity? Let’s start with state and federal employees. No sane state can justify paying government employees compensation packages 40% to 60% higher than the private sector. Have you ever been to the DMV? Is government run efficiently for all that money? Is it run effectively for all those big salaries given to public service employees? In many cases, government employs people who couldn’t get a job in the private sector. Do they deserve compensation 60% higher than you or me? On what grounds? Do they deserve to retire at age 55, while you and I work till the day we die, to pay all the taxes necessary for their huge pensions and unlimited health benefits?

Education is another place to start. “Spending more for the children” is one heck of a sound bite, yet what it sounds like and what it means are completely different things. A raise in “education spending” has little or NOTHING to do with spending more money on our children, or improving their economic opportunities in the future. It merely means spending more money on the education bureaucracy. It means hiring thousands of new bureaucrats (administrators) who will never pick up a book, grade an exam, or teach a course. Raising teacher salaries to far above the national average doesn’t help the kids (just look at California for the proof). It does however increase union dues for the teachers union. It does fund more bureaucrats. It does bloat the population of the teacher’s union- thereby giving it more clout and more reliable votes (in order to vote themselves more raises and pension increases).

Giving teachers tenure, so that under-performing teachers can never be fired- doesn’t help the kids either. Giving teachers bigger pensions and allowing them to retire at age 55 to enjoy a pension for LIFE doesn’t help the children one iota. But if that teacher lives to age 85, collecting a big pension for 30 years, it is guaranteed to overwhelm California’s taxpayers and bankrupt the state budget. In many cases, government employees are retiring young enough to be paid a pension for more years than they worked. Perhaps now you understand why California is mired in deficit and debt.

It all sounds “nice” and seems like “the right thing to do.” In reality it’s a one-way street leading to deficit, debt, and eventually bankruptcy. There just aren’t enough taxpayers, nor is there enough money in any state or country, to allow people to retire at age 55 and collect pensions for 25 to 30 years (or more). The numbers just don’t add up- unless you expect the rest of us to pay 70% or 80% tax rates until the day we die to pay for this “privileged class” of federal and state employees. And even that might not be enough.

Allowing trial lawyers to run wild sounds great for California consumers, patients, and of course the “victims” of abuse by big business- until you realize a few facts of life. First, if you raise taxes on business, the result will be a mass exodus by big business, small business and professionals (like doctors). They will flee your state by the tens of thousands- thereby reducing the tax base and requiring more tax increases for those who are left. Second, most jobs and tax revenues are created by thousands of small business owners- not by big business. Small business is hurt far more by high taxes and workers compensation rates. Third, business (even big business) isn’t all bad- the reality is that business pays the bills for all these bloated government programs and government employee pensions. Chase business away and there’s no one to pay the bills. Government (and all the people living off government) desperately needs business to be successful and satisfied, or government ceases to exist.

Fighting on behalf of the rights of “defenseless animals” sounds like the right thing to do- until new laws requiring more humane treatment of chickens (just approved by the voters of California in the 2008 election) force the entire egg industry to leave your state. That reduces tax revenues by millions of dollars- once again increasing the deficit and debt of California.

Radical environmentalism sounds nice too. Saving the beaches by banning offshore drilling; making it virtually impossible for new oil refineries to open within your state borders; and mandating draconian new greenhouse gas rules that will add billions of dollars to bills paid by business and consumers; all sounds great, until it you get your latest utility bill…until you see the bill as you fill up at the pump…until you realize every product you buy at the store now costs more…until you realize that these government mandates result in more energy dependence on foreign nations that support terrorism. The result is that Californians are treated to the highest energy costs in all of America- 35% higher than the national average.

This reliance on big government, big unions, big taxes and special interests is a toxic brew that has poisoned the future of California, its citizens, its taxpayers, and future generations. The California Dream has turned into a toxic nightmare.

Now it’s coming to a city, county or state nearest you. Instead of running from Armageddon, we’re embracing it. We’re electing more big government proponents (Obama and his friends); creating more bureaucracy (more agencies with hundreds of thousands of employees like Homeland Security); more draconian government rules and regulations (in the name of global warming); more government involvement in our everyday lives (universal healthcare); more foreign aid, foreign entanglements and wars across the globe; more powerful unions (our bailouts of the “Big 3” automakers will prop up bloated auto union contracts); more corporate welfare (by handing taxpayer money to wealthy companies through trillion dollar bailouts); more government “economic stimulus” packages; and certainly higher energy costs for consumers.

In reality the best way to stimulate the economy is not for government to spend more, while the citizens must cut more from their budgets. It is not for government to increase budgets and hire more employees, while the private sector cuts budgets and lays off employees. It is not for government to choose winners and losers- by giving away the taxpayer’s money through bailouts, corporate welfare, or stimulus giveaways. It is not for the government to impose new mandates and higher taxes in the name of global warming that force businesses out of business.

The best way to stimulate the economy is simple: dramatically cut the taxes of those who earn the money and create the jobs. There’s no middleman (government) needed. Let people keep more of the money they already earn. Now that’s the most powerful economic stimulus plan in the world. Give taxpayers and job creators like me a vacation for the next year from income taxes and watch the economy rebound. Watch real estate prices rise again. Watch the stock market soar. Watch credit and capital markets start to lend again. Watch jobs increase. Give taxpayers and job creators dramatically and permanently reduced taxes, so we can keep more of our own money, and get ready for the greatest economic expansion in history.

President Ronald Reagan already proved it works. But he made the mistake of allowing government spending to increase wildly out-of-control, at the same time as he dramatically cut tax rates. That was a big mistake. Now combine the Reagan tax cut model with a dramatic cut in the size, scope and spending of government, and watch the economy go and grow. But that would be far too simple. Too much common sense confuses politicians. Either that, or my plan ruins their plans to get re-elected by spending more and giving away taxpayer’s money to special interest groups and entitlement addicts.

We’re headed in the wrong direction. Instead of running away from the train wreck of California’s economic model, we are embracing it. With Obama as President, now all of America can turn into one big California with crushing debt; dramatic job losses; out-migration; failing schools; failing businesses; higher energy costs; higher business costs; bigger legal bills; and a drastically poorer quality of life. California Dreamin’ has turned into our national obsession…and our national nightmare.

Wayne Allyn Root was the 2008 Libertarian Vice Presidential candidate. His new book, “The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gambling & Tax Cuts” will be released in May 2009 by publisher John Wiley & Sons. For more of Wayne’s political views, commentaries and to watch his many media appearances on FOX News Channel, please visit his web site at: www.ROOTforAmerica.com

Posted to IPR by Paulie

22 thoughts on “Wayne Root: ‘California Nightmare: Why California leads the nation in deficit, debt and out-migration’

  1. Paul Shapiro

    I appreciate many of your concerns, although I believe your criticism of California’s overwhelming passage of Prop 2 (the Prevention of Farm Animal Cruelty Act) in last November’s election is misplaced.

    Cramming animals into tiny cages where they can hardly move an inch their whole lives is cruel, and Californians were right to phase out that form of animal abuse.

    While the opponents of Prop 2 tried to scare voters with the claim that the egg industry would simply move to Mexico, there was never much merit to the assertion. In fact, even Dan Sumner, the author of UC-Davis’s anti-Prop 2 economic report conceded in a July 24, 2008 article in the Sonoma Index-Tribune: “I personally think that’s unlikely…Mexico doesn’t produce much feed corn and that’s why Mexico isn’t a logical place for production.”

    Even Simon Shane, the editor of Egg Industry magazine, questions this campaign claim. In the December 2008 issue, Shane editorialized about the “no on 2” campaign’s message regarding Mexico:

    “We should recognize that the strategy based on ‘food safety and import substitution from Mexico’ was invalid and unrealistic from the outset. Both arguments were unconvincing, unsupportable, and were easily refuted.”

    You have some valid points, but I don’t think it’s fair to scapegoat a very popular anti-cruelty initiative for California’s admittedly very serious budget problems.

  2. Michael Seebeck

    Paul, Prop 2 was about ending meat agriculture in California, plain and simple. It was fostered by the domestic-terrorist-loving PETA fools. If you knew ANYTHING about farming you would understand why the whole idea was insane. It got a boost from the Chino Hills video, which was taken out-of-context and overhyped, and passed by a majority of clueless California voters (but I repeat myself).

    As crazy as it may sound, Root is correct. California does have a spending addiction, and the biggest culprits are the prison guard unions, the Democrats in the Assembly with their automatic increases every year, and the Teacher Screecher Unions.

    Had California followed the Colorado model of the 90s, they would not be in this mess at all!

  3. Andy

    How about the people who favor bigger animal pens donate money to farmers to build bigger animal pens instead of making it a law?

  4. Andy

    “Had California followed the Colorado model of the 90s, they would not be in this mess at all!”

    Yes, California would be much much better off if they had passed something like TABOR (Tax Payers Bill Of Rights) which was passed in Colorado back in the ’90s (which Colorado voters foolishly voted to suspend for a few years in 2006).

  5. Eric von Schonberg

    I happen to agree that the animals should not be mistreated, but that’s just one issue, and not worth my writing anything beyond this dismisal of the topic.

    Unfortunately, the problems here are unsolvable by a democratic government. I can only see these problems solved in a benevolent dictatorship. But, since that’s not likely to happen, and since most dictatorships aren’t benevolent anyway, the problems here are not solvable. Since these problems are not solvable, all anyone can do is protect one’s own assets and plan to bail from the state ASAP.
    Eric von Schonberg

  6. michaelt

    Making a point about Prop 2 as an argument either for or against Mr. Root’s point here is rather like arguing that the Titanic ought not try to disengage from the iceberg until it is determined that doing so would not endanger aquatic life.

    California is a “FAILED STATE”. Look it up.
    I am wrapping things up in this state where I have lived all my life and moving out. Now, there are many here who will say “good riddance” because I have not approved of the insanely liberal and corrupt state of politics here. There is a difference though. I have paid many hundreds of thousands of dollars in state taxes over my lifetime. The ones who will say “good riddance” to me are more often than not the recipiants of my generosity. That has come to an end.

  7. kevin

    Government spending can be beneficial but irresponsible, inefficient, and unbridled use of taxpayer monies is always catastrophic.
    The unfortunate part is that much of our spending in California is approved and allocated not by our legislators but by us through ballot propositions and measures. If a special interest group can’t get funding it turns to the people and gets a ballot measure. If people think it sounds good they often vote for it. They simply fail to realize that there is a cost.
    Certain government spending, even big spending like building an airport and providing infrastructure for goods and services benefit everyone. The ultimate question though that should be answered when spending that money is, What will this do for California? If it doesn’t help business or stimulate growth then it is a bad idea, and we have a lot of bad ideas that have gotten funding in California.

  8. Maria

    The reason businesses left California partly was driven by high house prices which would require them to pay workers more so they could afford a basic house.
    Lots of areas didn’t have a bubble in the US. I think that the most intense bubble areas were those that were within driving distance of areas with high-wage tech jobs. The median in San Jose was at $800k for a while. Likewise in Orange county, San Francisco, north of LA. Then, when speculation took hold, people in these places started flipping houses in nearby working class suburbs or valley towns such as San Bernardino, Stockton, merced, Vallejo – and these areas now have insane 1-5% foreclosure rates.
    What ended up happening is that ordinary hard working people could no longer afford to live in the humble areas of the state. Graduating students who wanted to start their lives could never afford to get married and get apartments or houses, unless they did irresponsible things like sign up for adjustable mortgages. So the only option for them and many businesses to do was leave the state. If regulation of business was the factor that drives relocation, everyone would be in Wyoming long ago

  9. MOISES

    YOU PEOPLE ARE CRAZY… You CANNOT compare the deficits in this stupid way.
    Has it occurred to you that California has about 50-100 times more population than the average state?!!! California is also the money maker, the innovator(Genetics, software, hardware), which benefit the rest of the states. Therefore it is not surprising to see such a debt. So when you see Utah with a 1 billion dollar deficit.. THAT is OUTRAGEOUS.. Utahs population is about 1/92 than that of Californias.

  10. Gene Trosper

    @2

    I am a long time Libertarian and honestly, I felt that way about Root, but lately, I am warming up to him. I hope he stays and becomes stronger in his libertarian outlook.

  11. Susan Hogarth

    California is also the money maker, the innovator(Genetics, software, hardware), which benefit the rest of the states. Therefore it is not surprising to see such a debt.

    Please explain why you think this statement makes sense. Shouldn’t innovators and benefactors have people in their debt rather than the other way around?

    The truth is that the STATE of California innovates exactly *nothing*.

  12. David N

    My wife and I are both professionals (engineers). We used to live in the Bay area and were paying $1800/month to live in a 2 bedroom apartment. We were also paying over $1000/month in state income taxes. We moved to Texas in 2006. Our house (3500 sq. foot, built in 2001) costs us $1432/month (including taxes, insurance, etc.). Texas has no income tax. Frankly, moving to Texas was the best thing we ever did. California is a one word IQ test with the answer: “Leave.”

  13. Bill

    The arguments are very good about the education system. What we are doing does not work and it needs to change. However, with issues such as global warming, mandates need to be put in place because humans discount future costs too much. I cannot imagine someone disagreeing with the idea that global warming, in its worst case scenario would be a fate much worse than the tax armaggedon we are talking about in the state of CA. I read this article about the effects global warming is ALREADY having on California. Check it out: article

  14. Wonkette

    Wayne said:

    The best way to stimulate the economy is simple: dramatically cut the taxes of those who earn the money and create the jobs. There’s no middleman (government) needed. Let people keep more of the money they already earn. Now that’s the most powerful economic stimulus plan in the world. Give taxpayers and job creators like me a vacation for the next year from income taxes and watch the economy rebound. Watch real estate prices rise again. Watch the stock market soar. Watch credit and capital markets start to lend again. Watch jobs increase. Give taxpayers and job creators dramatically and permanently reduced taxes, so we can keep more of our own money, and get ready for the greatest economic expansion in history.”

    Possibly. The problem here is the assumption that given lower taxes or no taxes for both individuals and businesses, that the money they save will be used for expansion, leisure, etc. Perhaps, but more and more people are simply saving it away for a really rainy day in the future. Money in the bank does little to stimulate the economy except make said banks have greater holdings. We cannot assume that given a bigger paycheck (due to lower taxes) will result in more spending. In the recent past, this assumption proved partially true, but in today’s recession, I would say, not true any longer.

  15. Milan Moravec

    Clean up University of California inefficiencies and save millions of $. Just how widespread is the budget crisis at University of California Berkeley? University of California Chancellor Robert J Birgeneau’s ($500,000 salary) eight-year fiscal track record is dismal indeed. He would like to blame the politicians, since they stopped giving him every dollar he has asked for, and the state legislators do share some responsibility for the financial crisis. But not in the sense he means.

    A competent chancellor would have been on top of identifying inefficiencies in the system and then crafting a plan to fix them. Competent oversight by the Board of Regents and the legislature would have required him to provide data on problems and on what steps he was taking to solve them. Instead, every year Birgeneau would request a budget increase, the regents would agree to it, and the legislature would provide. The hard questions were avoided by all concerned, and the problems just piled up to $150 million of inefficiencies….until there was no money left.

    It’s not that Birgeneau was unaware that there were, in fact, waste and inefficiencies in the system. Faculty and staff have raised issues with senior management, but when they failed to see relevant action taken, they stopped. Finally, Birgeneau ($500,000 salary) engaged some expensive ($3 million) consultants, Bain & Company, to tell him what he should have been able to find out from the bright, engaged people in his own organization.

    In short, there is plenty of blame to go around. Merely cutting out inefficiencies will not have the effect desired. But you never want a serious crisis to go to waste. An opportunity now exists for the UC President, Board of Regents, and California Legislators to jolt UC Berkeley back to life, applying some simple oversight check-and-balance management principles. Increasing the budget is not enough; transforming senior management is necessary. The faculty, Academic Senate, Cal. Alumni, financial donors, benefactors await the transformation of senior management.
    The author, who has 35 years’ consulting experience, has taught at University of California Berkeley, where he was able to observe the culture and the way senior management work.

    (Cal. (UC Berkeley) ranking tumbles from 2nd best. The reality of UC Berkeley) relative decline are clear. In 2004, for example, the London-based Times Higher Education ranked UC Berkeley the second leading research university in the world, just behind Harvard; in 2009 that ranking had tumbled to 39th place.)

    University of California, Berkeley in the news

  16. Milan Moravec

    Savings of students and thei parents picked clean by University of California Berkeley campus chancellor.

  17. Joe

    Sad to see some libertarians still stuck regurgitating the same false talking points as the xenophobic Republicans. Every reputable study I’ve read has demonstrated that Californian illegal immigrants contribute much more to the economy than is spent on them (e.g., contribution to Ca GDP: 16 billion vs. the educational expenses you cited above: 200 million). The truth is immigrants generally, legal or illegal, are the entrepreneurs and the engine of economic growth in this country.

    http://blogs.orlandosentinel.com/news_hispanicaffairs/2010/01/study-immigrants-contribute-more-than-they-take.html

    http://www.migrationpolicy.org/pubs/Peri-June2010.pdf

    http://www.forbes.com/sites/georgeanders/2012/05/09/why-immigrants/

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