California Is The Next Greece (Only Bigger)

[Zippyjuan]

Debt and deficit are two different things. Are you including all of the Bonds issued by California in that debt number?

Good question. That seems to be the annual budget deficit. Including bond debt and the number rises to $265 billion http://www.sfgate.com/cgi-bin/articl...EDED1HA111.DTL according to this article. That would be nearly 14% of GDP. But he is also including "unfunded liabilities" of future payments for payouts on pensions and healthcare (doesn't say how far into the future) which distort the figure since it assumes no tax revenues in the future available to pay for them. This year's pension and healthcare costs are paid for with this year's taxes and future expenditures will be paid for with future taxes. The article says that General Obligation Borrowing is $77 billion which would be a more reasonable number to use. This would be the total of bonds issued. Adding that figure to the current year budget deficit ($14 billion) and was get $91 billion or roughly 5% of GDP.

General obligation borrowing is authorized by voters for school buildings, clean water, housing, stem cell research and other expenditures. According to the state treasurer, the total outstanding is $77 billion, the majority of which is for long-term infrastructure investments.


Read more: http://www.sfgate.com/cgi-bin/articl...#ixzz1t58F5IhA

Some more figures to add- state government spending in California is 4.2% of GDP. Greece's tax revenues are only slightly higher than California's ($100 billion) and expenditures are $142 billion according to Wiki. http://en.wikipedia.org/wiki/Economy_of_Greece or 46% of GDP. The US budget is closer to 20% of GDP.

[Rick Williams]

. . . that might be one thing. But California cities are falling like flies too. Look at Stockton (about to go bankrupt). And Vallejo (bankrupt. And how about my own home city of Los Angeles. http://rickwilliamsforsenate.com/our...t-los-angeles/ Our California political leaders are as blind as those in Washington D.C. None of the welfare state governments (federal, state, local) are going to make it. But here's the good news-- the rebirth of entrepreneurship and freedom will soon follow the collapse. Why? Because it must. www.rickwilliamsforsenate.com

[Brian4Liberty]

And how can we forget Orange County, CA, which went bankrupt before Greece, and for the exact same reasons (hint: Goldman Sachs was involved in both).

Orange County was at the time the largest US county to have gone bankrupt, when in 1994 longtime treasurer Robert Citron's investment strategies left the county with inadequate capital to allow for any raise in interest rates for its trading positions. When the conservative residents of Orange County voted down a proposal to raise taxes in order to balance the budget, bankruptcy followed soon after. Citron later pleaded guilty to six felonies regarding the matter.

http://en.wikipedia.org/wiki/Orange_County,_California

[Brian4Liberty]

the California debt as a percent of GDP would be 0.7%

Good question. That seems to be the annual budget deficit. Including bond debt and the number rises to $265 billion http://www.sfgate.com/cgi-bin/articl...EDED1HA111.DTL according to this article. That would be nearly 14% of GDP.

Big difference there.

The article you linked is kind of funny when it says that debt service obligations will fall in the future, but then turns around and says that is assuming that no more debt is taken on. It then says that more debt is already approved.

The Debt Dealers will be here, that you can be sure of...

[thoughtomator]

California and Illinois (which is in even worse shape) - like Spain and Italy, are simply too big to bail out. If the federal government bails out one state, the very next day every other state (perhaps save North Dakota) will be knocking at the door asking for their own.

Unlike Greece, California has no currency of their own to revert to in the wake of a failed political-economic union.

[Zippyjuan]

Greece no longer has their own currency either. The Drachma ceased to exist in 2001 though until this year it was still possible to exchange some notes for Euros.

[craezie]

According to the Tax Foundation, in 2005 California sent $290 billion in taxes to Washington and received $242 billion back in the form of federal government spending or a net cost of $48 billion which would be 3.5 times this year's budget shortfall. http://www.taxfoundation.org/research/show/22685.html California ranks #9 in net contributions to the Federal government in absolute terms but allowing for its size it is #38 on a per- capita basis.

this.

Don't get me wrong -- my state has a horrible government and terribly bloated budget, primarily because of the stronghold public worker unions have had for years. However, I get so sick of people in other states--almost always midwestern and southern states who suck on the federal teat--saying how we deserve it and how the country should just let us eat it. The fact is that we give far more than we take, and have for years. We don't even receive nearly what we put into the federal tax bucket back, much less less any portion of all of that "borrowed" money. I don't really want the feds to bail us out because that will prevent the structural problems from being fixed. However, if anyone deserves a bailout, its the California taxpayers more than anyone else.

The other thing that is tangentially related is that our "progressive" federal tax system is colossally unfair to people that live in high cost of living states. If I make the same income as someone in Iowa, yet have 3x the cost of living, why should I have to pay the same tax rate? Especially since people in some parts of the country seem to have the idea that over 6 figures is "rich" and should have to pay more. Well in my county, you must have a MINIMUM 109k income just to afford a median-priced home. It makes it pretty hard to save up when you are paying high rax rates.

[craezie]

And how can we forget Orange County, CA, which went bankrupt before Greece, and for the exact same reasons (hint: Goldman Sachs was involved in both).

I live here, and the county is actually run super responsibly now due to tight budget restrictions that require a 10% margin from expected revenue. We could be a great example of how to run things at the state level, should they bankrupt and reorganize. Of course, now that OC has a budget surplus the state thanks us by "borrowing" the extra money without consent or plan to pay it back. My city government, too, is very fiscally responsible and had over a 1 million surplus last year which the state confiscated (I mean "borrowed"). This year they have re-done every single playground and are constantly filling potholes, widening roads, and building fences just to make sure they won't have 1 penny left for the state!

[thoughtomator]

I don't buy any of those "states paid in vs paid out" comparisons. For one, California, by weight of its outsized representation, directs the spending of far more than its share, regardless whether that money is actually spent in California proper. Also I am highly skeptical of the methodology that produces those numbers. And what of the massive amount of money that goes overseas, or the monetary manipulations of the Fed?

The delegations from the states designated as net givers together are more than enough to form a majority in Congress to put a stop to the outflow of cash from their states. If they've not moved to stop it (and these numbers have been around for at least a decade if not more), then it's because there's more to the story. This would be simple, easy issue to demagogue, and they would not ALL pass up the opportunity.

[Zippyjuan]

I don't buy any of those "states paid in vs paid out" comparisons. For one, California, by weight of its outsized representation, directs the spending of far more than its share, regardless whether that money is actually spent in California proper. Also I am highly skeptical of the methodology that produces those numbers. And what of the massive amount of money that goes overseas, or the monetary manipulations of the Fed?

The delegations from the states designated as net givers together are more than enough to form a majority in Congress to put a stop to the outflow of cash from their states. If they've not moved to stop it (and these numbers have been around for at least a decade if not more), then it's because there's more to the story. This would be simple, easy issue to demagogue, and they would not ALL pass up the opportunity.

States don't really get to decide what they pay the Federal government in taxes- the taxes occur based on economic activities that people in the state engage in so they can't do anything on the revenue side. I guess they could try to request more porkbarrel projects in order to get more of that money back though. That would mean higher taxes on everybody though (or more government borrowing).