California. The name has invoked countless images, beaches, sun, movie stars, and a golden land of opportunity for those willing to work hard to achieve success. Today however the name conjures up different meanings in the political world, debt, taxes, and disappointment. How can such a promising state which enjoyed countless years of economic growth now have over $350 billion in debt, one of the highest in the nation, with no signs of letting up? Everyone seems to have someone or something to blame, Democrats, Republicans, Hollywood, illegal immigration, crime, etc. The bottom line is that the state is in dire need of repair, and it’s starting to drag the entire United States down due to its economy.
Before I dive into the state’s current troubles, a quick history lesson of how California rose to the top in the latter half of the 20th Century. California has always had a legacy of being a place of opportunity, even after its acceptance to the United States as the 31st state back in 1850. With its untapped natural resources, easy access to the Pacific Ocean for trade with Asia, and an influx of cheap labor from abroad it was rapidly growing in strength both politically and economically. The infamous “California Gold Rush” only multiplied these attributes which lead to the United States government to invest in projects such as the Pacific Mail Steamship Company, the Mare Island Naval Shipyard, and eventually backed the Transcontinental Railroad politically. By the 1950’s and 60’s the state was one of the epicenters of American culture housing Hollywood’s elite, impressive urban cities, an an excellent education system thanks to Clark Kerr and his implementation of “The Master Plan for Education”.
It would be those successes that would impair the state as hundreds of thousands flocked to this utopia, contributing toward many poor decisions taken by the state’s legislature and its people. Unlike most of the east coast states, California and many western states have a popular referendum model in place. This allows ordinary citizens to create ballot initiatives (With enough signatures to qualify) for the populace to vote for and potentially become law. This tradition dates back to the 19th Century where you had western states fast tracking many political items due to do their recent statehood. If anything, you probably recognize the term “Proposition 8”, which refers to whether same-sex couples in California are allowed to wed. Due to the state’s constitution, the populace can vote for and repeal these laws instead of the legislature taking up the case. In the 1970’s California was in the grips of a crisis, due to their economic success a massive influx of immigrants both domestic and international, were starting to take a toll on the state’s budget. Residential prices were skyrocketing which went hand-in-hand in greater taxes on the populace to pay for public schools and other government services. In 1978 Proposition 13 was approved by the populace, which in short forbid the legislature from raising property taxes except when there was a two-thirds super-majority. This made state office holders job’s even more difficult considering back in 1933 another ballot was passed requiring a two-thirds super-majority to pass a state budget.
All of this culminates in a state that is cutting everything, from education to prison management considering it’s easier to cut to even marginally increase taxes over time. This has lead to other increases in taxes outside the limitation in attempt to tackle the state’s budget, it should be no surprise that California has one of the highest averages for gasoline, right now at $4.28. The state’s sales tax as well holds the highest record which is currently at a whopping 7.25%. All of this has a rippling effect on the state’s economy considering these taxes in one way or another affect the basic living needs of all residents. Even the housing market, what the 1978 ballot initiative aimed save is plagued with foreclosures, with California’s urban areas often making the top ten rankings.
All of this could be avoided with a solid budget to stabilize the state’s bond market and foster investments. However, due to the two-thirds super-majority needed to even pass one it’s become commonplace for them to be late year after year. Even in 2012, the state faces a $16 billion deficit, one of the highest in the nation which will probably lead to even more draconian cuts in other public services. With their state budgets consistently late due to the two-thirds super-majority requirement, IOU’s issued to government workers have occurred in passed such as in 2009 during Governor Schwarzenegger office term. All of this greatly affects the bond market which is at A- according to Standard & Poor, the lowest in the nation.
I apologize for setting up the California punching bag, though there is a reason why the United States was founded as a republic and not a democracy, we elect qualified officials to run government, not for the masses to pass laws for themselves. The propositions passed in 1933 and 1978 have destroyed their economy by taking away various tools and negotiations elected officials use to get the job done. Only recently in 2010 has the super-majority budget requirement been revoked, though the damage has already been done. With California having one of the highest unemployment rates in the nation and cities starting to contemplate bankruptcy I often wonder why so many of my college age friends want to relocate there. California is no longer a state of opportunity, it is a state which symbolizes the failure of mass politics and faded dreams. There is still hope for the populace, but it requires a different mindset of allowing assemblymen and senators to do the job they were elected to do.
I purposely left out the issue of illegal immigration, which deserves a whole article by itself. The reason is because it’s difficult to get accurate numbers of how the state has been affected by them, whether it be in healthcare, public education, or potential “job stealing”. You’ll find a wide range of estimates of costing the taxpayers from a few millions to tens of billions each year, which further complicates getting an accurate reading. Is it a problem? Yes, though there are a wide range of solutions, from gradual citizenship to deportation. In general though, I believe a state’s lawmakers have the right to deal with illegal immigration for better or for worse considering it’s their own economy directly affected.
This article is intended to inform everyone about the truth of California, and possibly for anyone who wants to move there to make sure their finances can take the tax burden and living expenses. California was once a place of wilderness that was tamed and evolved into an economic powerhouse by the mid 20th Century. Once again the populace is in a wilderness, but not by nature but by economic uncertainty pertaining to the future. I’m confident that they can grow out of their fiscal hole, though it will require tough choices and large scale political reforms to get it back to a golden land of opportunity.