and when you pay people in CA compared to TX, whether private or public sector jobs, the people need more money to make the mortgage…

The issue isn’t what public employees “need”, only whether they are overpaid compared to the market, i.e. if the government cut CA teacher salaries by 12%, could it still hire teachers of sufficient quality in sufficient quantity. If so, then tax payers are being fleeced at current pay levels.

A bigger government, sucking a larger portion of private resources, does “attach particular economic importance to the absolute size of the public sector vs. the private sector.” Good grief!

Can you tell me where Austrian economics is currently in use and its validity being popped?

http://willworkforjustice.blogspot.com/2009/01/californias-tipping-point.html

From what I hear, California’s government just started withholding an additional 10% from employee paychecks to bolster its financial health.

Jaime:

FYI, most “non-Keynesian” economics, just like Keyensian economics, does not attach particular economic importance to the absolute size of the public sector vs. the private sector. Libertarian political theorists (which include some economists) certainly are obsessed with it, but mainstream economics holds that it’s possible to achieve relative efficiencies in particular fields through either governmental or private economic organization.

Moreover, though, there are VERY few economists who reject Keynes’ insight into countercyclical fiscal policy. There are economists who don’t like it for ideological reasons and therefore tend to deny in any particular situtation that there is a need for fiscal stimulus, but the only economists who really believe that fiscal stimulus can’t work at all in any situation are followers of discredited and debunked theories such as Austrian school economics.

No you don’t. (a) and (b) are sufficient to maintain the status quo. Accounting for (c) would allow you to increase spending/services (although the two are not synonymous) without increasing the overall governmental burden, but that’s hardly a requirement. There’s no mandate that the government always consume (say) 10% of GDP. The government should consume as much GDP as necessary to provide the services the citizens desire. Were California’s governmental services so seriously deficient back in (pick the year)?

If the level of services were acceptable in (pick then year), then it’s your responsibility to defend increases in spending above (a) and (b) over the intervening years – economic growth in the state is irrelevant to that.

How about the size of the government remaining small, regardless. In that way the economy does not have to account for the interference from government activity and artificially create the illusion of prosperity.

Read some non-Keynesian economics.

Notwithstanding all of the back and forth above, Texas is fiscally sound while California is not. The Texas Constitution was written in response to events that happened during Reconstruction following the Civil War. Once the Damn Yankees were no longer in control, the citizens of this State decided to put serious limits on the power of state government. The constitution prohibits deficit spending by the legislature. It also limits the legislature to 140 days in session once every two years. These limits have applied regardless of whether the dominant party was the Democrats or Republicans. So a large part of the problem in California is that they aren’t prohibited from doing themselves harm through overspending. Of course Congress is following the California model.

You stole my thunder. Unfortunately the Texas Legislators think that the 140 day limit is an excuse to cram all kinds of laws rather than a constraint on them to leave us alone.

An unfotunate side effect of the large number of new immigrants (the legal kind from other States) into Texas is that they come here vote the same way that gave them the hell-hole they now have to flee. Sadly, Texas is slowly becoming indistinguishable from other States.

Hey, guy from Austin … go back to Silicon Valley.

One might think hard about whether it actually provides a more stable tax base.

IIRC, that was one of the reasons Milton Friedman favored property taxes.

the column you linked purports to show how the offending party cherrypicked figures from different time periods in order to cook the books.

It wasn’t just that, though that was part of it. The other part was failing to account for economic growth over the time frame, which I believe you didn’t account for either.

To compare taxes over time, you need to account for (a) inflation, (b) population increase, and (c) economic growth. You (if I understood you correctly) left out (c).

There’s another feature of CA’s economics which I haven’t seen mentioned here. CA gets back from the feds only about 70% of the tax dollars we pay in to them. I have no particular gripe about that ceteris paribus. Where I think it’s unfair is that CA is left to provide for immigrants when the feds should be handling that expense. It’s one of the things which makes comparison with states like MA less relevant (obviously, TX would be comparable to CA in this respect).

Austin was for many years built mainly around UT and the state government, plus some people attracted to the “relaxed” atmosphere, Willie Nelson and the boys. Folks actively resisted building roads because they wanted to limit growth – sort of “if we won’t build it, they can’t come”.

They came anyway, and Austin’s been trying to catch up ever since. Not as nice a place as it once was – the place is overrun with Yankees and refugee Californians :)

You might consider Rice U in Houston. Good school, small, nationally ranked.

Please tell me why the figures I used are incorrect and I’ll be happy to admit I am wrong (assuming you are right).

That’s silly, though. There are lots of stable taxes. A capitation is relatively stable. The car tax (vehicle registration fee) is relatively stable. Estate taxes are relatively stable. And it happens that property taxes are relatively stable, even when assessed at market value. Certanly more stable than income and sales taxes, which California primarily relies on now.

What makes it worse is balanced budget requirements. In the abstract, I think these are a decent idea. But NOT if there are structrual limits on taxation. Because when you have taxes that are so deeply tied to the fortunes of the economy, a balanced budget requirement means deep spending cuts exactly at the time when you most need the government to be spending money, to stabilize the economy during a recession.

The point is, you want your tax policy to continue to produce decent revenues during a recession so that you don’t have to do draconian budget cuts. Property taxes give you a fighting chance to do that.

Mitchell J. Freedman: You can live in a Libertarian fantasy, like the American Stalinists of old,

You’ve got to admire someone who can create the idea of a “libertarian Stalinist.” Very Frank Rich.

LarryA: Plus, Texas actually allows drilling for oil and refining it. You can’t tax oil until you pump it.

No, wait, why not? I think it’s a terrific idea. Somebody tell the California legislature. Why should all those valuable natural resources not be taxed just because they can’t be severed? And the best thing is that when you tax the resources the land can’t move out of state!

I fully UNDERSTAND Proposition 13. That said, the people who voted for it acted as if the only consideration that can possibly matter to a tax system is making sure that people don’t have to sell their homes when massive gains in value result in large property tax bills. (And remember, even if one was forced to sell in that situation, the homeowner still made a boatload of money– that, after all, is the REASON the homeowner’s tax bill got so high, as it is based on assessed value.)

As noted above, property taxes provide a more stable tax base than income taxes. Having a stable tax base is actually really important. Which is worse? What we are going through now or the fact that some homeowners who made a bunch of money in the real estate market might have to sell their homes?

adam: My only fear is that fleeing Californians will bring their liberal politics and bad attitudes with them, and so destroy our low-tax, laid-back lifestyle.

When I first emigrated to Nevada I spotted the following bumper sticker on a mini-van: “I don’t care how you did it in California.” Point taken. But I do fear our low tax days are gone, not because of population change but because we have been financing everything on the backs of tourists/gamblers and the consumers of mining products. That income aint there anymore and legal prostitution just doesn’t seem to be a big enough draw.

Randy: “Randy misses NH, which is close to the bottom on the tax list but close to the top on most education rankings. That’s a little factoid which NH residents love to point out to much higher taxed Mass (and VT/ME) residents.”I pulled my stats from ALEC, the American Legislative Exchange Council .ALEC bills itself as a conservative policy institute, with Paul Weyrich on the Board.I figured that if this is what a conservative site says, you folks would find it much more credible than what the NEA or other institutes might offer

The next problem is that your source doesn’t say what you said it did. It has California bottom 5 on the 4th and 8th grade assessments and in the low 40s overall while Texas is has ratings of 19,30,12,31 for assessments and number 26 overall (improving from 41 in 2003)

The immediate effect of Proposition 13, passed in 1978, was to reduce property taxes by approximately 60%, and school districts were (and are) no longer authorized to increase property tax rates for operational revenues. As a result, school districts overnight became almost entirely dependent on general fund revenues to stay operational, and thus subject to the annual budget battles in Sacramento. Along with something called a “Gann limit,” which we won’t go into here (but was sponsored by Paul Gann, the co-author of Prop. 13), the result was that education in California suddenly (a) had a less stable source of funding, and (b) was subject to far more political wrangling than ever before.

What happened next? In 1987, the education community — i.e., unions, and school boards’ associations — decided to take their cause directly to voters via Proposition 98. Although only understood by a now-extinct near-medieval set of scholastics living in Plato’s cave, the basic idea behind Proposition 98 is that education funding will never be less than 40% of the state’s general fund budget, no matter what. In addition — and you might want to pop an advil before I continue — when general fund revenues decline in a bad economy, Proposition 98 requires the state to make up any cut to education in future budgets. For example, for the most recent fiscal year, the state is obligated to pay back $11 billion to education if/when California ceases to operate like a banana republic.

So, what we have here is a failure to communicate. The Proposition 13 voters want to “starve the beast!”, limit property taxes, and make education funding dependent upon state (rather than local) revenues. But the Proposition 98 voters don’t want to starve the education beast, and they’ve amended the state constitution to guarantee education funding that simply isn’t there. It’s illustrative of what some of us here in California call the “Two Santa Clauses” theory of government, and it simply doesn’t work.

Sorry. It was meant to be directed at anyone who assumes that Texas is a low tax state and yet have good schools. According to at least one conservative think tank, they don’t.

Public Higher Ed: in CA you have UC, UCLA, UCSD, UCSF, Davis – all top tier universities. TX has UT and A&M and then… not much. TX higher ed is comparable to much smaller states such as NC or VA, not CA. Not even considering TX colleges for my daughter (UT would be OK but I’m a strong believer in NOT going to college where your parents live). K-12 ed: TX is mediocre, but no evidence that CA is ahead. Yes in TX we have more of the vocal morons who are anti-evolution, who claim that the Civil War had nothing to do with slavery but then wonder why blacks can’t “get over” slavery, who believe that criticism of any past action of the USA (or CSA) is impermissible although they believe government is inherently bad – but they seem to have little actual impact on the classroom.

“Today, you go to Texas, the roads are no worse…”

TX seems to do a better job filling potholes and keeping what they have smooth, but the transportation infrastructure is decades behind CA. I-35 between Austin and Dallas/Ft Worth is still mostly the 2-lanes-each-way road built in the ’50′s – it’s ridiculous. The Austin area had far too little highway capacity until a recent spate of toll road building. Austin is supposed to be the most CA-like city in TX, but compared to Silicon Valley, bike lanes are almost non-existent, surface streets are narrow – few boulevards, many highways lack modern interchanges, requiring you to go through multiple lights to get from one “freeway” to another. Most traffic signals in Austin are still on timers, whereas Silicon Valley lights are mostly on traffic sensors and have been for at least the last 25 years. Of course Austin is adding light rail, so they will be catching up some to CA in wasting money.

Obviously CA is screwed up financially, but TX is NOT offering “equivalent service for less” in many areas. Personal circumstances permitting, I’d go back to CA in a heartbeat for the much better weather, greater outdoor activity opportunities and variety, and the more relaxed social attitudes; it’s worth the extra cost.

During this same period population increased about 20% and inflation came in around 51% for a combined increase of 81.2%. What’s wrong with this picture?

For the flaws in your logic, see this column.

Well, how deep in the weeds do you want to get? Other states enforce their single subject rules more rigorously, rule certain subject areas outside the scope of initiatives, require more petition signatures or a legislative referral to get something on the ballot, and permit legislative amendment of initiative statutes.

It is, of course, possible to have ELEMENTS of direct democracy in an otherwise republican system. But delegating broad legislative powers directly to the voters is a causal element of the mess we have in California.

Direct democracy can work quite well. Here in New England, most non-city local governments are very direct democracy — the “legislative body” of a town is whatever voters show up to a town meeting (which are scheduled 1–3 times a year).

Well, that’s like saying that communism can work really well in small groups. (It can.)

California’s budget shortfall comes from the fact that the legislature will not control spending.

Much of the spending in our state is on K-12 education and prisons and law enforcement, as well as bond interest. That spending was all MANDATED by the voters.

Further, because we have a balanced budget requirement, the rump Republicans in the legislature have to spell out what they are willing to cut in order to avoid tax increases. And it turns out that you can’t do it by singling out wasteful programs, unless you consider, say, allowing the professors in the state universities to teach a full semester’s worth of classes rather than being “furloughed” 2 days a month constitutes “waste”.

Please elaborate. Stalinest living in a Libertarian fantasy – it boggles the mind.

Dilan, I think you are trying to play Calvinball. If California is such a special case because of all of these particular issues, then is says little about direct democracy in general. If direct democracy in general is so bad, then you need to explain why other states with ballot initiatives are not dysfunctional, or at least not as bad as CA. Me? I think CA has some particular oddities that makes it not work well there.

Direct democracy can work quite well. Here in New England, most non-city local governments are very direct democracy – the “legislative body” of a town is whatever voters show up to a town meeting (which are scheduled 1-3 times a year). Town officials have to really do their homework to pass a budget, a new zoning law, etc. The town where I live just had a town meeting – hundreds of my neighbors showed up to decide some tough issues, including whether to spend a lot of money on a new school in tough economic times. Of course, we also have statewide initiative petitions.

Do you just dislike allowing the little people to decide how they are governed?

Prop 13 only capped tax increases on homes in between sales, with the taxable value being revised to the purchase price with each new owner. Tax receipts have NOT been languishing at 1978 levels or anywhere close.

California budget as per:

http://www.usgovernmentspending.com/California_state_spending.html#usgs302

FY 1992 – $114B
FY 2009 – $440B (+285%)

During this same period population increased about 20% and inflation came in around 51% for a combined increase of 81.2%. What’s wrong with this picture?

Incidentally I did not cherry pick 1992 for any particular reason – that was the earliest year I could find at a usable source.