Hey, Big Spenders!

IBD ^ | March 5, 2008

[Kaslin]

Fiscal Policy: California Democrats, apparently unable to curb their spending, say they may not approve a state budget until they get a tax increase. In this, as in much else, the Golden State may be starting a trend.

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Hand it to Democrats, both in California and nationwide. One of the great bits of political jujitsu in recent years was to portray Republicans, not themselves, as the party of tax-and-spend. Now, with control of both Congress and California's state house, they're showing their true colors.

Take California. Just four years ago, the state went through the worst financial crisis in its history. Time to tighten the old belt, right? Not in the Golden State. Democrats have boosted general spending 32% in just four years to $103 billion. That's 8% a year.

Revenues, though growing rapidly, haven't kept pace. If spending had grown just half as much — at a still-healthy 4% — the budget today would be in balance.

Democrats were warned about spending so much, especially with the state's finances so dependent on just a handful of mostly rich taxpayers. They didn't listen. They gave lavish contracts to state employee unions and padded retiree benefits. They even tried to hand out benefits to millions of illegal aliens.

This has been a fiscal disaster. Over the next year and a half, California's nonpartisan Legislative Analyst predicts the state will have an unprecedented $16 billion budget shortfall. Pretty nasty, considering just last summer the state predicted a surplus.

To close the gap, Democrats now say they must have a $5 billion tax hike — a ruinous levy that would sink the state's economy.

[NormsRevenge]

How Progressive of them.

[BRL]

Solution to problem?

Print more money

Drop it from the choppers

Uncle Ben will erase all debts

Who cares if our currency becomes worthless?

[SierraWasp]

"Print more money"

As you should know, states can't do that, so our so-called "Republican" Governor has Wall Street print up more bonds for us to hand to our unsuspecting grandchildren.

The "Kindergarten Cop" was "for the children," so he nails the grandchildren instead. What a peckerhead!!!

[kingu]

Sounds fine with me - there’s enough Republicans to basically shut down Sacramento. Do it. Don’t come back until tax increases are off the table, and the Rats slash and burn their idiotic spending sprees.

The local newspaper ran a front page story about how the local schools were going to lose out a million dollars a year. I called up the author of the article and asked - was this money that they had already received or were budgeted to receive? She didn’t know, as she didn’t ask.

[mysterio]

I actually had to read the article to know if big spenders was referring to dems or repubs. That’s a sad situation that didn’t exist in the 90s.

[businessprofessor]

In defense of Arnold, he did try to change the public employee pensions. He gave up after feeling the heat from the unions. Defined benefit pensions are a time bomb waiting to explode. The fuse gets shorter every year. Pensions are contributing to the current budget woes but there are other factors such as illegal alien spending and runaway rat spending. California’s environmental regulations and high taxes will only make the budget problems worse. Unless California and the nation has good economic growth, pensions will stangle future budgets. Defined benefit pensions such as Colorado and California are simply vast repositories of hidden deferred compensation.

[BRL]

The "Kindergarten Cop" was "for the children," so he nails the grandchildren instead

Here is the dirty little secret: Who says the grandchildren have to actually pay? They may choose not to.

[Post Toasties]

In my county, the local school district, library, fire department, police department and god knows who else, are trying to pass tax increases at least twice a year, claiming that they cannot continue to provide the same services they have previously been providing for less.

To which, the local voters have so far, fortunately, responded: "What the hell are you talking about? Screw you!"

[calcowgirl]

The proposed pension fix wasn't a fix at all. It just shifted the risk to the employee from the pension manager (and taxpayer), letting the manager off the hook for bad investment decisions. A real reform would have changed the benefits which would result in an expense reduction, whether under a defined benefit or defined contribution plan. The lies coming out of Sacramento on the pensions were beyond repulsive, trying to imply that a growth from only $160,000 to $2 billion was due to benefits when in fact it was the result of going from a self-funding environment (when the dot-com boom stock market went wild) back to ordinary contribution levels. There is no reason that a defined contribution plan cannot be offered without being a catastrophe -- plenty of responsible companies have done it for decades.

[Entrepreneur]

While Democrats claim the state is "undertaxed," levies per capita have soared 28% since 2004.

Kalifornia? Undertaxed? ROTFLMAO

Glad I moved.

[LibertarianInExile]

“Here is the dirty little secret: Who says the grandchildren have to actually pay? They may choose not to.”

True, they can leave. But with what? They sure won’t be able to bring cash that’s worth anything. And they won’t be able to sell any real estate, since no one will want to live in a state with the confiscatory tax rates necessary to pay off these terrible bonds.

[Amerigomag]

In defense of Arnold, he did try to change the public employee pensions.

Really? Increasing pension costs is technically a change, but hardly the point on a conservative forum.

Schwarzenegger is a European liberal, by both citizenship and political ideology. This Austrian emigrant never should have been allowed to run for public office in the US. The moment he broke the oath of sole allegiance he signed in 1983, his US citizenship should have been revoked ON-THE-SPOT.

Defense of the indefensible, professor, is a fool's mission.

[calcowgirl]

Correction:

There is no reason that a defined contribution benefit plan cannot be offered without being a catastrophe -- plenty of responsible companies have done it for decades.

[tflabo]

I recently rented a car in San Francisco. No kidding about 1/3rd of the total rental charges were taxes. Out of control piggish governments.

[businessprofessor]

I am not sure what you mean by increasing pension costs. Arnold proposed some reasonable pension reforms. He caved on the idea after meeting stiff opposition. Without some major reforms, pension costs are fiscal time bomb.

Arnold began with some reasonable ideas. He has changed after taking a beating from the unions. He was never a strong conservative but he has morphed into a big spending, environmental activist. On balance, he has been perhaps a little better than a rat governor. I do not know about his dual citizenship. I am not for dual citizenship although it is nice to have on an individual level but bad for this country.

[businessprofessor]

My mistake on the wording. I agree that a responsible defined benefit plan can be offered. The federal FERS plan is reasonable although the federal government does not fund the plan. The benefits are reaonable, just somewhat more than 1% per year.

State DB plans such as Colorado and California are another story entirely. These plans cannot be responsibly managed because the benefits are lavish. These plans are vast repositories of undeclared deferred compensation. I have carefully analyzed the Colorado PERA plan. The amount of deferred compensation is obscene. I cannot understand why public employees deserve on the average $521,000 of deferred compensation to enable them to retire at very young ages. The retirement ages of public employees should be raised to match social security. Here are links to my study if you are interested.

Speakout editorial for RMN (http://blogs.rockymountainnews.com/denver/speakout/2007/09/): scroll down the page

Full version: http://ssrn.com/abstract=985621

[calcowgirl]

Thanks. I took a peek at the RMN article — we probably agree on many things. But don’t be confused that Arnold’s plan was on the same wavelength. He never addressed benefits (age, % of salary, employee contribution amounts, etc). In fact, many of those benefits have been enhanced under his watch. And to make matters worse, the one category of workers with the most outrageous benefits, “Public Safety” workers, has been expanded to include people who have little reason for being categorized as such. There are probably 10 to 20 variables to play with in how to structure and manage a pension plan. Arnold dealt with none of them except the DB vs. DC part of the equation. I believe that was a change encouraged by many of his donors who would stand to benefit from such a change. If that change had occurred without changing benefits, the annual cost to the state would be virtually the same. At the same time, Arnold has approved things like allowing the pension funds to put more money in hedge funds and some rather questionable investments. It appears that you have looked in detail at Colorado’s antics—I suggest you look closer at the details in California before concluding that what Arnold was trying to do was a good step, let alone responsible.

[The South Texan]

Coming to DC in 2009.

If people thought spending was bad under the GOP. wait till the Rats run the entire show. Wait, I know. It will all be for the Children, so we can spend anything and everything for the Children. Yuck!

[businessprofessor]

I have tried to look at California’s pensions but I have not been able to acquire data. I hope to use my existing data to study a wider range of plans in future work.

I am not very informed about the California situation. I think that moving all workers to a DC plan is a major step forward. I am not sure if the DC plan would have been optional or required. I agree that giving employees the option of a DC plan while maintaining outrageous benefit levels for the DB plan may not lower pension costs. Employees who plan on working a short time will enroll in the DC plan while the vast majority of employees will enroll in the DB plan. Most DB plans are partially subsidized by short term employees.

I have been trying to get data on pensions for public safety workers. It is difficult data to obtain. Without an attorney fighting for open records access, I cannot get the data. I think there are many pension spiking practices in pensions for public safety workers specifically with overtime work late in careers and false disability claims. Other public employees see the pension benefits and lobby to get similar benefits. The problem spreads beyond law enforcement.