A Currency for California
This story is five days old, but it strikes me as something that deserves more attention—there’s a bill being considered in the California Assembly that would have the state accept state-issued IOUs as payment for taxes. That would, of course, give the IOUs some real value to anyone who owes taxes. And that, in turn, means that all kinds of business owners and others would have reason to offer to buy IOUs from IOU-recipients provided they could get some kind of discount. Which is another way of saying that California would be essentially creating a new currency, which James Galbraith suggests over email that we call the “CAIOU” pronounced like “cailloux” (French for pebble), and the discount would be the exchange rate.
In most places I think this would be totally non-viable. But California is very large and California metro areas don’t tend to involve inter-state commuters (it’s not like New York or Philly or DC, in other words) so you could actually imagine this working. And monetizing the state’s debt is something that could look very appealing to legislators once they realize it might be doable. Which doesn’t mean it’s a good idea. For one thing, what California’s already done with the IOUs arguably violates the Constitution’s ban on states creating currency. Thus far, nobody’s inclined to try to do anything about it, but pushing the envelop might force the federal government to try to do something in order to maintain the credibility of its own debts.
66 Responses to “A Currency for California”
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July 13th, 2009 at 1:06 pm
Oy. Yeah, because what California really needs is another way to deficit spend, and some inflation to keep the economy moving.
July 13th, 2009 at 1:07 pm
Well I hope the state would have enough confidence in itself to accept its own IOUs…
July 13th, 2009 at 1:11 pm
Hasn’t the Treasury read them the riot act yet. This is not constitutional and I hate getting all constitutional and thus becoming some sort of wingnut fellow traveler. This amounts to the state issuing its own currency. A currency backed by nothing by the way.
I’m really agnostic on states or anyone else issuing currency at this point but it just doesn’t pass constitutional muster. It doesn’t pass economic muster either but at this point WTF.
July 13th, 2009 at 1:16 pm
If viewed as a country, I doubt that California’s imports are too small for anyone to care that they’re paying with IOU’s.
This might force another referendum on northern California’s perennial urge to secede from the southern half. If the northerners can’t even get paid with actual money anymore because spending is haywire down south, the northerners might just be able to quit this time.
July 13th, 2009 at 1:18 pm
The move sounds like a way for republican legislators to discourage the issuance of IOUs, since accepting them in lieu of taxes means less cash comes into the state coffers at a time when the state needs cash.
July 13th, 2009 at 1:18 pm
Where in the Constitution are states banned from issuing currency?
July 13th, 2009 at 1:21 pm
Article I Section 10:
“No State shall … coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts…”
July 13th, 2009 at 1:21 pm
I don’t know about states themselves, but there are plenty of examples of local (paper) currencies throughout US history and they appear to be legal. Ithaca Hours pioneered a modern local currency movement.
July 13th, 2009 at 1:21 pm
Cyrus – actually the ability to deficit spend would be great for California, and for the country.
Rapier – I think no one’s done anything because: A. default would be worse than IOUs, and B. there is the expectation that the IOUs will be redeemed in U.S dollars not Californiabucks.
Gmorwhatever – except that this isn’t a North/South issue. Plenty of stuff is in CA politics, such as water, but this is a state revenue issue, and there are plenty of Northern counties that live or die based on state revenue (check out some of Calitics’ excellent reporting on this for more).
July 13th, 2009 at 1:21 pm
Way to steal a post from the economist’s blog from this morning.
July 13th, 2009 at 1:25 pm
This might force another referendum on northern California’s perennial urge to secede from the southern half. If the northerners can’t even get paid with actual money anymore because spending is haywire down south, the northerners might just be able to quit this time.
Ignorant. Nobody in CA thinks along those lines anymore. And it’s not like gov’t spending is a localized phenomenon.
This, however, is well worth exploring.
July 13th, 2009 at 1:26 pm
Actually, the IOUs are interest-bearing, which in a perverse way makes them more like bonds than currency. There’s no prohibition of the bond market.
I suppose you could use bonds in financial transactions if both parties are willing to accept their value. Obviously corporations do this all the time.
http://yubanet.com/california/California-IOU-Interest-Rate-and-Maturity-Date.php
The State will pay 3.75 percent annual interest when it redeems the IOUs. The State Pooled Money Investment Board (PMIB) — chaired by State Treasurer Bill Lockyer — set the interest rate today. The State will redeem the IOUs no later than Oct. 2, 2009. The PMIB today set an Oct. 2 maturity date for the IOUs. But under emergency legislation signed into law Wednesday by the Governor, the IOUs can be redeemed before Oct. 2, if the State determines it has sufficient cash. If the IOUs are redeemed early, the State will pay the interest accrued up to that time, instead of the full interest that would be due Oct. 2.
July 13th, 2009 at 1:27 pm
This is an incredibly dangerous situation. Once people start really thinking about what money is it opens the door to a political crisis that few can imagine when it spreads beyond California.
At this very moment the financial elites are celebrating their belief that everything is now under control. In the meantime the economic situation for tens of thousands of households reaches crisis level every week. The macro economy continues to deteriorate nationally and internationally.
There is a disconnect here of monumental proportion.
July 13th, 2009 at 1:29 pm
A number of regional governments in Argentina did the same thing during its last currency crisis in 2001 — most famously the Province of Buenos Aires with its Patacónes.
July 13th, 2009 at 1:35 pm
This is a great idea.
It will instantly alleviate the crisis for California and essentially create a new currency for them to have control over that is outside the legislatures control.
This is exactly what the economists from Kansas City have been proposing.
July 13th, 2009 at 1:41 pm
The market is giddy today on the expected report that GS is going to announce a $2 billion profit for the week. Meanwhile the Treasury is going to borrow another $15 billion this week after last weeks $68 billion.
In a way it’s little wonder that there is a shortage of money in other places. The government is borrowing most that is available and giving it to the lucky few here and there in small amounts and huge amounts to corporations especially financial ones. That money stays there in the financial system and makes the financial guys think everything is under control.
They couldn’t be more wrong.
July 13th, 2009 at 1:43 pm
actually the ability to deficit spend would be great for California, and for the country.
I agree with you, actually (just skimmed the link, but countercyclical spending seems like a good idea, and I know all but two states have balanced budget requirements or similar), but it’s California we’re talking about. That place is a mess, and consideration of any proposal to help the current budget crunch should weight heavily whether it encourages or discourages overall reform, and I think this would discourage progress. (But what do I know, though.)
July 13th, 2009 at 1:44 pm
Well, that’s one way to try and blackmail the feds into bailing out the state!
July 13th, 2009 at 1:45 pm
and I know all but two states have balanced budget requirements or similar
I guess I should say “one or two states.” I thought Vermont was the only one that didn’t, but when I Googled it Indiana popped up as well. There seems to be some disagreement on this.
July 13th, 2009 at 1:46 pm
Campesino – good point, which clears up the constitutionality question. Essentially, this isn’t the issuance of a currency, but rather a forced loan. Which isn’t great, considering that forced loans were kind of the hallmark of the ancien regime in France before they declared bankruptcy and had to call the Estates General…
So if California ends up calling a Constitutional Convention, and then the Governator tries to crack down on the delegates, and they swear an oath declaring themselves the Golden State Aseembly, we’re in for some fun times. Vive la Californie!
July 13th, 2009 at 1:50 pm
Cyrus – why I agree that California is in need of institutional reform, we have to be really, really wary of the “reform” label. Because in California, it gets thrown around a lot, explicitly on terms of “consideration of any proposal to help the current budget crunch should weight heavily whether it encourages or discourages overall reform.”
That’s why the governator is vetoing things that would have saved the state money because they didn’t include his proposals for taking an axe to public employee’s health care plans, pensions, and fingerprinting people who ask for CalWORKS or in-home services.
Personally, I would say we need to completely separate the budget from the reform argument.
July 13th, 2009 at 1:52 pm
@StevenAtwell
No shortage of tennis courts for the oath, though…
July 13th, 2009 at 1:57 pm
All this really means is that California is not yet serious about their problems. Throw the poor off welfare? Sure. Throw the poor off state healthcare? Sure.
Cut the overly generous pension plans for state union members? Of course not.
At least we can see what progressives consider to be important when push comes to shove. You can throw grandma in the snowbank, but gosh forbid you make a state govt union member pay for anything.
July 13th, 2009 at 2:01 pm
This is why free market types make me crazy. There’s a certain group of economic activities that can be functionally equivalent to printing money under certain accounting conditions. Any time liabilities end off balance sheets, you’ve basically allowed a company to print money.
And when you give certain entities the ability to print money, they will act recklessly with it. And, in fact, if they’re economically rational, they probably should act recklessly with it, because it’s not the core currency of the market or your firm, it’s smaller sums on the margin.
This spills over into the real economy. And when enough reckless guys print money long enough, it can be devastating. For instance, it can act directly to inflate certain asset classes (like, say, housing values). It also drives down all returns on non-inflated aspects of the economy, because returns created by normal economic activity can’t compete with returns created when reckless actors can just print money so long as it’s assigned to, say, a house’s value.
The bubble was caused by more than Greenspan’s monetary policy, it was caused by a monetary “policy” inadvertently created by lax regulatory oversight. Poor regulation of complex financial entities drives up the money supply. And not across the board, like conventional monetary policy–it does it in tremendously perverse and distorting ways.
But what I find amazing is that legions of economists will doubtless descend on California’s IOU scheme, and warn of the box of worms opened by this state’s foray into monetary policy.
Yet NONE of them even see the monetary policy implications of unregulated Wall Street activities, which are far more pernicious to the overall economy than California’s policy. Which, frankly, may not be too bad in these extraordinary circumstances.
July 13th, 2009 at 2:03 pm
Sorry my link should have been
http://neweconomicperspectives.blogspot.com/
Check out Chartalism at wikipedia. Taxes create the demand for a fiat currency. These IOU’s will then be functionally equivalent to a currency.
July 13th, 2009 at 2:11 pm
That requires a bit of thought, since what CA would be doing would be creating fiat money, that is of course, very valuable if it has a use that lot’s of people in CA can use it for.
Rapier’s comment above is pertinent though, since the US dollar, or any fiat currency, though there are legal tender laws and such but these only work to a small extent, is only valuable because US tax authorities (including state and local) insist that you have some to discharge one’s obligations to them, they won’t take gold or wheat or cattle or blog posts about health care policy in lieu of cash. It would seem that the Fed should get really mad about this, CA is stepping on their institutional toes.
July 13th, 2009 at 2:20 pm
Let me get this straight. The state has no money, so they’re paying the people IOUs instead of cash – essentially, a low-interest bond. Now, with this, people could pay their taxes with said IOUs – essentially paying the state with its own debt.
That definitely sounds like issuing a new currency. Somebody get the Treasury Department.
July 13th, 2009 at 2:22 pm
At least we can see what progressives consider to be important when push comes to shove.
At least we can what James Robertson cares about, which is “stuff that makes James Robertson feel personally satisfied, no matter how irrelevant it is,” What masturbatory nonsense.
July 13th, 2009 at 2:26 pm
James Robertson, showing his typical concern for the human victims of Republican policy disasters (though, at least in this case he isn’t insisting that we murder them – so I guess we can be grateful for some things) insists that we renege on contracts that already exist, merely so that California can continue its Republican led slide into disaster.
What a moron.
And, please show that you aren’t as stupid as you seem by not insisting that the problems could be fixed by the Democratic majority – since, given the nonsensical rules that give outsized power to the tiny minority of crazy people, they cannot.
July 13th, 2009 at 2:43 pm
anonymiss,
Couldn’t agree more. The Tech bubble was caused by the acceptance of shares of stock as a de facto currency by the market.
July 13th, 2009 at 2:53 pm
James:
You clearly haven’t really been following California politics very closely. First, progressives passed TWO majority-vote budgets that precluded the destruction of CalWORKS, CalGrants, and in-home supportive services, and have repeatedly rejected Arnold’s calls for them, to the point where he dropped them. Second, the objection to Arnold’s shenanigans comes from the fact that he keeps coming up with new ones (i.e, moving the goalposts) every time we get close to a settlement. He’s not negotiating in good faith. Third, Arnold’s proposals are basically retreads of his 2005 special election proposals, which were roundly rejected by the electorate – this is budget blackmail, just as it was when Maldonado put a gun to California’s head and threatened to shoot if he didn’t get his referenda.
July 13th, 2009 at 2:58 pm
Because when catastrophes occur, the people most likely to blame are the ones not in charge.
Please show you’re not as stupid as you seem by remembering that the Democrats’ favored plan of still higher taxes was soundly rejected by the public.
July 13th, 2009 at 3:05 pm
One has to live somewhere in order to really get how it works. In NJ and NY, two banana republics of my aquaintance, the local Democratic parties are basically the political operations of the state employees of their respective states, and it seems that that’s the case in CA too.
If one takes something like education policy for poor kids in the inner city, or any other facet of education policy, the Dem’s are pretty much incapable of having a policy beyond teachers don’t get paid enough, they work too hard (smaller class size), and it’s too easy to fire them. Progressive policy intellectuals ever going beyond this is a joke, given that their political party is the Dems, and the Dems don’t and basically can’t do any other education policy beyond this.
If I were a progressive, this state of affairs would really tick me off. I’m not a progressive and it really ticks me off. Why aren’t you guys ticked off?
July 13th, 2009 at 3:08 pm
First of all, the vote against the initiatives in the primary was a tax issue for some, but an underfunding issue and usurpation of the executive for legislative responsibility issue for others.
One thing is certain, a big enough minority of California want to continue to believe that mass tax evasion is the way to raise revenues. Ah, the world’s greatest educational system long down the toilet into the sewage tank. Services? fuggetaboutit, get your own private police force and fire department; health care–why everyone knows that emergency room socialism is cheaper than state funded programs; but hey we have the nation’s biggest prison system even if no one wants to provide the jack for it.
Personally, I don’t want to pay my landlord rent either. How about some state guaranteed ious to cover that. After all I work hard for my money; why should someone have the right to tithe me monthly just for living on his property?
July 13th, 2009 at 3:11 pm
Not as Stupid as Not as Stupid as James Robertson:
Except that virtually done of the May 19th ballot initiatives actually had anything to do with increasing taxes. They voted down securitizing the lottery and stealing money from childern’s health and mental health funds, and a proposition that included a spending cap. And as the good folks at Calitics note, many people voted in local tax hikes, even though that takes a ludicrous 2/3rds vote.
And that the whole thing was not the Democrats favored plan, but rather Maldanato’s blackmail.
July 13th, 2009 at 3:12 pm
* none, not done.
July 13th, 2009 at 3:13 pm
If I were a progressive, this state of affairs would really tick me off. I’m not a progressive and it really ticks me off. Why aren’t you guys ticked off?
The Democratic party in California is an absolute sham. They have all the worst characteristics of the national Republican party pre-2006. The state is totally gerrymandered, so fealty to the power structure is what advances your career. And since no one ever has to run a competitive GE race, no one bothers to learn any political skills, and as a result our bench is worthless.
Outside of a constitutional convention (which I support 100%, even if Arnold’s the one doing the writing) there’s nothing to be done.
July 13th, 2009 at 3:20 pm
Cyrus – actually the ability to deficit spend would be great for California, and for the country.
Yup. It’s absolutely insane that the states don’t have the ability to engage in counter-cyclical deficit spending.
July 13th, 2009 at 3:22 pm
re: my last comment
I mean, there are other problems as well. The Republicans are all extremely right wing. There’s the supermajority for the budget. There’s the Sisyphean effort required to raise taxes. There’s the ridiculous initiative system. And there’s the evil, evil Prop 13, which basically caps property assessments (and thus the concordant taxes) at 1970s levels.
Basically, the state needs to give up and start from scratch. I don’t think incremenatl change can fix it.
July 13th, 2009 at 4:09 pm
And there’s the evil, evil Prop 13, which basically caps property assessments (and thus the concordant taxes) at 1970s levels.
=============================================================
Only if your house is never sold. New construction has a current valuation and houses are reassessed at time of sale.
For all of the hype about Prop 13, if you look at data it’s surprising how little it appears to have inhibited property taxes in California. If you look here
http://www.boe.ca.gov/annual/pdf/2008/table4_08.pdf
you’ll see property tax levies in CA in 1998 were $21.4 billion. By 2007 they’d risen to $47.2 billion. That’s a 121% increase and about 5 times the rate of inflation
July 13th, 2009 at 4:30 pm
#29 – the Democrats have held the legislature in California for eons. It’s pretty much all their mess. So no, it’s not what I care about; it’s demonstrably what some of the most liberal Democrats in the US care about.
Facts hurt, I guess.
July 13th, 2009 at 4:57 pm
James, you dimwitted spiller of your own seed, I’m sure the fact that the Republicans have wrecked the state of California does hurt you. But I don’t see how that’s much of a defense of your position. That’s just whining.
And if you are so stupid you don’t know why that’s the case then you shouldn’t be commenting at all.
July 13th, 2009 at 5:03 pm
Would someone slightly smarter than a banana slug explain to James that holding the legislature is not the same as having total control?
Please use words small enough that he can grasp them. That is, they all need to be single syllable and preferably no more than three letters long.
July 13th, 2009 at 5:14 pm
Some Vegas casinos have already announced they will accept them.
July 13th, 2009 at 5:29 pm
Remind me again where spending bills originate? Oh, right – that would be the legislature. Far be it from me to let Arnie off the hook – he’s happily gone along with the spending orgy until about 2 months ago, and previous Republican governors have as well.
It’s still the case that spending bills originate in the legislature, though, and the only thoughts that the two parties out there can have is:
– Democrats: Raise taxes more, we haven’t killed enough businesses yet
– Republicans: Cut taxes more, never mind that spending is going up like mad
Neither party wants to do the hard work of looking at the spending that CA does and actually deciding what is and is not important. That’s apparently way too much like work.
July 13th, 2009 at 5:36 pm
James, don’t be a moron. The Republicans have childishly stopped any action that might actually solve the problems. Whining that the state should renege on its responsibilities demonstrates that you are one of those little children.
This is not a bipartisan problem. The voters of CA have rightly reduced the crazy party to as small as it can go and still represent the people of CA. Unfortunately some stupid decisions have made it possible for the nuts to prevent any fiscal sanity.
What’s too much like work is for you to know what the hell you are talking about. Is there any topic on which you are not monumentally stupid?
July 13th, 2009 at 5:55 pm
James, you haven’t been paying very close attention, have you.
The governor, who has been very active with his veto pen, is a Republican.
New revenue, which is THE ONLY way to prevent such budget crises from becoming an annual affair, requires a legislative supermajority, which has been blocked by Republicans.
July 13th, 2009 at 6:03 pm
Umm, you might have noticed that the voters of CA voted down a bunch of revenue initiatives that mirrored what the Democrats in the legislature wanted to do. So like I said: Neither party wants to look at out of control spending, absurd union pensions and benefits… they want to play to their base and point fingers.
Wake me when either party sits up and realizes that the pension plans in place in California for state employees are simply not sustainable. That has nothing to do wit ideology – it’s a simple math problem.
July 13th, 2009 at 6:34 pm
@notastupidasnotasstupidas
“that the Democrats’ favored plan of still higher taxes was soundly rejected by the public.”
That had a spending cap in it, which is why many of us rejected it. 30% of us voted. We’ve also recently voted for measures which increase taxes. The spin on the recent elections as a rejection of state spending isn’t even wrong.
July 13th, 2009 at 6:39 pm
“So if California ends up calling a Constitutional Convention, and then the Governator tries to crack down on the delegates, and they swear an oath declaring themselves the Golden State Aseembly, we’re in for some fun times. Vive la Californie!”
All they’ll need is a tennis court. And one fine day, Sarah Palin will morph into Robespierre. I see a mini-series here.
July 13th, 2009 at 6:58 pm
a bunch of revenue initiatives that mirrored what the Democrats in the legislature wanted to do
Only if “mirrored” means “bore little resemblance to.” The items on the ballot were on the ballot precisely because they modified programs that had been enacted by propositions to begin with and thus couldn’t be touched by the legislature.
July 13th, 2009 at 7:01 pm
#49 – the fact is, the public that turned out voted against tax increases – they effectively said “enough”. The people who didn’t vote have likely mentally checked out, thinking that the system is so broken that their vote no longer matters.
None of that matters much though. State Income taxes in CA are already driving upper income people to nearby states, so you’ve hit a state of negative returns there. Regardless of what you think the fairest rates ought to be, upper income people in CA are voting with their feet. If you try to raise state rates more:
– you’ll drive more people out
– there isn’t enough money there anyway
The problem is simple: the spending that Californians have enacted, both in the legislature and in the initiative process, just doesn’t add up. In particular, the guaranteed state pensions to local govt union members is unsustainable. Right now, neither party in California wants to face that reality. Matt wants to talk up the IOUs so that we won’t ponder how California’s present presages our national future. And too many people in the comments just want to spit, yell, and toss pejoratives because the truth: the unsustainable nature of California spending – hurts too much.
Spending cuts out there don’t have to mean the end of state welfare programs. It looks like that’s the path though, because SEIU members pay, benefits, and pensions are just way, way more important.
July 13th, 2009 at 7:31 pm
James, I spit pejoratives at you because you are too fucking stupid and too fucking selfish to acknowledge the truth – there is no way to get enough money in CA because the Republican Party has devastated the system.
It’s not the selfish working people whose unions negotiated in good faith for benefits on the back end rather than pay now. What you want, you selfish asshole, is to, once again, show that no one should ever, ever, ever, assume that a negotiation is in good faith instead you should realize that the assholes who have the power will come back after your concessions on the now to create concessions for you in the then.
But what’s important to you is that the Republicans don’t get their fair share of the blame (which is pretty much all of it) and that you get to fuck over those who work for a living.
July 13th, 2009 at 7:38 pm
@JamesRobertson
Funny you should mention the canard of the rich fleeing California.
http://www.sacbee.com/static/weblogs/capitolalertlatest/023782.html?mi_rss=Capitol%20Alert
“Rich Aren’t Fleeing California, PPIC Study Concludes” is the title of that article. It came out two days ago.
Income taxes are high, but property taxes are low. Overall CA is just into the top-third in tax burden.
Further:
There’s just no reason to think that more people voted against the propositions because they didn’t want higher taxes. As I said, recently people have voted for a whole spate of new spending programs.
The majority of people in the state vote center-left. Its current problems are wholly a result of Prop 13–both the 2/3 requirements and the gutting of property tax revenues.
July 13th, 2009 at 7:41 pm
Btw, JamesRobertson, why are you against the middle class? Why do right-wingers hate those with decent retirement plans? You should attempt to dress up your love of plutocracy a bit. Try the American flag; that usually works well.
July 13th, 2009 at 7:50 pm
Here are some salient facts vis-a-vis the California budget.
http://www.cbp.org/pdfs/2009/0902_Californias_Tax_System.pdf
You can see how corporations pay almost nothing in California, and the actual tax paid is highest for the middle and working classes.
July 13th, 2009 at 8:20 pm
I’m not “against” pension plans – I’m against ponzi schemes for which the math doesn’t work.
Prop 13 only locked in property tax rates for existing owners. It whacks people buying in. My neighbors left California because they had no hope of buying there. Even in my over-priced neighborhood, they could afford to buy.
As to “There’s just no reason to think that more people voted against the propositions because they didn’t want higher taxes”
Sure. You keep telling yourself that. Keep taking your meds, too.
July 13th, 2009 at 8:37 pm
It’s an intuitive, immediately appealing proposal. I can think of at least three ways it could destroy the whole country off the top of my head. I could see it getting a lot of attention in a California stalemate. I can see an indefinite stalemate.
July 13th, 2009 at 8:42 pm
Why haven’t we thrown California out of the union yet? It can along with Texas and Florida.
July 13th, 2009 at 9:05 pm
Much has already been said to refute James Robinson.
I’ll only add a couple things.
1. As people at Calitics have noted, the supposedly anti-tax California electorate of May 19th also improved local tax increases in a variety of localities and counties, which requires a 2/3rd vote, thanks to Prop 13.
2. The May 19th ballot referenda were not the favored plan of the legislative Democrats – as can easily be shown by the majority-vote budget they passed prior to the eventual 2/3rd budget which the May 19th ballot referenda were a part of.
3. Contrary to the argument that Democrats have refused cuts, they have in fact cut $15 billion dollars over the last three years – prior to the $15 billion in cuts done back in February and the $20 billion in cuts proposed by Democrats at their most recent majority-vote budget. So adding it all up, Democrats have in fact shown themselves willing to cut $50 billion; all but three Republicans have been unwilling to vote for $1 in new taxes.
July 13th, 2009 at 9:25 pm
Funny you should mention the canard of the rich fleeing California.
You’re correct, actually it is the poor fleeing California and a lot of them coming right here to Nevada despite the fact that we are about as bad as you guys, or in the case of Las Vegas which is believe or not actually worse.
They are coming to avoid the relatively high rents and unemployment of the Bay and Sac areas but unfortunately, we have low rents but no jobs and even fewer state support services, so people end up homeless anyway.
It’s a miracle that our highly disfunctional state government hasn’t botched it as bad as CA, but somehow they ended up not screwing the budget this spring, I doubt they’ll have the same discipline next year.
July 14th, 2009 at 1:27 pm
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July 14th, 2009 at 2:49 pm
The Lorax Says:
July 13th, 2009 at 7:38 pm
@JamesRobertson
Funny you should mention the canard of the rich fleeing California.
http://www.sacbee.com/static/weblogs/capitolalertlatest/023782.html?mi_rss=Capitol%20Alert
“Rich Aren’t Fleeing California, PPIC Study Concludes” is the title of that article. It came out two days ago.
Income taxes are high, but property taxes are low. Overall CA is just into the top-third in tax burden.
=============================================================
Did you really read this? Very misleading title, obviously doing their best to spin the situation. A more accurate title might be: “Rich Aren’t Fleeing California Quite as Fast as Poorer People”.
At the upper income end, it still shows a net emigration from the state of 9%. At that rate ten years and everyone’s gone.
Believe me I left Southern California for Colorado in 2007. You could see the train wreck on the horizon
July 14th, 2009 at 4:05 pm
This is just not fundamentally how the IOUs work, and people who have no understanding of it are wildly claiming “California made their own currency” based on nothing. What currency that you know isn’t honored by banks? What currency cannot by law be used to pay state employees? What currency bears short-term interest that must be paid off by dollars in three months?
The IOUs were distributed – and Arnold actively interfered to speed their distribution – to force a solution to the budget crisis on Republican terms. That’s all. Nothing else.
July 14th, 2009 at 11:59 pm
dday:
There are other reasons that can be ascribed to the issuance of IOUs, aside from the very obvious one that the state is out of money. One of them is that every IOU is worth less than its face value when you factor in risk, the recipient’s opportunity cost, and the state’s opportunity gain because their cost of borrowing regular currency than their cost of issuing IOUs. So it makes sense for California to issue IOUs because they make money, AND it smoothes their cash flow.
July 17th, 2009 at 10:45 am
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