Is California Sliding into a Depression?

Russ Steele

California’s tax revenues are down 20.2% in a month that citizens normally pay their taxes.  From Controller John Chiang’s Press Release:

“Year-to-date through April, total revenues were down $3.5 billion (-5.1 percent) from estimates in the Governor’s proposed budget. Leading that disparity was income tax, down $2.7 billion (-6.2 percent). Sales tax missed estimates by $411 million (-2.7 percent), and corporate tax receipts were down $464 million (-7.0 percent).”

“The State ended last fiscal year with a cash deficit of $8.2 billion. The combined current-year cash deficit stands at $19.2 billion. Those deficits are being covered with $12.8 billion of internal borrowing (temporary loans from special funds) and $6.4 billion of external borrowing.”

To pay the bill the State is stealing from key Trust Funds and borrowing from Wall Street banks.  How long can this go on?  California unemployment is not recovering, being the second highest in the nation.  Small business new starts are down according to the Census.

This press release does not consider the $10 Billion the the State borrowed from the Federal government to pay unemployment checks. It does not address the $500 Billion of underfunded retirement programs.

When are the Democrats going to come clean with California citizens? We cannot fix the problem, until we admit we have one.  When will they admit we are in a depression? More taxes are not the solution, the only effective solution is to revive the economy. Other states are drilling their way out of a national recession and we are sliding in to depression.

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About Russ Steele
Freelance writer and climate change blogger. Russ spent twenty years in the Air Force as a navigator specializing in electronics warfare and digital systems. After his service he was employed for sixteen years as concept developer for TRW, an aerospace and automotive company, and then was CEO of a non-profit Internet provider for 18 months. Russ's articles have appeared in Comstock's Business, Capitol Journal, Trailer Life, Monitoring Times, and Idaho Magazine.

11 Responses to Is California Sliding into a Depression?

  1. sean2829 says:

    Russ,
    I know you said revenues in CA are falling behind projections but are actual revenues down? For 2011, the census bureau says states revenues overall are up 9.4% and California even led the way on increases in (recessive) fuel taxes. http://www.census.gov/newsroom/releases/archives/governments/cb12-62.html California specifically increased revenue by 11% over 20110 according to this document: http://www2.census.gov/govs/statetax/2011stcreport.pdf It looks to me that the problem is folks who pay taxes can’t seem to generate revenue as fast as the state can spend it.

    • Russ says:

      Sean,

      Thanks for the input. You are correct, we have a spending problem. If we could stop spending, our current revenue would eventually catch up. But, there are other economic issues that are taxing business.

      “But try telling that to California’s Democratic legislators. Assembly Speaker John Perez is pushing hard to get AB 1500 passed. The bill which would impose a $1 billion tax hike on businesses which are not headquartered in California, but have significant operations in the state.

      Then we have the Brown/unions/Munger $160 billion tax increase ballot measure to deal with

      And then there are AB32 Cap and Trade billions that will have to be paid.

      It just never gets better.

  2. Arthur M. Day. says:

    Ancient economic wisdom: If your outgo exceeds your income, your upkeep will be your downfall. Ancient Chinese wisdom: He who rides the tiger (socialism, i.e. buying votes with other people’s money) may not dismount. The sane drain will only accelerate. Russ, when are you going to join the march? There is no light at the end of California’s tunnel.

    • Dena says:

      I can understand Russ staying. He is retired so he doesn’t need a job, he has family and he is willing do and able to live on little money if needed. He also has a great location away from major population centers which add a degree of security if things really fall apart. He is one of the few who get through a collapse without it disturbing his life style much. The bad place to be would be near Los Angles or San Francisco. Those ares could become a hell very quickly.

      • Russ says:

        Dena,

        There are a group of us retired folks here in the foothills that are worried that the impact will be when San Francisco turns in to a mini-hell and people start escaping in to the foothills. What do we do with al these needy people, how to we keep them from attempting to take what we have built and nurtured in preparation for a future disaster. We are prepared to support our own needs, but not for the thousands that will flood in to the foothill. We have tried to discuss the issues with out local government leaders, but they just shrug and hope it never happens. But, it will, the only variable will be when.

      • Dena says:

        I could be wrong, but I would suspect they would head for another major population center such as Las Vegas or Phoenix. They could also head north to Oregon or Washington. Big city people would want to find another big city instead of a small town which they don’t know how to get by in.

        We see something like that where I live. I am on the outer edge of Phoenix and people come out here to drop off their trash and pets they no longer want because they think nobody lives out here. The truth is the population extends about another 20 miles but it is sparse and if you don’t know the area you could fall into that logic trap. The things that makes it appear that way is the indian reservation just a short ways away along with the salt river that has a floodplain topped off with farm land. It’s the reason many city people would find it hard to survive outside of the city or inside the city if services were restricted. For them the end of the world is at the city limits.

  3. stevefrisch says:

    Tin foil hat, meet immovable object!

  4. gjrebane says:

    Depression2 is now 3.5 years old. And Obama is following in FDR’s failed footsteps.

  5. Arthur M. Day. says:

    What do you do with invading city people when it all collapses? Shoot them and eat them. People out here in the woods across Puget Sound from Seattle where I live have license plate frames that say: “Don’t trifle with me, I have a gun, a shovel, and acreage.”

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