Californians talk about default fears. No politics

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gdetore
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Californians talk about default fears. No politics

Post by gdetore » Sat Jun 27, 2009 6:14 pm

I like valuethinkers thread giving a head's up on exposure to Ca bonds, but notice a lot of people want to hear about, or talk from experience about, what we see in California. Maybe this thread could do that IF we promise not to bash politicians. If it ain't civil the moderators will lock us up. :(
So I'll start. I do have exposure to CA munis. And the usual in Vang Total Bond.
Reaction? Ehh. Californians have struggled since Prop 13 (that basically froze rising house taxes). We have the once populist option of creating props and doing the budget ourselves, which has ended up totally befuddling the statewide budget process. It may be time to revisit how how we vote on taxes and spending (this much for schools, this much for prisons, etc) without voting to pay for it.
But it is not Grapes of Wrath time here, please. Life goes on, it is expensive to live here, so public employees may look like they make a lot (I am a teacher) but it is gobbled up with higher cost of living in great state (climate, scenery at least).
People LIKE it here. I grew up in New Jersey, it was fine. I am not going to pick a place to live my one short life based on income tax or that year's legislature!
We can all speculate on solutions to the crisis, like we did during the banking/Lehman debacle, but it all will work out and people will pay their taxes and enjoy the weather and variety of people and keep investing in bonds and paying taxes.
Everybody thinks THEY pay too much tax, but try firing THEIR teachers, THEIR firemen, etc. We all want the services that make life safe and healthy. So turn off FOX and MSNBC or whatever the financial channels are that spew nonsense to get you to watch to support sponsers and stay Bogleheads. Diversify, buy and hold, and come visit California on your next vacation.

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kramer
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Post by kramer » Sat Jun 27, 2009 8:13 pm

I am in California at the moment. *Everyone* that I have talked to wants the pensions of their firemen and their teachers lowered, that is for sure.

Even for current pay (not comparing benefits, pensions, summer time off, etc), California already has the highest paid teachers in the nation:

http://www.nea.org/home/29402.htm

Those with government jobs may not be planning to leave during their working career, but many others in the private sector are leaving. And many of the government employees leave as soon as they retire. My cousin just retired a few days ago from a California school district and is thinking of moving to Texas now to avoid the high cost of California living (mostly due to indirect mandates) and high taxes on her generous pension.
Consider California’s net domestic migration (migration between states). From April, 2000 through June, 2008 (8 years, 2 months) California has lost a NET 1.4 million people. The departures slowed this past year only because people couldn’t sell their homes.
http://www.mdp.state.md.us/msdc/Pop_est ... table5.pdf
These are not welfare kings and queens departing. They are the young, the educated, the productive, the ambitious, the wealthy (such as Tiger Woods), and retirees seeking to make their pensions provide more bang for the buck. The irony is that a disproportionate number of these seniors are retired state and local government employees fleeing the state that provides them with their opulent pensions – in order to avoid the high taxes that these same employees pushed so hard through their unions.
Kramer

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Post by MWCA » Sat Jun 27, 2009 8:22 pm

They could start with the ridiculous state health and pensions. :)

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Post by Levett » Sat Jun 27, 2009 9:08 pm

Prop 13. That's where it all began in, oh, so many ways.

How do you unwind its many effects?

Godspeed to all Californians. It was once my home state. Bob U.
There are some things that count that can't be counted, and some things that can be counted that don't count.

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Post by Oicuryy » Sat Jun 27, 2009 9:50 pm

Is it legal to buy California's registered warrants at a discount? I might offer 90 cents on the dollar.

Ron
Money is fungible | Abbreviations and Acronyms

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gdetore
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Post by gdetore » Sun Jun 28, 2009 2:38 am

The problem of health and pension avoids the issue. It's a minor part of California's budget and really points to the problem that so many other people don't have pensions and health care. That seems a bigger moral crime. Cutting off the last few benefits so everyone is screwed isn't a good solution. How do we give more people more coverage (and pay for it)? Maybe Hedge fund managers and investment bankers shouldn't take home twenty million a year as they bring down the financial system. I guess this discussion can't happen on this site because the problems get blamed on poor politics and the solutions are devised by politicians, so every discussion gets back to conservative liberal issues.
I hope California can go back to the sixties when it was the golden state and we expected to contribute to the better good-roads, schools, government, jobs, parks, neighborhoods.

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kramer
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Post by kramer » Sun Jun 28, 2009 3:22 am

gdetore, I say this in the nicest way possible and I don't mean any harm or bad will to you. But you need to get out and talk to some people that are not working for the government in California. And to say that not having a pension is a "moral crime", Lord have Mercy.

California has a spending problem (as shown by per capita spending figures) and has a hostile business regulatory environment. Zoning and environmental rules dramatically increased the cost of housing compared to other parts of the country. Virtually no one denies this.

I agree that Prop 13 is bad public policy. But that does not excuse the out of control spending by the state.

I have current links to back all this up along with a lot of other statistics on overspending but I agree, let's not get too political.

The reason California can't go back to the 60's or the 80's is because the political left has taken over the state. Now they are simply reaping the consequences of their policies.

Kramer

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celia
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Post by celia » Sun Jun 28, 2009 4:02 am

Not only does California have the highest or second highest income tax rate in the country, but I would guess that about half of the people don't pay any taxes (due to being below the minimum income before taxes need to be paid). With that many non-payers, it is easy for them to vote for everything to pass that requires money since they know they won't have to pay for it (ie, Why not get as much as you can when it is "free").

So I think part of the solution is to lower the threshold for who needs to pay income taxes so that there aren't as many people voting for "free" things we can't afford. If they have to help pay for new programs, they'll have second thoughts on voting for them.

I've heard that many of the higher income residents and companies are leaving or have left the state. That leaves even fewer taxpayers to pay for state programs, unless new taxpayers are added.

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Post by Levett » Sun Jun 28, 2009 4:59 am

gdetore--

I well remember growing up in and getting a great public education in the golden state.

In fact, this was the major topic of conversation last night at a dinner party, where three of the four men came from California and truly lamented what is happening in the state.

There was no gloating. We were all grateful to the golden state for helping to launch our adult lives and careers.

The entire country needs California to get well. Bob U.
There are some things that count that can't be counted, and some things that can be counted that don't count.

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Post by Valuethinker » Sun Jun 28, 2009 6:32 am

bob u. wrote:gdetore--

I well remember growing up in and getting a great public education in the golden state.

In fact, this was the major topic of conversation last night at a dinner party, where three of the four men came from California and truly lamented what is happening in the state.

There was no gloating. We were all grateful to the golden state for helping to launch our adult lives and careers.

The entire country needs California to get well. Bob U.
In the late 1960s there were major cuts in the U of CA funding which were very popular because of anger against protesting students, and as I understand it, this has continued since.

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Post by Valuethinker » Sun Jun 28, 2009 6:38 am

celia wrote:Not only does California have the highest or second highest income tax rate in the country, but I would guess that about half of the people don't pay any taxes (due to being below the minimum income before taxes need to be paid). With that many non-payers, it is easy for them to vote for everything to pass that requires money since they know they won't have to pay for it (ie, Why not get as much as you can when it is "free").

.
I am afraid I cannot reply to that without going into political analysis about how California is structured, and how it votes.

That would be a good analysis that you have proferred, but my understanding is that the data shows that the plurality of voters in CA are in fact, income tax payers.

ie that although income tax payers are a minority, they have a far higher participation rate in the political process.

What I think is really wrong is the State Constitution which allows voters to sponsor initiatives without any reference to cost ('3 strikes and you are out' has flooded the CA prison system with largely non-violent offenders at massive expense). Proposition 13 cripples local funding compared to, say, Texas.

And the requirement for (60% or 2/3rds?) majority on any funding or budgetary bill.

And the gerrymandering of districts which means officials are always reelected but vulnerable in their primaries to more zealous idealogues of their own party (heavily funded by 3rd party interest groups like Club for Growth and the Trade Unions).

The result is the elected officials have zero incentive to collaborate in resolving budget problems. Because what they fear is a primary challenge from someone more extreme in their own party.

And it's classic Game Theory. The minority party will take no pain with its voters (who oppose any and all taxes, and attribute all ills to excessive government spending on 'those people') if it refuses to cooperate and, in effect, prevents any solution emerging.

You essentially have created a system which, in Game Theory terms, is guaranteed to deadlock, and hence to crisis. Only crises allow any kind of resolution.

Because the way legislative democracy is designed to work is the opposite, it functions by creating bipartisanship.

But in the CA case, the system is structured so it cannot do that: the political pain for 'crossing the floor' is just too high.

What actually has to happen, and we all know this, is that taxes have to rise (which taxes depends) and spending has to be cut. For both parties, that is contrary to the interests of their core supporters.

Government is messy and painful that way, but that is how democracy works. Everybody gives up something, in return for something else.

But CA is currently structured so that is not possible. Hence, crisis.

For the world's 4th (5th?) largest economy, it makes for a curiously 3rd World sort of politics-- shades of Italy or Belgium.

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Post by Levett » Sun Jun 28, 2009 6:51 am

Hi VT,

I'd love to give you my personal narrative (interpretation) of what went wrong in the 60s, but that would unavoidably involve some political statements.

It truly saddens me to see what has happened to a once great state.

It's still an awfully beautiful place to visit--especially from the Bay Area north. Bob U.

P.S. Taxes have to rise and spending has to be cut throughout our country. To think otherwise is to be in deep denial.
There are some things that count that can't be counted, and some things that can be counted that don't count.

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Post by Index Fan » Sun Jun 28, 2009 7:00 am

But it's business as usual in some quarters:

BART strike threat looms in Bay Area
As the Bay Area braces for a possible BART strike, transit union and management negotiators struggle to reach an accord on issues that have dogged the transit system for years: benefit costs and work rules...

A top-scale station agent and top-scale train operator each make $30.01 per hour, $62,860 a year, in base pay. The transit system also pays 100 percent of the so-called employee contribution toward pensions — an amount equivalent to 7 percent of a salary — though many other California public agencies require workers to pick up some or all of that contribution toward their state pensions.

Overall, BART employees — including managers and hourly workers — get average total annual pay of $71,633, including overtime, and BART picks up an average of $48,000 a year for each worker's benefits, the transit system said.

Workers contribute $81.90 a month toward medical insurance.

Antiquated work rules hurt BART finances by ramping up overtime, BART officials said.

They point to rules requiring that two workers remove seat covers and backing for cleaning. A utility worker unsnaps the cushion. A journeyman mechanic is called in to remove two screws for the seat backing.

Among cleaning crews, a worker in one job classification cleans inside stations and another worker in another classification cleans outside the roof line of stations.
"Optimum est pati quod emendare non possis." | -Seneca

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Post by bmb » Sun Jun 28, 2009 8:17 am

Well, now that you all haven't gotten all political...
The problem is that people want lots of stuff but aren't willing to pay for it. That has nothing to do with the left or the right or the 1960s.
All that illegal immigration hasn't helped either, and that is something I know from first hand wasn't just encouraged by the left, it was mostly right-wing businessmen who encouraged and profited from it, while they bemoan it and avoid the high taxes that have resulted.

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