Hasta la Governator

I think this is and interesting video about the current governor of California and the crisis affecting the state. (Warning: it is from Reason.com so take that as you may.) California has consistently expanded it's budget without regard to income, payment, or sensibility. (Here is an article from the economist.) Basically the state is in huge trouble and not all of it can be blamed on any one group (liberal, conservative, illegal immigrants, unemployed, elderly, etc.) they are all to blame.

There are lots of reasons for the problems however I suspect one reason that goes under reported is the moving of industry out of the state. If you look at major players who were once completely in that state, they have moved a lot of work outside the state. Who can blame them with a state income tax of 10% and a sales taxes of about 10% it wouldn't be hard to lose over 50% of your paycheck to taxes (Lets say you were trying to live a middle class lifestyle in San Diego: 8.750% sales tax + 9.3% income tax + 33% Fed taxes to buy companies + property taxes + etc.). Who would want to do business in that state? Your employees are going to be poor forever even if (maybe because) you pay them well.

What I find interesting is that even Paul Krugman (prior post) is against prop. 13. It is sensible to be against it as it is a very destructive law that hurts the state. However I would not have suspected he would have been as outspoken against it. Price controls on rents and housing are a mainstay of modern liberal thought of which he is a card carrying member. For proof look at anything the democrats say currently about propping up the housing bubble. Which actually makes the housing unaffordable but they coach it as making housing affordable by giving tax breaks and the like. (Which just raises the costs for everyone which leads to inflation and on and on.)

Basically it is very likely that major change will have to come to the state soon. The system just cannot support itself. For me, I feel the biggest problems are the ease with which the California constitution is amended and prop. 13. If those two things were removed then maybe other systemic issues could be solved. However without those changes there is little hope for real change as the state is subjected to the every whim of current popular thought.