From direct democracy to direct federal financial rule in California
The obvious penalty to discourage recidivism is to impose direct financial rule by Washington over the state of California in exchange for fiscal financial support for the state of California from the federal government. That is what happens with municipalities and counties that go or are about to go belly up financially and that turn to the state government for financial support. It is what happens in other federal systems when a state government knocks, cap-in-hand on the back door of the federal Treasury, begging to be rescued. Direct financial rule would mean that neither California's state executive nor the its state legislature would have any financial decision making powers until financial normalcy is restored. California's `proposition mechanism' would also be suspended for any proposition that would have financial implications for the state. A federally appointed Board of Overseers would have full powers to cut public spending, raise existing taxes or introduce new taxes or charges until the budget deficit has been eliminated in a sustainable manner. Such direct financial rule reduces the state of California to a legally and financially incompetent minor. Because that is exactly the way the state has acted and continues to act, this is both efficient and fair. The only irony is that this direct financial rule rule would be excised by an entity appointed by a federal government that itself is structurally incapable of putting its fiscal house in order. But that is an irony Californians will have to learn to live with. Beggars can't be choosers.
Direct financial rule would mean that neither California's state executive nor the its state legislature would have any financial decision making powers until financial normalcy is restored. California's `proposition mechanism' would also be suspended for any proposition that would have financial implications for the state. A federally appointed Board of Overseers would have full powers to cut public spending, raise existing taxes or introduce new taxes or charges until the budget deficit has been eliminated in a sustainable manner.
Such direct financial rule reduces the state of California to a legally and financially incompetent minor. Because that is exactly the way the state has acted and continues to act, this is both efficient and fair. The only irony is that this direct financial rule rule would be excised by an entity appointed by a federal government that itself is structurally incapable of putting its fiscal house in order. But that is an irony Californians will have to learn to live with. Beggars can't be choosers.
ChrisCook:Frankly, unless Washington prints money and bails out every state that needs capital, including California, federal power will decline amidst this severe economic recession, and the process of a soft American devolution will begin. If you think this idea is outrageous, then you've still not come to terms with a core reality of our current situation: the structure of this financial crisis is wholly different than any in our post-war era. This isn't a recession. This is collapse.FT.com: From direct democracy to direct federal financial rule in California (Willem Buiter's Maverecon, July 13, 2009)The state still services its outstanding stock of official debt with cash, which is why no formal event of default has been called yet, but de-facto California has already defaulted on its financial obligations and commitments by paying suppliers and employees with funny money rather than with cash. When the banks stop accepting the IOUs except possibly at massive discounts, which will happen soon unless an early resolution of the budgetary stalemate is achieved, the state of California will close down for business. Municipalities and counties dependent on state funds will follow suit. Before long the teachers won't teach, the fire fighters won't fight fires, the police won't maintain law and order and neither garbage nor taxes will get collected. It will be a grand Hobbesian experiment.Energy Bulletin: Closing the 'Collapse Gap': the USSR was better prepared for collapse than the US (Dmitry Orlov, December 4 2006)My talk tonight is about the lack of collapse-preparedness here in the United States. I will compare it with the situation in the Soviet Union, prior to its collapse. The rhetorical device I am going to use is the "Collapse Gap" - to go along with the Nuclear Gap, and the Space Gap, and various other superpower gaps that were fashionable during the Cold War....The subject of economic collapse is generally a sad one. But I am an optimistic, cheerful sort of person, and I believe that, with a bit of preparation, such events can be taken in stride. As you can probably surmise, I am actually rather keen on observing economic collapses. Perhaps when I am really old, all collapses will start looking the same to me, but I am not at that point yet.And this next one certainly has me intrigued. From what I've seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we won't be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.
Frankly, unless Washington prints money and bails out every state that needs capital, including California, federal power will decline amidst this severe economic recession, and the process of a soft American devolution will begin. If you think this idea is outrageous, then you've still not come to terms with a core reality of our current situation: the structure of this financial crisis is wholly different than any in our post-war era. This isn't a recession. This is collapse.
The state still services its outstanding stock of official debt with cash, which is why no formal event of default has been called yet, but de-facto California has already defaulted on its financial obligations and commitments by paying suppliers and employees with funny money rather than with cash. When the banks stop accepting the IOUs except possibly at massive discounts, which will happen soon unless an early resolution of the budgetary stalemate is achieved, the state of California will close down for business. Municipalities and counties dependent on state funds will follow suit. Before long the teachers won't teach, the fire fighters won't fight fires, the police won't maintain law and order and neither garbage nor taxes will get collected. It will be a grand Hobbesian experiment.
My talk tonight is about the lack of collapse-preparedness here in the United States. I will compare it with the situation in the Soviet Union, prior to its collapse. The rhetorical device I am going to use is the "Collapse Gap" - to go along with the Nuclear Gap, and the Space Gap, and various other superpower gaps that were fashionable during the Cold War....The subject of economic collapse is generally a sad one. But I am an optimistic, cheerful sort of person, and I believe that, with a bit of preparation, such events can be taken in stride. As you can probably surmise, I am actually rather keen on observing economic collapses. Perhaps when I am really old, all collapses will start looking the same to me, but I am not at that point yet.And this next one certainly has me intrigued. From what I've seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we won't be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.
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The subject of economic collapse is generally a sad one. But I am an optimistic, cheerful sort of person, and I believe that, with a bit of preparation, such events can be taken in stride. As you can probably surmise, I am actually rather keen on observing economic collapses. Perhaps when I am really old, all collapses will start looking the same to me, but I am not at that point yet.
And this next one certainly has me intrigued. From what I've seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we won't be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.
A lot of its revenue has been earmarked for particular purposes (as a sweetener to get taxes approved by a referendum) so that the general fund available for discretionary expenditures is very small. There is hardly any leeway to shuffle money among budget categories. The peak-to-trough part of the business cycle is an outlier. Carnot would have died laughing.
There are very way too many very way too rich people in the state to allow that to happen. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
Anything essential is earmarked to prevent the insane political ideologues in Southern California from using the state budget as a social experiment any more than they already have.
This is why it is typically best to ignore the state when they whine yearly about "going broke" and "catastrophic cuts" because they're really only talking about a very small $% of the budget.
The real issue that is coming to head this year is of course the lack of revenue due to not collecting nearly enough taxes on property. This is just the kind of catastrophe necessary to bring "prop 13" back into the discussion.
I linked to that blog recently...
