California is Insolvent, Fiscally and Otherwise

California, the most populous U.S. state, is a social trendsetter that is also at the leading edge of local governments failing to come to terms with an economic crisis.

[From California governor offers new budget fix plan | U.S. | Reuters]

What is really amazing about the fiscal situation in California is how many people simply don’t make the obvious connection of the two observations noted in the above quote.

California already has some of the highest income and sales taxes in the country, it is cognitive dissonance to suggest that more taxes will solve our financial crisis when that has failed miserably as a strategy to date.

The governor’s plan also fails the common sense test by suggesting that attaching an additional $14 billion in tax assessments will result in anything but more economic contraction. Just think about it for a moment, the state is proposing taking an additional $14 billion out of the hands of consumers in the state, their spending will simply not be at the same level because consumers don’t have an extra $14 billion to give the state.

Lastly, the state is now saying that they will be paying their bills with IOUs come February. Taxpayers of this state should respond in kind with a massive civil disobedience campaign, let’s pay our taxes with IOUs to express our displeasure with the political leadership in Sacramento.

Decline and Fall of Europe

This is a really interesting book that should be viewed as informative for the American experience. Prof. Thornton cites economies as less adaptable and competitive because of an enormous regulatory burden, social welfare entitlements are incredibly expensive, and low birth rates (often as a function of cost of living) as factors in the demise of Europe.

There’s also an interesting discussion about the role of secularism in eroding the fundamental belief system that created Europe and the New World.

What I find interesting about Europe and the U.S. is that as manufacturing economies become less competitive and shrink as a result, financial services industries grow disproportionately and government strategical dependency on financial services sectors becomes unavoidable. Well that hasn’t worked out so well for Europe or the U.S.

“Decline and Fall: Europe’s Slow Motion Suicide” (Bruce S. Thornton)

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