Questions that answer themselves

What, me worry?

Roger Simon: Is California insane? The voters on the left coast seem ready to elect Jerry Brown and Barbara Boxer, the Demmerkrat candidates for governor and senator, respectively, and Mr. Simon wonders why. Here’s why: We as a nation, and certainly Californians, still believe in a free lunch. You can have a green economy, clean air, free medical care, great schools and well paid union workers, all at no cost. All that’s needed is to cut “fraud and waste” and presto! We’ll witness the restoration of the garden of Eden.

So, it would seem that we’re still a few election cycles away from bellying up to the reality bar. Hard to believe, but things will have to get even worse before voters get it. And things will get worse.

21 Comments

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21 responses to “Questions that answer themselves

  1. Pesky Truth

    And Roger Simon, as he showed for 8 years of the previous administration, believed we can have two wars, a vast expansion of Medicare, and huge new social programs like No Child Left Behind…”all at no cost” and requiring that taxes never be raised.

    And, because he approvingly posts Simon’s commentary and like Simon was quiet as a mouse for 8 years, so does Chris Fountain, apparently.

  2. Libertarian Advocate

    Not only that, but Jerry Brown has said as much…

    http://libertarianadvocate.blogspot.com/2010/10/this-is-why-califonia-is-fed.html

    Actually the title to my post reads: This is why California is F***ED!

  3. Peg

    I just want to make sure that the rest of us don’t have to bail out whacky CA when the desperation reaches its heights.

    Maybe they can become their own little bankrupt nation on the Pacific?

  4. And the two opponents for Brown and Boxer are Whitman and Carly Fiorina. Dare I say it, two corporate washouts.

  5. cos cobber

    Pesky truth, where did fountain say bush did a good job?

  6. Old School Grump

    No, silly boy, “cutting fraud and waste” is just the come-on. Once they’re elected, they’ll get down to business: demanding that “the rich pay their fair share.” I’m sure Aahnold will have found a new domicile by then.

  7. Inagua

    Pesky has a point, Chris. When you say that Bush was an “okay” president you are implicitly endorsing No Child Left Behind, the prescription drug benefit, two wars, TARP, and the auto loans.

    Californians are politically insane. I know. I live here. I interact with liberals everyday. And they simply do not connect the dots between their ideals and the resulting economic reality. California is on a downward slide that is making life less attractive for the middle class, but for those with money everything is still very nice. And the weather is so wonderful that almost everyone you meet is still very agreeable.

  8. Daniel

    Whitman cut a deal with the police and fire unions to not mess with their pensions in exchange for their endorsement. We need to go into default on our debt before anything will get done. I give it a few more years.

  9. California is hollowing out. As a state, it’s a perfect picture of “unsustainable.”

    We should all pray to Saint Andreas to show California all of it’s faults and wash it into the Pacific.

    (Except for Pebble Beach.)

  10. Inagua

    Daniel,

    There are alternatives to default — a federal bailout, sale of state assets, expansion of the bankruptcy code to include states, or even an economic recovery.

  11. LLS 2

    middle class have been taking a hit for the last 30 years or so.

    welcome to 3rd world america

  12. Actually another reader

    Really important point – YES, the chick in the photo Chris selected should WORRY that you could slide a dictionary down her cleavage and not “touch” either boob. Yuck!

  13. Sanjay Bigglesworth

    If that picture is of an insane Californian, then color me the mayor of crazy town.

  14. Georgie in Greenwich

    CF, this was really well said….and sad to say, CT—and even Greenwich is drinking from the same kool-aid.

    Until this nation gets that there is no free lunch and that we are losing our competitive edge (i.e. potential for real economic growth) based on keeping the status quo we are going to see things get a lot worse before they get better.

  15. Anonymous

    CA’s capitalists (and some of its biggest taxpayers) largely reside in Woodside and Atherton (and Beverly Hills), away from the G550 commies in Palo Alto

    But CA’s income taxes (and housing costs) are still far lower than those of Manhattan, which suffers the various G550 commies who reside at 15 CPW and in UES’ ole tenements (AKA co-ops on 5th or Park)…as well as crappy yr-round weather and far worse roads and parking infrastructure

  16. Anonymous

    Not a single comment on your accompanying picture…I’m surprised. A wide gap between the mountains.

  17. HG

    Politically, I am on the same page as CF and all the fiscally responsible posters here. The problem is no longer that the voters are still voting themselves free lunches served up by Boxer, Brown, et al. That was the problem ten years ago. Now, you could clone Chris Christie and put him in every elected office in the land and it would not make a difference. DEFAULT IS CERTAIN. In some form. The time for fiscal responsibility was in the 1980s and 1990s and although Republicans did a piss-poor job, the Democrats stand head-and-shoulders above them in terms of fiscal irresponsibility. When I point out that the US government is levered at 15-20x revenues, partisan Democrats splutter that the budget was balanced under Clinton and it is all Bush’s fault. But these 130 IQ Ivy League graduates, sad to say, are just financially illiterate. The budgets they are citing ignore generational accounting, i.e., Medicare and Medicaid. We are entering a period when the exercise is no longer about balancing the budget…it is more akin to a proceeding in bankruptcy court. Proceedings in a corporate bankruptcy involve various creditor classes fighting over the remaining, valuable operations of the business. The next 30 years in America will be about fighting over the limited cash flows (say, 20% of GDP) that can be collected as taxes and which must be used to cover expenses, including Medicare, that are scheduled to mount toward 50% of GDP. Chumps, including the Chinese taxpayer, are buying something called Treasury bonds…in a corporate bankruptcy, the bondholders inherit the estate but in the constructive default of the US government I think it is very unlikely that someone with a piece of paper (and no voting rights) is going to prevail. The trick for all of us is to stop worrying about the public policy issues–public policy is just going to be a mess–and figure out what asset class represents true seniority in the coming default.

  18. Georgie in Greenwich

    hg…confused on your point, or better said, the solutions for the future.

    How can Chris Christie (or hundreds of him) and his approach to stop spending is not be the answer?

    Regardless of the many reasons of how we got here, going forward is about cutting spending and living within our means. No more, no less. Is it not?

  19. Inagua

    “The next 30 years in America will be about fighting over the limited cash flows (say, 20% of GDP) that can be collected as taxes …”

    If only that were the case, HG. Europe has shown that countries can survive where governments take over half of GDP.

  20. HG

    Inagua, countries have shown that they can fund government expenses equal to half of GDP via borrowing, but they have not shown they can extract taxes equal to half of GDP in a democracy.

    Georgie, sorry, that was a bit of a rant. There comes a point in the life of every overleveraged organization where the amount of debt is so large that no amount of economizing with regard to ongoing cash flows will be sufficient to cover the debt. We have reached that point in the United States and no amount of Chris Christying is going to prevent it. A rule of thumb in leveraged buy-outs might be that you can’t lever a company at more than about 10x cash flow. The US government is levered at 15-20x revenues. Since the first cohort of baby boomers (born 1945-46) begins collecting medicare right around now, the theoretical problem everyone has known about all along is now an actual cash flow problem. As a practical matter, until the government reneges on medicare obligations, we will engage in a process of issuing Treasury bonds to cover medical bills paid by HHS. At some point, we will renege on Medicare promises or we will succeed in translating the Medicare liability into actual contractual liabilities (Treasury bonds) of large size. The Treasury bonds will be no more payable than the Medicare liability was and we will either actually default or constructively default by printing money. It would have been possible to save for this in prior years but I believe the cash flows from the Medicare program (Medicare taxes minus medical bills paid by HHS) flip negative this year and begin requiring Treasury bond issuance. If we assume that medical costs peak about age 75 for each cohort, our cash flows will get worse and worse until around 2035 since the peak birth year was 1960 (1960 + 75 = 2035). A rough estimate might be that present value of the government’s unfunded obligations are about $500,000 per household, which makes rough sense if you compare this in your mind to the likely medical expenses toward the end of life for an average American. The average American household does not have the ability to pay incremental tax in this amount nor is there enough ‘waste and abuse’ to cut. Simply put, baby boomers will not be able to go to the intensive care unit (as we know it) at some point in the future.