Marty: Californians take one on the chin

Pen and paper

Any short list of great sports calls must include Howard Cosell’s “Down goes Frazier!” repeated three times when challenger George Foreman put Joe Frazier on the mat during the first round of their championship fight in January, 1973. Frazier got up but Foreman eventually won by TKO after knocking him down five more times. The point is that heavy blows can have a cumulative effect and California just took one on the chin – you could feel it stagger and fall.

Governor Brown recently announced that California’s estimated deficit had exploded from $9.2 billion to $16 billion since January’s budget request, a 74 percent increase. The cause was the old one-two, excess spending and a shortfall in tax revenues – so much for the art of estimation.

It’s simple really; the state is not getting income tax revenue because its residents are not getting income. Meanwhile, continued excess spending buys votes and everything comes behind votes in California. Just send my Nobel Prize in Economics care of this newspaper.

Progressive tax rates look great on the way up, but you can’t get something for nothing and they work in reverse on a way down. From 2006-7 to 2009-10, California resident taxable income fell $143.2 billion, 16.4 percent, while income tax revenue dropped $10.8 billion, down 21.8 percent.

Locally, the unemployment rate is bumping 18 percent and the state isn’t doing much better. The average unemployment rate for California from the second quarter of 2011 through first quarter of 2012 was 11.5 percent, the second highest in the nation behind Nevada’s 12.7 percent. Nevada can normally survive on California’s loose change, but we don’t have any loose change left.

You should know by now that the unemployment rate does not include those not looking for work for whatever reason. Measuring can be tricky, but we know the participation rate – those employed or looking for a job – is at historic lows. If the participation rate were back to historic norms, the national unemployment rate, currently 8.1 percent, would be 11 percent. If a few million more people go from full-time to part-time and/or join the swelling ranks of the disabled or discouraged, no one will be working at all, but the unemployment rate will still fall. They call that a statistical anomaly, I have another word for it, but this is a family newspaper.

I supported Governor Brown’s plan to raise taxes and cut spending but the Feds, the courts, and organized labor’s Democratic hand puppets in Sacramento have killed any hope of cuts while business, Republican lock-steppers, and the overburdened man-in-the-street say no to all new taxes. The key to Brown’s program was the ‘and’ word; he had to do both to get my support – not that he cares – and make it work. Brown has given up on the “and” word and I’ve given up on him. Being a politician Brown is now falling back to familiar habits, recommending increased taxes but purposing no real dent in long-term obligations. Someone has to pay to save our schools, says the governor (now cue the picture of the schoolchildren – no, no, not the picture of the retired school superintendent living on the Riviera pulling in $250,000 a year in retirement payments).

Eventually the gigantic debt at the state and local level coupled with the inability to cut spending and raise revenue will pass the tipping point and the general standard of living will fall; it won’t be pretty. We will probably make some heroic comebacks and survive; however, you can only take so many hits before you go punch-drunk.

Down goes California … Down goes California … Down goes California!

Marty Richman is a Hollister resident whose column runs Tuesdays.

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