Why Is California Collapsing ???

I.O.U.

Over the past couple of days I have come across two articles with very different diagnoses of California's fiscal crisis. One article, by Kevin O'Leary in Time Magazine, lays the blame for the crisis on Proposition 13, a Constitutional Amendment approved by California voters in 1979 that limits the property taxes that localities may levy. Because of Prop. 13, the argument goes, the state legislature must appropriate more and more money for projects and activities, such as public education, normally funded at the local level. As a result, the state has no little money left over for projects at the state level ordinarily funded by the state legislature.

A second article, by Kevin Hasset of the American Enterprise Institute, argues that California's troubles are the result "an orgy of spending" leading to its $26 Billion deficit. Having stated this conclusion, he then argues that California's experience is a cautionary tale for President Obama and his various expensive proposals.

O'Leary's hypothesis is shared by many, but it is only that, a hypothesis. Moreover, it is subject to a simple empirical test. The theory implies that states like California would derive less tax revenue overall, because of the Proposition 13 constraint, than states without such a restraint, thereby explaining the "gap" between spending and revenues in California. (After all, if California obtains more tax revenue from its citizens that other states, then the distribution of those receipt between state and local government should not logically impact the state's ability to provide services equal to the value of such revenues.) The theory also implies a subsidiary thesis, namely, that in California, local spending would constitute a smaller portion of overall state and local spending combined than in other states.

The data are inconsistent with both predictions and thus seem to falsify the O'Leary hypothesis.

According to the U.S. Census Bureau, California raised $236,646,725,000 in state and local revenue in during the 2005-2006 fiscal year, when its population was 36.1 million. That's $6,555 per person. (2005-2006 is the most recent year for which data are available at the census website.)  By contrast, during the same fiscal year, Utah raised $13,275,165,000, on a population of 2.5 million, for a total of $5,310 per person.

That is, California raised 23 percent more revenue per person than Utah in 2005-2006.

Utah, it should be noted, is not idiosyncratic. During the same period, Virginia, with a population of 7.5 million in 2005, raised $44,144,819,000, or $5867 per person, a figure closer to Utah than California. Indiana's tax revenue was also less than $6,000 per person. Here is the Census website, with the data on revenues and spending. 2005 population figures come from other reliable sources, e.g., Census press releases and a report from a think tank at UVA.

Note that a different source puts California per capita taxes in 2005 at $7,253.00, compared to $5,889.10 for Virginia, $5,811.8 for Utah and $5,710.10 for Indiana. Again, California's per capita spending is between 23 and 27 percent higher than that in Virginia, Utah and Indiana respectively.

What about the subsidiary thesis, i.e., that California localities will collect a smaller share of overall state taxes than localities in other states ? Here again, the data apparently contradict the O'Leary thesis. According to data on the same website listed above, California localities derive a LARGER share of overall state tax revenue than the localities in the other three states mentioned. Here are the figures, i.e., the percentage of overall state tax revenue taken at the local level, in the 2005-2006 fiscal year.

California 43 percent.

Virginia 41 percent

Indiana 41.8

Utah 36 percent.

Absent some equivalent to Proposition 13 in these three states, one must respectfully disagree with Mr. O'Leary' hypothesis. Spending, not some inability to tax, is the problem in California.

Note also that, from 1992-2004, a period with relatively low inflation, total state spending in California nearly doubled, according to from $123.9 billion, to $240.2 billion. It's hard to characterize California as a low tax state.

Lobsters and More Lobsters!

Two items on lobsters --- what I call "bottom-feeding crustaceans" --- caught my eye recently.

First, on July 5, the New York Times reports: "Lobsters Race, Slowly, in Bar Harbor."

The Times reports that the idea for the Bar Harbor races originated in Myrtle Beach, South Carolina. While a bystander can buy a lobster and return it to the sea ("amnesty"), most end up on a dinner table that evening.

Second, the Bangor Daily News (which apparently had no space available to cover the lobster races) reports that a man caught two orange lobsters in Harpswell, Maine. Apparently only 1 in every 30,000 lobsters is orange, though other recent sighting are reported as well.

Believe it our not, one can also find video of lobster races on Youtube. Just search "lobster races." 

F-150 Still Number 1 !!!

We're Number 1 !

MLIVE.com reports that Ford's F-150 (known on this Blog as the world's greatest truck) outsold the Toyota Camry in June, 2009, thus returning to its rightful place as best-selling vehicle in the USA.

http://www.mlive.com/auto/index.ssf/2009/07/ford_f150_beats_toyota_camry_i.html

The same story also reports that the Camry has edged out the F-150 as the car that is the most "American made" according to a study by Cars.com, reported here:

http://www.cars.com/go/advice/Story.jsp?section=top&subject=ami&story=amMade0709

The F-150, which was number one in the "American made" category last year is now number 2. Note that the truck is manufactured in Michigan and Missouri, but 20 percent of its parts are manufactured outside the USA, according to this other article on Cars.com:

http://www.cars.com/go/advice/Story.jsp?section=top&story=amMadeParts&subject=ami

The photo above, from Wikipedia Commons, is of a 2007 F-150 Supercrew, Harley Davidson edition.

Some Patriotic Music !

In honor of our nation's birthday, here is a link to Whitney Houston's rendition of the Star Spangled Banner, performed before Superbowl XXV at Tampa Florida, during the first Gulf War. At the very end, you will see a flyover by four F-16 "Fighting Falcons."

If you are an American and don't get goosebumps watching and listening, then you should probably move to Canada.

http://www.youtube.com/watch?v=qciWEufZ2xA

Here is "The Battle Hymn of the Republic," performed by the Mormon Tabernacle Choir.

http://www.youtube.com/watch?v=pmTWVJ_pXBk

As an added bonus, here is John Mellancamp's "Our Country," originally aired as part of an a

dvertising campaign for the world's second best pickup, the Chevy Silverado. We all know what the BEST pickup is . . . .

http://www.youtube.com/watch?v=U0HTff63E0I

Finally, here is another patriotic favorite, "Only in America," by Brooks and Dunn.

http://www.youtube.com/watch?v=U0HTff63E0I

Happy Fourth, Great Patriot's Roundup

In honor of our nation's birthday, here are photos of some great patriots, in no particular order:

Ricci v. New Haven Roundup

1. George Will has penned an excellent evaluation of the Supreme Court's opinion in the Ricci v. New Haven case. Among other things Will notes:

"It is deeply depressing [that] they [the plaintiffs] won narrowly;"
Depressing, Will says, because the City's "Egregious conduct . . .did not seem legally suspect to even one of the court's four liberals, whose harmony seemed to reflect result-oriented rather than law-driven reasoning."

Moreover, Will highlights the Court's conclusions that:

"All the evidence demonstrates that the City rejected the test results because the higher
scoring candidates were white."

The city's criticisms of the exam "are blatantly contradicted by the record."

"[T]he City turned a blind eye to evidence supporting the exams' validity" (emphases
added).

In other words, the language Will highlights required the conclusion, diametrically opposed to that of the court below, that no reasonable jury could find for the City and against the petitioners. (The court below, by contrast, had found that no reasonable jury could find for the petitioners.)

Will then concludes:

"The nation shall slog on, litigating through a fog of euphemisms and blurry categories (e.g., "race-conscious" actions that somehow are not racial discrimination because they
"remedy" discrimination that no one has intended). This is the predictable price of faing
to simply insist that government cannot take cognizance of race."

Here is Will's piece.

http://jewishworldreview.com/cols/will063009.php3

By contrast, Professor Scott Powe, at the University of Texas, has authored a piece on Cnn.com regarding the Ricci opinion with which I must respectfully disagree, at least in part.

http://www.cnn.com/2009/POLITICS/06/29/powe.new.haven/index.html

Among other things, Powe attributes the result to a purely political distaste amoRepublicans for affirmative action, an odd statement given that 2 out of the 4 dissenters were Republicans. Powe does not mention the possibility that the five justices in the majority were simply faithfully following the law --- Title VII --- (which, after all, forbids discrimination based on race, including discrimination against whites, and does make by its terms make any exception for racial discrimination that furthers "affirmative action"). Nor does he consider the possibility that the dissenters, by contrast, were letting THEIR ideology influence their judgment (as George Will argues). Indeed, Powe does not seem to offer any LEGAL analysis of the competing opinions, but instead simply interprets them as one might interpret the votes or Senators or, for that matter, members of a City Council.

Powe also claims that "the court acquired a majority that appears more concerned about discrimination against whites than about racial equality in American society." This statement only makes sense, however, if one assumes that "racial equality" means throwing out a test whenever members of one or more identifiable racial groups does not do as well as, say, the Mayor of a small town had hoped. One would have thought that the American ideal of equality would have required something quite different, namely, equal opportunity for everyone to be judged by the same open and transparent criteria, as was apparently the case here, at least before the city threw out the criteria and started anew.

http://www.cnn.com/2009/POLITICS/06/29/powe.new.haven/index.html

Finally, it is notable that Justice Ginsburg's dissent begins to veer off course even earlier than usual, this time in the second paragraph. There her opinion claims that the petitioners had no vested right to promotion. She is wrong. The City threw out the test at issue precisely because, had the City implemented the results of the test, Mr. Ricci would have been promoted to one of the open positions. Justice Ginsburg's assertion to the contrary seems to be entirely circular, resting, as it does, on her ultimate conclusion that the City was entitled to disregard the results of the test because it was not happy about the ethnicity of those who had received the top scores. Only in this (meaningless) sense did the petitioners not possess a vested right.

http://www.law.cornell.edu/supct/html/07-1428.ZD.html

Finally, over at the National Journal, Stuart Taylor, whose work I admire greatly, argues that a close reasing of the various opinions shows that all 9 Justices rejected the standard that had been propounded by the court below.

http://ninthjustice.nationaljournal.com/2009/06/justices-reject-sotomayor-posi.php