California’s economy has been mismanaged and damaged by mass immigration to the point of collapse and now contains one-third of the U.S.’s welfare recipients, a new report has revealed.
In an article titled “California’s Greek Tragedy,” written by Michael J. Boskin and John F. Cogan, both members of the Task Force on Energy Policy, it is said that once upon a time, California’s high standard of living attracted millions seeking upward economic mobility.
“But then something went radically wrong as California legislatures and governors built a welfare state on high tax rates, liberal entitlement benefits, and excessive regulation,” the article then says.
“From the mid-1980s to 2005, California’s population grew by 10 million, while Medicaid recipients soared by seven million; tax filers paying income taxes rose by just 150,000; and the prison population swelled by 115,000.
“California’s economy, which used to outperform the rest of the country, now substantially underperforms. The unemployment rate, at 10.9%, is higher than every other state except Nevada and Rhode Island. With 12% of America’s population, California has one third of the nation’s welfare recipients.
“Annual spending on each California prison inmate is equal to an entire middle-income family’s after-tax income. Many of California’s K-12 public schools rank poorly on standardized tests. The unfunded pension and retiree health-care liabilities of workers in the state-run Calpers system, which includes teachers and university personnel, totals around $250 billion.
“Meanwhile, the state lurches from fiscal tragedy to fiscal farce, running deficits in good times as well as bad. The general fund’s spending exceeded its tax revenues in nine of the last 10 years (the only exceptions being 2005 at the height of the housing bubble), abetted by creative accounting and temporary IOUs.
“Now, the bill is coming due. After running a $5 billion deficit last year and another likely deficit this year, Gov. Jerry Brown’s budget increases spending next year by $7 billion and finances the higher spending with income and sales-tax hikes.
“Specifically, he’s proposing a November ballot initiative raising the state’s top income tax rate to 12.3%, making it the nation’s highest, and raising the basic state sales tax rate, already the nation’s highest, to 7.75% from 7.25%.”
“The state’s progressive tax-and-spend experiment is broken, threatening basic services, from courts and parks to education and health care for its most vulnerable citizens. Mr. Brown’s tax initiative only exposes the state to an ever more dangerous roller-coaster ride.
“No wonder many Silicon Valley CEOs say they won’t expand in California because of high taxes and burdensome regulation. And no wonder net migration has recently reversed, with hundreds of thousands of workers and their families leaving the state in search of better opportunities.
“Many Americans fear the federal fiscal train wreck will turn us into Greece. But, barring major change, they need look no further than California to see what this future portends.
“Relying on ever-higher taxes to fund payments to an outsized population of benefit recipients is a recipe for exporting prosperity. That is one California trend that other states emulate at their peril.”
