You hear that giant sucking sound? The one that sounds like the world’s largest toilet is being flushed… Well that would be the Democrats who hold a super majority in the California state legislative branches taking the first step down the road towards single payer healthcare for the state and the financial ruin of socialism. It seems I cannot go much more than a week without the DPRK giving me a healthy dose of be glad you got out when you did news. With all the lecturing hypocrites from Hollywood, government infringement of rights and violent leftists suppressing free speech; it is sometimes get lost in the shuffle that the state is one of the largest economies in the world. (Although that number is creeping down.) Despite all the vast potential of the Californian economy we have a front row seat to watch Democratic majorities across all levels of government pile drive the once vibrant economy into irrelevance and we should pay attention least we allow Democrats to replicate their failures further.
As I discussed in an earlier blog, “Democratic People’s Republic of Kalifornia: Bullet Train to Bankruptcy” the state already had to raise both the gas tax and car registration fee in order to collect money to address crumbling infrastructure. Now Democrats seem prepared to fill the train with TNT as they begin the investigative process of replacing the soon to be repealed Obamacare with a state funded single payer healthcare system in the newly introduced “Healthy California Act” and “nationalizing $287 billion of health care spending for 24 million residents.” Many would argue that California has already been on this path for some time as “…almost 33 percent of the population in California is enrolled in Medicaid” and according to Breitbart News “…beginning on July 1, will spend $279.5 million of general fund revenues per year to provide free Medi-Cal coverage to 185,000 mostly illegal alien/undocumented minors” as part of their “Health 4 All Kids” program. A reasonable person would wonder if it is criminally negligent for Democrats to increase entitlements for citizens and illegal aliens in an economic climate where the government is having trouble funding basic services like… filling potholes.
No the Californian Democrats have their heads up their buried in the sand on this one as the economic outlook for the state long term is looking quite dire. Between the massive amounts of state regulations that go beyond federal standards and being one of the highest tax areas in the country, companies are already looking for ways to cut costs which in many cases means relocating to other states. If the Trump administration cracks down on H1B visa abuses by Silicon Valley many high tech companies that are the bread basket of the California tax base may have to follow suit as they make the switch from lower cost imported skilled foreign labor to hiring Americans. Add in what some have estimated as a $946.4 billion unfunded pension liability and you have created the conditions in which the large corporations and rich will flee the state before the final collapse and leave the poor and small businesses holding the bag and ruined by the state’s eventual bankruptcy.
California is at a tipping point and Democrats seem intent to upend the cart in the name of progress. Unstable revenue projects will likely see California run a 1.6 billion dollar deficit this year and as Forbes reports “…over-reliance on high income taxpayers makes revenues less stable and budgeting more difficult. Nearly half – 48% – of total California income tax collections are paid by the top 1% of earners.” We have to face the facts. Rich people are mobile and if they are taking too large of a beating in taxes will simply move to a more hospital tax climate and take their wealth with them which would see California tax collections plummet. Since such a small number of people are funding such a large portion of the state budget if even a small fraction of that 1% pick up and move out of state then California will be driven further into the red which will likely cause the state to chase additional dollars by increasing taxes and driving out more high earners to move and creating a cyclical cycle downward that only ends at the bottom of the porcelain pot.