California Budget Lives in the Matrix

John Seiler
Most recently the press secretary for state Sen. John M. W. Moorlach, for three decades John Seiler was an editorial writer for the Orange County Register

Gov. Jerry Brown and the Democratic Legislature continue taking the Blue Pill over the state’s economy and the budget they’re finalizing this week. It’s for the fiscal 2017-18 budget, which begins on July 1. They’re living in the Matrix, not the Real World.

Although Brown has warned, weakly, of impending budget difficulties, his budget still spends way too much should the state economy soften. There are plenteous indications that’s happening, largely because of the anti-business taxes and regulations this state has imposed on its people, instead of pro-business policies such as those in Texas, Florida and other forward-looking states.

Perhaps everything will be fine. Maybe the national Trump Boom will carry along even California. Maybe California will boom boom boom. But it’s right to be prudent. That way, if the state ends up enjoying extra money in its budget, it could pad the Rainy Day fund, or maybe start paying down its $1 trillion in unfunded liabilities.

But the Golden State increasingly sees itself as its own separate, golden country. Brown jetted off to Beijing to make his own climate deals with the People’s Republic of China, which, despite quasi-market reforms, still suffers one-party rule by the Communist Party of China and bans California companies such as Facebook.

Do you think the Chinese have noticed Brown will be gone in 19 months? Meanwhile, they have a lot of great deals on solar panels for green-conscious Californians.

Here are some negatives hitting hard:

  • “The five biggest technology stocks including Apple lost nearly $100 billion in market value combined during trading Friday,” reported “Mizuho Securities’ Abhey Lamba downgraded the iPhone maker to neutral from buy on Sunday, saying the best-case scenario is priced into the shares. The analyst echoed a common concern by investors taking profits in big technology stocks last week.”
  • “Technology Shares Lead Global Declines,” headlinedthe Wall Street Journal. “Some investors worry that such a highly concentrated group of companies has led the market higher.”
  • “First New Coal Mine of Trump Era Opens in Pennsylvania,” runs the Fox Insider headline. “Corsa CEO George Dethlefsen said the mine will be a boon to the struggling local economy. He praised Trump’s easing of regulations and encouragement for fossil fuel exploration.” Which means…
  • Trump is emphasizing what California operatives call “dirty energy” industries – remember the anti-Proposition 23 propaganda? – as he promised during his campaign. Sorry, California, the eco-mania fed during the Obama years is over. As Bill Clinton once said while in the Oval Office, “I reward my friends and [expletive] my enemies.” Just the way it is. Last year, Pennsylvania threwits electoral votes to a Republican for the first time since 1988; California backed Hillary by 4 million votes. And California politicians keep insultingthe president.
  • According to the June 12 Market Watch, “The Federal Reserve will raise rates this week and signal they expect to follow through with another move later this year, economists said.” Which means…
  • The Fed has been ending its ZIRP, or zero-interest-rate policy. Historically, interest rates have stood 2 percentage points above inflation. ZIRP was supposed to be a temporary policy helping dig us out of the Great Recession, but hung around for eight years. ZIRP’s big problem is it makes it impossible for the middle-class to save money. But ending ZIRP means higher interest rates, especially for housing – which means housing prices could fall. That will hurt California real estate values. But the positive side is it would mean cheaper housing for those who don’t have it, perhaps easing the homelessness problem.
  • California’s minimum wage rise to $15 an hour in 2022 already is hitting hard, and soon will hit harder. San Diego already has pushed the state $10 minimum ($10.50 for large employers) to $11.50. The results, as reportedby the San Diego Union’s Dan McSwain – who is highly sympathetic to the plight of low-wage workers in sky-high-expense California : “The latest batch of federal data suggests the job losses among low-wage workers that began in October accelerated in February, March and April. For example, the food-service industry employed 2,200 fewer people last month than it did in April 2016 (a comparison that adjusts for normal, seasonal variation).”
  • More from McSwain: “Indeed, if San Diego’s restaurants had merely kept pace with statewide growth – as it had for years before voters lifted the local wage floor – the sector would have employed 4,600 more people than it actually did in April, estimates Lynn Reaser, chief economist of the Fermanian Business & Economic Institute at Point Loma Nazarene University.” Now, multiply that by the whole state as the minimum wage runs up the ladder to $15 an hour. Lost jobs. Lost incomes. Lost families. Lost revenues to state and local governments.
  • The recent tax increases continue to dig in: On cigarettes, plastic bagsand now the dreaded $55 billion gas tax, which in a couple years likely will get siphoned off for the pensions, not roads. And what new tax hikes lurk in the future?

On the positive side, last week Controller Betty T. Yee reported, “California revenues of $8.39 billion for May beat expectations in the revised budget proposal Governor Jerry Brown’s released last month by $133.4 million.” So maybe we can enjoy that nice juicy steak like Cypher did inside the Matrix: “You know, I know this steak doesn’t exist. I know when I put it in my mouth, the Matrix is telling my brain that it is juicy and delicious. After nine years you know what I realize? Ignorance is bliss.”

Former Orange County Register editorial writer John Seiler’s email is: [email protected]

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