Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Truth about California: It's actually saving the rest of the USA

marketwatch.com

Post reply on HN
Print view View original

41–50 of 60 posts

Re: The Truth about California: It's actually saving the rest of the USA

#41

Post by fleitz »

The point about the State of California heading towards bankruptcy is not affected by either its tax rate compared to other states or the amount of venture capital dollars it sucks up. The primary driver for the state going bankrupt is its expected income vs. its expected expenses. Venture funding in California has little affect on its tax base as most profitable startups are incorporated in Delaware or have their revenue generators incorporated offshore.

Yes, they'll be good revenues from the employees but no windfall should be expected. (i.e. the state should not expect abnormal returns because of in state venture capital investment)

My point is that when you take look at expected income vs. expected expenditures you can expect to see the state go further and further into debt. It's anyone guess as to whether that will lead to filing for bankruptcy or not, but the direction the state's fiscal health is heading is clear.

Regarding the state's fiscal picture this article largely addresses a straw man. No one is arguing that the state will go bankrupt because it's tax rate is wildly out of whack, or because it is not getting enough venture capital funding.

People are arguing that the state will go bankrupt because the state already has a fair amount of debt relative to GDP, it runs large current accounts deficits relative to GDP, and has large unfunded pension mandates. This article addresses none of these points.

Re: The Truth about California: It's actually saving the rest of the USA

#42

Post by nhebb »

gwern wrote: post #36
nhebb wrote: post #19

Earlier quoted context omitted.

Texas has a two-year budget cycle, and the $25 billion deficit figure that's been batted around the internet is speculative since the official numbers won't be known until January.

Are there any reasons to think that the speculative number will be off by more than a billion or two? If the real deficit is actually 23 or 27 billion, I don't think that really affects the comparison too much. ('Oh, Texas's deficit is actually $24.23 billion and not $24.24 billion? Well, obviously that invalidates all the comparisons to California! Let's discuss something else.')

People seem to be getting a bit heated on this topic. I was just trying to point out that the number was an estimate, and that it was for a two year period. If we take a low-high range of $23 - 27B, then that is $11.5 - 13.5B/year, which is significantly different than the $25B that is being implied for a one year budget.

Personally, I think all the California vs. Texas debates are a childish extension of blue state vs. red state political bickering. Nobody in the US is better off if either state has financial problems.

Re: The Truth about California: It's actually saving the rest of the USA

#43

Post by [deleted] »

boucher wrote: post #7
karzeem wrote: post #3

Most criticisms of California target public sector backwardness, so it's not a refutation of that to point to the strength of the state's private sector. And "CA's private sector is strong, ergo it hasn't been harmed by the government" is a circular argument. This is an argument over the precise extent to which bad policies are bad. Seems more useful to discuss what genuinely good policy looks like.

The argument that California's policies must be bad, regardless of the fact that they've produced the strongest private sector in the country, is equally fallacious.

[deleted]

Re: The Truth about California: It's actually saving the rest of the USA

#44

Post by webXL »

aidenn0 wrote: post #14
webXL wrote: post #11

The gist seems to be that despite numerous stories predicting its demise, California: - is wealthy and talented - has more (people, VC, etc.) than it did in 1999 - has been funding the rest of the country in federal transfers (he calls them bailouts, therefore you can't complain if CA asks for one) - has a small budget deficit relative to its budget It leaves out $138B of unfunded liabilities for state employees unti…

"It leaves out $138B of unfunded liabilities for state employees until the end, and ignores companies like Facebook opening datacenters out of state, a growing number of people leaving the state (I'm one of them), and its awful credit rating." From the article: "But how big are these costs in California? The non-partisan Legislative Analysts’ Office in Sacramento estimates there’s a $136 billion gap in the state pens…

I said "until the end". If you only read 80% of the article, you would think CA was an oasis of economic growth with a model government. If I were trying to persuade people that things aren't so bad in CA, I would start with the most glaring problem and perhaps offer reasons why it isn't a problem, or state how the problem will be overcome.

Sure that $136B gap is only 1/7 of the CA GDP, but a lot of that GDP is being siphoned by the Fed's gap, too.

Re: The Truth about California: It's actually saving the rest of the USA

#45

Post by Yzupnick »

karzeem wrote: post #9
boucher wrote: post #7

Earlier quoted context omitted.

The argument that California's policies must be bad, regardless of the fact that they've produced the strongest private sector in the country, is equally fallacious.

True, though for a lot of state policies, people seem to generally agree that they're bad, just not on whether they're bad enough to justify the pain of changing them. The policies, good or bad, coexist with the country's strongest private sector, but that doesn't mean they caused it.

I would even say that the reverse is possible. That because of it's extremely strong private sector, the state was able to afford these bad policies.

I'm pretty sure that this is not true, I'm just emphasizing your point of not reading into it that much. Pretty much any theory you want could be proved from two seemingly related pieces of data.(broad generalization I know.)

Re: The Truth about California: It's actually saving the rest of the USA

#46

Post by bd_at_rivenhill »

JSig wrote: post #17

The author has a serious chip on his shoulder. Lots of politicking in this article that distract from the point being made. Take a look at what the market thinks of the chances for a California default. http://www.economist.com/blogs/dailychart/2010/11/credit-def... As of a week ago, "The state with the biggest budget problems, California, is seen as slightly less likely to default than Spain but slightly more so tha…

I will not argue against the case that the US will print more dollars, because I think that will happen, but will they print enough to refloat California's obligations without specific funds being allocated by Congress for a bailout. The Republicans control enough votes to determine whether this happens or not, and it would appear that the political benefits to them could outweigh the damage in the near term.

Re: The Truth about California: It's actually saving the rest of the USA

#47

Post by ataggart »

boucher wrote: post #7
karzeem wrote: post #3

Most criticisms of California target public sector backwardness, so it's not a refutation of that to point to the strength of the state's private sector. And "CA's private sector is strong, ergo it hasn't been harmed by the government" is a circular argument. This is an argument over the precise extent to which bad policies are bad. Seems more useful to discuss what genuinely good policy looks like.

The argument that California's policies must be bad, regardless of the fact that they've produced the strongest private sector in the country, is equally fallacious.

The argument that California's policies produced the strongest private sector in the country is equally fallacious.

Re: The Truth about California: It's actually saving the rest of the USA

#48

Post by jonah »

JSig wrote: post #17

The author has a serious chip on his shoulder. Lots of politicking in this article that distract from the point being made. Take a look at what the market thinks of the chances for a California default. http://www.economist.com/blogs/dailychart/2010/11/credit-def... As of a week ago, "The state with the biggest budget problems, California, is seen as slightly less likely to default than Spain but slightly more so tha…

One of Spain's big impediments to getting themselves out of their economic mess is that they're on the Euro. In ways similar to the varying economic situations in US states. http://www.nytimes.com/2010/11/29/opinion/29krugman.html

Re: The Truth about California: It's actually saving the rest of the USA

#49

Post by webXL »

Locke1689 wrote: post #12
webXL wrote: post #11

The gist seems to be that despite numerous stories predicting its demise, California: - is wealthy and talented - has more (people, VC, etc.) than it did in 1999 - has been funding the rest of the country in federal transfers (he calls them bailouts, therefore you can't complain if CA asks for one) - has a small budget deficit relative to its budget It leaves out $138B of unfunded liabilities for state employees unti…

and ignores companies like Facebook opening datacenters out of state Explain this to me. It seems obvious that companies would open datacenters outside of just California. What would be more obvious to me would be placing them close to 1) backbone hubs and 2) cheap electrical power.

Well that's fine, but don't tout that your state is an engine of economic growth when the companies you mention decide to "offshore" major chunks of their operations. Figure out a way to keep them in state, or generate some kind of equivalent growth, maybe even outside silicon valley.

Re: The Truth about California: It's actually saving the rest of the USA

#50

Post by _delirium »

dhbanes wrote: post #31
boucher wrote: post #7

Earlier quoted context omitted.

The argument that California's policies must be bad, regardless of the fact that they've produced the strongest private sector in the country, is equally fallacious.

Maybe I am mistaken, but it seems to me that California's private sector is strong despite its backward government, not as a result of it. California is an extremely desirable place to live. This attracts business owners and highly qualified employees alike. I would be interested to hear which of California's policies you believe play a significant role in the success of its resident businesses.

> I would be interested to hear which of California's policies you believe play a significant role in the success of its resident businesses.

Its large subsidies for higher education played a significant role imo, especially during the era (up through the early 1990s or so) when they were larger. The state used to fund the UC and Cal State systems with a larger subsidy than today's (much larger if you account for population growth), and also indirectly supported the state's private universities, by providing very generous scholarships to CA high-school students with good grades, if they chose to attend any in-state university, public or private (the old CalGrants program, which still exists in name, but with much reduced scope).

The "ton of taxpayer money spent on higher education" policy doesn't fully account for the highly qualified employee base and large number of university-research spinoffs and collaborations, but I think it probably accounts for some of it. Interestingly, Texas is another example, despite otherwise being more small-government than California: it imposed an oil-and-gas extraction tax in the early 20th century, with a significant portion of the revenues legally required to go to the state-university trust fund, which in part accounts for the strength of the UT and Texas A&M systems, and the high-tech concentration in Austin.

Post reply on HN