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

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

#51

Post by uuilly »

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.

Most of the pain of California's bad policies have not yet been felt. Things are easy when you're spending but they get harder when you have to pay people back. Also rich people and corporations are leaving the state and poor people, mainly Mexican immigrants, are moving in. So along with a completely unsustainable budget, the largest tax contributers are decreasing and the largest tax recipients are increasing.

California cannot survive without some combination of:

-Huge Spending cuts

-Huge Tax increases (which, if overdone, may result in less tax revenue.)

-Federal Gov't bailout.

You can play cause and effect all you want, but basic arithmetic is really all that matters.

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

#52

Post by webXL »

sabat wrote: post #13
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…

Well, wait -- ignores companies like Facebook opening datacenters out of state The bulk of Facebook's employees don't work in datacenters, and (as another poster noted), big companies do this for redundancy and to reduce latency -- not because of some ill will against the state. a growing number of people leaving the state (I'm one of them) Sounds anecdotal to me, and I've noticed nothing but a surge of out-of-state…

Sounds anecdotal to me

More people leave California than arrive: http://articles.ocregister.com/2010-09-05/finance/24551853_1...

My main point was that while silicon valley might be booming, the rest of the state isn't. The article doesn't address that fact.

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

#53

Post by sagarm »

webXL wrote: post #49
Locke1689 wrote: post #12

Earlier quoted context omitted.

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.

> 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

You're clearly implying here that Californian companies are placing datacenters outside California because of state policies, which is simply incorrect.

While it makes sense to put one datacenter somewhere in the vicinity of California, datacenters should be geographically distributed. It's also common to place datacenters near rivers for cheap cooling, but good sites are relatively rare. Now consider competitive bidding from cities, cheap power, and wanting to locate datacenters near users. Basically, state policies have a relatively small impact.

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

#54

Post by pyre »

uuilly wrote: post #51
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.

Most of the pain of California's bad policies have not yet been felt. Things are easy when you're spending but they get harder when you have to pay people back. Also rich people and corporations are leaving the state and poor people, mainly Mexican immigrants, are moving in. So along with a completely unsustainable budget, the largest tax contributers are decreasing and the largest tax recipients are increasing. Cali…

  > Also rich people and corporations are leaving the state
  > and poor people, mainly Mexican immigrants, are moving
  > in.
My take-away from the blog post is that most of the hand-waving about California comes down to people making generalized statements like this, but when pressed to come up with actual data, they start to squirm and weasel out of making a more fact-based statement.

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

#55

Post by pyre »

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…

  > Take a look at what the market thinks of the chances
  > for a California default.
This assumes that 'the market' is a rational actor. But it's proven time and again that it isn't.

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

#56

Post by masklinn »

akgerber wrote: post #38
j_baker wrote: post #20

Earlier quoted context omitted.

Really? That's actually somewhat surprising to me. Still, I don't really think of Texas as a farm state either. I'm thinking more along the lines of the Midwestern states like Kansas or Nebraska.

Texas has two of America's six largest cities in addition to all of its agricultural land. North Dakota has a city of less than 100,000. So its hinterland is a little more important.

The original article was about growth, so absolute size is not relevant to the argument.

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

#57

Post by bjnortier_hn »

pyre wrote: post #55
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…

> Take a look at what the market thinks of the chances > for a California default. This assumes that 'the market' is a rational actor. But it's proven time and again that it isn't.

The question around the [ir]rationality of markets is irrelevant. Markets determine the cost of borrowing. If California wants to lower the cost of debt, or maintain the current (low) cost, it must value the opinion of the markets.

The calculation of the author, with state debt costing $6billion a year, assumes a constant cost of borrowing into the future! Investors have been selling municipal debt in the past two weeks, which will result in higher borrowing costs [1]. The same thing happened and is happening with the PIIGS, where those in power have been complacent about their ability to service debt because of the assumption of constant debt servicing costs.

[1] http://search.ft.com/search?queryText=muni&ftsearchType=...

November 25, 2010 US muni bond funds lose another $2.3bn November 18, 2010 US muni bond funds see record outflows November 16, 2010 US muni bonds see biggest drop since 2008

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

#58

Post by webXL »

sagarm wrote: post #53
webXL wrote: post #49

Earlier quoted context omitted.

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.

> 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 You're clearly implying here that Californian companies are placing datacenters outside California because of state policies, which is simply incorrect. While it makes sense to put one datacenter somewhere in the vicinity of California, datacenters should be geographically…

I conceded that point about the datacenters, but we both know that a lot of tech companies in California offshore their manufacturing, call centers, etc. Get some of that to stay with state policies.

Reason has some more evidence why the article is bunk:

http://reason.com/blog/2010/11/29/is-californias-decline-jus...

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

#59

Post by geebee »

ataggart wrote: post #47
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.

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

I'm pretty sure I agree... I think you're saying that it would be fallacious to attribute california's strong private sector by association alone. (ie., california has a strong private sector, therefore, california's government must not be harming the private sector is fallacious).

It's an open question. California's private sector may actually enable bad government. Some of this is just geography - california has some huge advantages (quality of life) that means people will put up with a lot to live here.

As for government... well, one thing the state gov't did a long time ago was fund an extremely strong system of public universities, a move that continues to pay huge dividends, both in terms of educating large numbers of native-born californians as well as drawing in highly productive people from the rest of the world. I think that to some extent, california is coasting on past investments here, since the amount the state contributes to UC has been declining.

But it would take a lot to wrest high tech away from a region that has stanford, berkeley, and UCSF. So to some extent, you could say california gets away with some very bad decisions because it also made some very good decisions.

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

#60

Post by hga »

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.

You didn't ask this question of me, but I would add the unenforceablity of non-competes. E.g. it's hard to see how Shockley -> Fairchild -> A Hundred Flowers would have happened in another state.
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