i wonder how a place like california got into such mess.
They were ground zero for a pair of US bubbles. This caused the state's revenues to skyrocket. Believing revenues would always skyrocket, groups which have essentially captured the state and municipality budgeting processes voted themselves large increases in benefits. It is politically impossible to reduce those benefits once enacted, yet they automatically snowball in costs every year. Its like the miracle of compound interest, except in reverse, and with the full principal being due every year.
The bubbles have burst and California no longer sees the potential for staggering revenue growth every year, but will see double-digit increases in benefits outlays for the politically powerful groups.
Bonus points: every time California has a short-term lack of funds they negotiate with their beneficiary groups to trade a lack of increase this year (note: not a cut, just less increase than they would have otherwise gotten) in favor of a new entitlement due in N years, whose NPV is astoundingly higher than the savings due to the lack-of-increase.
"groups which have essentially captured the state and municipality budgeting processes voted themselves large increases in benefits ..."
By "groups", you mean "politicians, government employees, and unions" right?
- California teachers and school employees are the highest paid in the nation. 35% above the national average.
- State employees make about 35% more than private-sector employees
- An enormous pension problem for government employees. A public-safety worker can retire at age 55 with 90% of his/her salary. The result: $65B in upcoming, unfunded pension liability. My father-in-law is a retired probation officer. He does consulting for his county and pulls a pension check–basically working part-time and pulling 1.5 salaries.
- The state spends 70% more (per capita) than the national average on social services, primarily because of it's welfare programs.
Funny story: I worked at a CA community college for a few years while still in college. Just special programming projects and IT stuff. When I quit to pursue my first startup, I got a letter letting me know I had $2,000 in a PERS retirement account. As much as I enjoyed cashing it out for our startup, it just shows how reckless CA is with spending and obligations to these groups.
Don't think all this is because of a lack of income either. State personal income tax is really high. Part of the reason we left 2 years ago.
Agreed. I run the IT dept. for an agency that provides mental health services to abused and neglected children. The program qualifies for "cost reimbursement". That means every supply given to our Mental Health program (pencils, computers, etc...) is billed right back to the state who then pays us the exact amount back. All you have to do is prove the supply went to Mental Health staff.
A couple years ago our Therapists complained that all the other agencies had LCD monitors and they didn't (this was back when LCDs were still relatively expensive). I tried to stop the purchase but the truth was they were right, the state would pay no matter what and every other agency like ours HAD bought their staff new LCD monitors.
In the end we spent about $15,000 of state money replacing monitors and ended up throwing out CRT monitors that were only 1 or 2 years old (and which the state had also paid for). Worse there are about 8,000 agencies like ours in California and they all did the same thing.
"But the latest U.S. Census survey, from 2007, shows the average annual salary of California state government employees was $53,958, compared with $40,991 for the average private-sector worker."
Private sector jobs include all the minimum wage stuff which have no benefits. Even Steve Jobs only makes $1 a year, those types of pay packages skew the results as well. It would be more interesting to see averages segmented by job categories.
Many public sector jobs have a market rate barely above minimum wage [1], but actually cost far more thanks to public sector unions.
I don't know about California, but I know that NYC MTA garbage collectors (job: taking garbage out of the subway) make about $50-60k and gets to retire after 20 years of work.
[1] Very few people, even highly unskilled workers, earn minimum wage. Market rate tends to be higher.
[edit: to clarify, by "taking garbage out of the subway", I mean taking the trash bags out of the garbage cans and bringing them to the dumpster, sweeping, picking up refuse, etc. In the private sector, this does not cost $50-60k. I'm not talking about track work.]
Given the observed difference between the salary of a (unionized) school janitor and a (non-unionized) cleaning crew worker for a hotel, whose job duties are essentially identical, I can only assume that either a) unions kill more people than cancer or b) that there is another factor at play besides risk premiums.
The Sancramento Bee asked the government for salary data and then did some number crunching. The average public sector employee, excluding the university system, made $68k (median: $66k).
The Bureau of Labor Statistics and other federal bodies maintain average wage stats for all states which should be comparable to those numbers. In California, the statewide average wage is $48k, the median about $36k.
If you want to spend some time doing your own stats analysis of how much pay is for "comparable" jobs across the two sectors, a) it will be tough -- "comparable worth" is a very subjective notion b) you'll have one of the best linkbait ideas of the century and c) expect death threats.
Using the quote like that makes it sound like a state employee doing the same job as a private employee will get paid 35% more, but that is far from the truth.
Different people doing different jobs get paid differently, that's about all those statistics say.
It's probably hard to compare, but look at clerical job openings (something that requires no college degree) at a university or public agency office with those in the private sector.
Maybe comparable jobs aren't always 35% higher, but I think you'll find they are consistently higher
Absolutely on the money. These are the fruits of rosy-eyed welfare policy: rampant poverty, fiscal collapse, the poor get poorer and the middle class? What middle class?
I'm the type to prefer the government stay out of my money and personal business, but let's get real here. The greatest expansion of the middle class in American history (late 1950s) occurred at a time when the top tax bracket was 90%.
They just knew better than to blow all the money like California did :P
The expansion of the middle class has nothing to do with the top tax bracket. It has to do with industrialization before automation (lots of low/medium skill jobs that provided significant value), and the destruction of competition around the world.
Speaking more seriously, I'm pretty certain the expansion of the middle class was due to strong white labor unions and Fordism as a cultural subtype within Modernism.
This entailed many things, with which the top tax bracket had little to no relevance.
1) We are frontier with way less developed countries. Africa-Europe frontier.
2)We have good climate all over the year.
3)We got in debt for buying houses. Tens of years of loan debt were given to the government in the form of taxes. E.g, you got 35 year loan and paid right now 16% taxes.
4) The government got used to spending the money, thinking ill will last forever.
5) People stopped paying loans. They had the same money that before, taxes grew because debt grew. Today we have millions of unsold houses.
6) Government spends way more that come in. They don't want to stop spending so they, as an state, go in debt too.
7) Government is in trouble. We are near 20% unemployment rate, gov is constantly trying to lower the official rate making statistical tricks, like not considering unemployed those that don't work but go to a employment class.
Spain's public debt is not so bad compared to it's other neighbors - France, Portugal and Morocco all have almost twice as much. Spain's problem is mainly with the private debt...
Anyway, as you mentioned Eurozone, PIGS countries (Portugal-Ireland-Greece-Spain) are obviously a major burden with their problems.
But what will happen will depend on what actions will be taken. Personally I'm quite pessimistic about Europe.
Property taxes in Spain vary but are typically in the range of 5% to 8% depending on where you buy the property and the ages of the buyer; way less than 16% which is the VAT ('IVA') rate.
Of course, you pay property taxes, but with the money you pay you are paying the VAT other people pay(the person who sells you the house needs to, and all the chain).
Uh, no; that's not how VAT works. If you buy a new property then the promotor, builders, carpinters, painters, architects etc can all claim back any VAT paid for services, supplies or materials. If you are buying second-hand, then the previous owner will have paid property tax, not VAT.
If California wasn't subsidizing the South, then they wouldn't have the fiscal problems they currently have. In 2005 alone, Californians paid $47 billion more to the Federal Government than they received in spending.
Considering California's annual budget is $100 billion, Californians could lower their taxes by almost [Edit] 40% and avoid their budget problems if they stopped subsidizing the red states.
First off, the South wasn't always "red" states and you would do well to not permanently brand an entire state as such. Georgia's current governor is the first Republican to hold the spot in 130 years!!
Now you point out this $47B overcharge. And what happens to the great California economy once the U.S. is developing economic cancers all over the rest of the country due to lack of funds? Who's left to buy the iPods? Like it or not, Cali is part of the U.S. All for one.
Seriously, if your looking for root problems, not fanning the flames of bubble economies is a good start. I've never heard of a bubble that ended well. Paying attention to state governance to not allow the spending to get this out of hand would help as well.
California (and New York, Texas, Illinois, Florida, etc) would be fine without subsidizing other states. In fact, they would probably be better off. When places become difficult to live in, people tend to move to better places. We spend money trying to make unproductive places viable places to live when that money would be used more efficiently in states with better infrastructure, both human and physical. The more people who move away from subsidized places, the more money they will make on average, and the more iPods will be sold.
Humans agglomerate because it makes us more productive. By subsidizing dying towns in the middle of nowhere (and Michigan), we're paying people to be less productive. I don't care where people choose to live, but I shouldn't have to pay for their choices.
Even if it were in the self-interest of productive places to subsidize non-productive places, our current method of doing so isn't the best approach. There are greater gains in productivity to be had for less money in Mexico, which would create wealthier neighbors for us to sell things to. This is simply another case of the tendency of majorities (which in the US may only be electoral, not real majorities) in democracies to take what they can from the minorities.
Those numbers would only be a fair comparison if they exclude military spending and entitlements. A air force base in Kansas or a submarine purchased from Misisippi is (in principle) defending the entire US.
Also, federal entitlements follow the person, not the state, and can't be counted against states. Simple example: a person works in CA (paying taxes) and then retires someplace cheaper like AZ (receiving taxes).
Maybe CA does subsidize the south. But the tax foundation numbers don't prove much, one way or the other.
I don't have statistics, but in "Cities and the Wealth of Nations" Jane Jacobs argued that what really happens in modern times is that cities end up subsidizing rural areas. So more urbanized areas would "subsidize" those less so.
I think one of the biggest strengths for fiscal security the Texas government has to offer is our inability to take on debt. By decree of the Texas state constitution, the budget must be balanced each and every year. That's something that article misses out on.
Of course, there are some really stupid things that Texas does in relation to its spending. Namely, budgets are set two years in advance. It might have made sense when Texas was first formed, but it hardly makes sense now.
The article overstates CA's response to its problems. The slashing and "vast numbers" aren't enough to right the ship and are pretty minimal compared to private industry, or even other state governments. The response of state employees and their unions to furloughs (walkouts, infighting, demands for still higher taxes) demonstrate seriousness hasn't set in.
Booms and busts define the state, long before the housing or internet bubbles, there was the gold rush, the oil boom, the space race, the PC revolution, you name it. There's always another boom to cover the last bust—this time, too. That boom and bust mentality extends to radical political solutions that become problematic in themselves, like the initiative process, super-majority rules, and prop. 13. The state pretty much is the guy described in the Lisp thread: http://news.ycombinator.com/item?id=859669
Maybe it's in our interest to be the world's hypomanic dreamscape? If so, the feds and everyone else can bail us out, like they do the rest of the nation's problem children (banks, farmers, automakers, savings and loans, tire makers, steel producers, railroads…), leave us to our booms and busts, enjoy the gravy when times are good and let us live in their basement strumming our guitar when we screw the pooch.
But, Uncle Sam's not much better off. He's just running on a slower pace. Long enough in his basement and he'll start to see how alike we really are—right around the time he gets foreclosed on. Our federal system has a seriously great architectural basis, but it's an 18th and 19th century design burdened with two centuries of gnarly patches and tweaks hacked together in two-year bursts by groups of 535 glad-handers and administered by a nameless, faceless, unrepresentative bureaucracy. As the nation scaled-up, the exquisite balance of republic and democracy struck by the founders turned into an opaque, incomprehensible, unfair, inefficient, ineffective cancer. Some major refactoring needs to be done. CA, having the same issues, will serve as a proving-ground for reforming the whole country. If it doesn't work out, well there's always another boom after the bust.
The problem that this article doesn't point out and nobody wants to talk about: California is burdened with the largest reservoir of undocumented/illegal workers in the country. Until these people are brought into the system, until we see some true immigration reform (either by naturalizing every worker or, conversely, by getting serious about border policy) the state is in an untenable position. Things will get worse before they get better.
California and US immigration policy are a mammoth case of "walk on left side, okay; walk on right side, okay; walk in middle - squish! just like grape" which you Karate Kid fans might remember...
How do illegal workers contribute to the problem? I understand that they don't pay income tax, but at their typically low incomes, I'd expect that they wouldn't be paying much tax anyway, and would more likely qualify for the Earned Income Tax Credit (i.e. negative income tax) if they were legal.
I'm reminded of the difference between the view of economists on the economic non-problem of immigrants as described by Bryan Caplan:
"Economists are vastly more optimistic about its economic effects than the general public. The Survey of Americans and Economists on the Economy asks respondents to say whether “too many immigrants” is a major, minor, or non-reason why the economy is not doing better than it is. 47% of non-economists think it is a major reason; 80% of economists think it is not a reason at all."
One idea: Illegal immigrants contribute to the problem by creating social conditions that are unfavorable for optimal living conditions, causing the people with money (big taxpayers), to move, leaving behind cities with an unskilled workforce and a high reproduction rate. Anybody capable of moving away from areas and cities with huge illegal immigration populations will move. Once they are gone and the businesses move with them, what you have left is an area that consumes taxes at a high rate and contributes very little back.
Is it racism that causes people to move? It could be, but there are valid reasons to flee such areas. There are huge gang problems and schools start to under perform. Hispanic students are some of the worst performing students in the country, often not even finishing high school. Now you have unskilled people competing for unskilled jobs, which few exist anymore.
Is it that simple? I can't tell if your comment is tongue in cheek. But if you consider the hundreds of billions of dollars it would take to locate, process, and deport every illegal, if you consider increased labor costs for local businesses many of whom would go under without a plentiful supply of cheap labor, and if you consider that America has never really been about "deporting people" (quite the opposite) it seems like simply deporting every illegal is a horrible solution.
Equally horrible is to have to provide ever-increasing social and welfare benefits to millions upon millions of undocumented, non-tax-paying workers who are now also unemployed. There is no quick fix here. But if you were to naturalize those workers, give them SSNs and DLs, encourage them to partake of the "American dream" or what's left of it...maybe in ten or twenty years you'd find things had started to improve.
I don't really know. If this were a game of chess, I'd simply resign.
It is totally feasible. Ike did it in the 50s, right before he fired the whole border patrol and immigration control apparatus and reformed it.
It would be very cheap right now because there is a lot of idle shipping. You load the illegals on boats and drop them off at a home port. In the case of Mexico you take them to the far south, not just over the border.
This can be done and it would have massive popular support.
Naturalization is a horrible idea. We need to get the illegals out and seal the borders. America needs zero immigrants with less than a high school diploma, especially right now. Nobody making less than $90K should be let in this country to work, period.
> "You load the illegals on boats and drop them off at a home port"
And the receiving country is just supposed to take our word for it? "Hell, he sure looks Guatemalan!!!"...."Dear China, We are sending you 50,000 'orientals' on the next 3 OOCL container ships, they have no passports but they sure as hell don't speak American." Yeah, this will go over well with all our trading partners.
> "In the case of Mexico you take them to the far south, not just over the border."
I'm pretty sure Mexico won't go for this.
> "get the illegals out and seal the borders"
Have nanotech magic-growth fences been invented and I didn't notice? Precisely how do you plan to do this? Oh I know, hire cheap Mexican labor? Or maybe bring over some Chinese to build the fences like we used them to build our railroads?
> "Nobody making less than $90K should be let in this country to work"
Aren't immigrants making over $90k taking $90k jobs away from people already here? Or do you mean we figure out what our real skill shortage is and manage it much better than we ever have been able to?
> Have nanotech magic-growth fences been invented and I didn't notice? Precisely how do you plan to do this? Oh I know, hire cheap Mexican labor? Or maybe bring over some Chinese to build the fences like we used them to build our railroads?
I do not have a problem with the rest of your post - but this statement isn't correct. A lot of countries have in the past successfully secured their borders. Even in lower technology times this was successfully done.
What would Mexico or China do about it? Nothing. Be realistic. The US still comes from a position of strength (for now).
> Have nanotech magic-growth fences been invented and I didn't notice?
The border was fairly tight for most of US history. Don't pretend this is a technology problem. This is a corruption and lack of will problem. It could be solved in short order given the will. As I alluded to, Ike responded to a growing problem and effectively dealt with it in the space of about three months. It remained solved pretty much until the early 70s.
I would like to see meaningful data on how both "The border was fairly tight for most of US history" and how "Ike" cleaned things up so efficiently.
You may be able to solve your fence problem by having extremely strict laws punishing U.S. citizens that engage in employing illegals. I doubt any other approach would work.
I also don't know what the economic impact of losing the gray/black market labor would be and how long it would take to recover from it the changes.
You obviously sound like someone who is doing a large amount of armchair posturing. How do I know? looks out window Oh, hey! Mexico. I can even see the border wall from where I sit. I've met a number of illegal immigrants, I even went to school (in America!) with a few of them. The fact of the matter is that you have miles and miles of border that is damn near impossible to secure. Short of militarizing the border with some sort of armed computer-operated sentry, you aren't going to keep people from getting in. Building a wall simply forces people to either go over or under it.
If you can't get keep people from getting in, how do you spot them once they're here? I work with a Mexican national (he's legal, though). Without knowing better, I wouldn't be able to tell that he's an immigrant while some other person is not, and I've lived my entire life, save for one year, on the border. You could, of course, try to document the legal people (with, I don't know, some sort of passport) and force every person that looks like they could be illegal to present identification. I know I for one would love to live in a place that unfairly persecutes anyone that isn't white! </sarcasm>
Get real, the only way to ease the problem with illegal immigration (and with borders the size of the US, you'll never get rid of it) is to make the process of becoming legal a sane experience. It takes something like 18 years just to have the chance to get into this country if they're from a Latin country. It's no wonder people would rather hop a fence.
Funny how there wasn't an illegal alien problem up through the 60s. Wonder how they managed that if it's impossible.
People's attempt make this about a physical wall is absurd. It's not about a wall. It's about many measures. Also, it is rather easy to prove that someone is an illegal alien. Hey, Japan makes foreigners carry an alien registration card and if you can't produce one you might find yourself on a flight out of the country. Not that I recommend this approach, but it's quite ridiculous to assert it's impossible.
The difference is, Japan is openly and honestly racist about the process. You can tell whether or not someone looks Japanese really easily, and there's almost no such thing as a naturalized Japanese. If you see a white dude in Japan, you can be damn sure he's not Japanese.
But a Japanese-looking dude in the United States might be an American citizen, or he might not be. The same is true of Mexican-looking people, black people, and even white people. A white dude with a funny English accent might be an immigrant, or he might be the second coming of William F. Buckley.
You should still be able to determine most of those by accent and by subtle differences in physical appearance. I imagine that would be easier if you were Japanese.
There wasn't? There's been an illegal immigration problem in the States since we started clamping down on immigration. There was a large problem with Chinese immigrants in the late 1800's, early 1900's. In fact, El Paso (my hometown) was a focal point of that as well.
For a large part of the history of El Paso, Juarez (our sister city across the border) and El Paso flowed naturally. There wasn't really much of a divide between the two cities, up until the 1920's when a fear of lice caused Mayor Tom Lea to cut back on immigration which eventually spawned the Bath Riots. Even still, it wasn't really difficult to get into El Paso as a Hispanic individual. You simply had to go through a delousing process (designs of which Hitler used to exterminate the Jews) that sprayed you with Zyklon B and steam bathed your clothing. Not exactly the most honoring thing to go through, but you were still permitted access afterwards.
You could say there was even illegal immigration starting during the Mexican revolution when the States became a launching point for some of the revolutionaries. The U.S. still had this idea of neutrality and wanted those people to stay out. They came in anyway.
Flash forward to the WWII era and you have a program (I forget the name) that brought in Mexican citizens to work in the U.S.
So...you saying that there wasn't a problem until the 60's is simply misguided on one hand (there wasn't a problem because a lot of people were largely encouraged, or at least not stopped, from coming in) or horribly wrong on the other (there's been illegal immigration in this country since the quota system was introduced).
Like I said, you sound like someone who doesn't know jack about this subject. You're obviously entitled to your opinions, but your opinions are still wrong.
I'm afraid you are trying to mislead. No, a large pool of undocumented mexican labor was not coming to the US to live and work. Not until the late 40s, anyway. Then the problem was solved until the late sixties.
Talking about the ease of crossing the border in El Paso is irrelevant to the question of whether large numbers of people were illegally finding work in the US.
The Chinese you talk about were episodically shipped out en masse. Kind of makes my point more than yours.
How is enforcing existing laws against a group which is predominantly white a "racially motivated witch-hunt"?
You are also horribly misusing the term "witch hunt". The problem with a witch-hunt is that witches don't exist. Anyone you catch in a witch-hunt is innocent. By contrast, rounding up illegals is highly likely to catch a bunch of existing criminals and will probably have a low false positive rate.
Not at all. They'd merely have to pay a "living wage".
Moreover, we have a lot of legal residents and citizens on "aid". Lots of them can do farm work. (Yes, I know how hard farm labor is. I've done it. Have you?)
As to child care, the ones who can't do farm labor can provide it. After all, we trust them with their kids, so surely we can tell some of them that their aid depends on them taking care of other people's kids. (Of course, we'd have to break the social workers hold on such activities. Welfare programs are pretty much designed for the providers.)
Farm labor costs are a very small fraction of total food costs.
> send every single California farm into bankruptcy?
Bollocks. You're repeating industry propaganda. Some farms on the margin may go, but so what.
How about silicon valley takes a hiatus from frivolous social apps and make some good fruit picking robots so nobody has to do it? It wouldn't make business sense now, but post deportation it might.
> How about silicon valley takes a hiatus from frivolous social apps and make some good fruit picking robots so nobody has to do it? It wouldn't make business sense now, but post deportation it might.
Frivolous social apps exist because a market for them exists. Furthermore, the manufacture of web apps is significantly easier than the manufacture of machines with image processing and manipulation skills capable of matching an immigrant.
The initial cost of purchasing robots capable of harvesting fruit would be astronomical, probably enough to send more than a few farms on the margin into deep debt or bankruptcy. I can't imagine what the support costs for such an operation would be.
I don't have an answer, but I doubt you can prove its the most fiscally effective solution.
I'm sure there's been studies on the costs of doing this. These are just off the top of my head.
1 - finding and sending them home. This will be huge. There're not all from Mexico, not always an easy/cheap trip. Cost of finding them will put cost pressures on local law enforcement. Cost to detainment while you send them home. Some you won't be able to prove to the receiving country that actually is their home which increases detainment time, sometimes indefinitely.
2 - lost low cost labor would increase business costs resulting in inflation and business failures. This may also be huge. Its an unknown economic shift.
Our gov isn't too great at estimating costs. The ongoing Iraq war was initially estimated at around $60 Billion or so. Current estimates have it at $3 trillion.
Remember, California has the size and diversity of many medium-sized nations... so generalizations often don't work.
The scene at the forum wasn't really connected to the recession or California but US health care and US urban poor in general.
I'm surprised how little I notice the recession, much less the "collapse" of California. Of course, I'm in the Bay Area and I think that LA and especially the central valley were harder hit. But that is how the US generally has been economically - strong urban area but with hinter-lands that are poorer than one would imagine.
Actually Los Angeles County's unemployment rate was only .6 percent higher than Santa Clara County (12.6% vs 12%). San Francisco does a little better at 10.1% but it's still above the national average (see here: http://www.google.com/publicdata?ds=usunemployment&met=u...)
In reality California's unemployment rate gets dragged up by the smaller counties in the extreme north and south. For example, Imperial County (which borders Mexico) has a 28.7% unemployment rate while Shasta County (about 40 miles or so south of Oregon) has a 15.2%
California will ultimately pull out of this situation. The question is how long will it take, and how much pain will people have to endure before things get better.
As Entrepreneurs we hold part of the key to better times through the development of our businesses. The other side of the equation is for the most part out of our hands. Things such as the state passing a worldwide gross receipts tax and other similar actions that in the past have served to cool businesses interest in the state must bear some of the blame for this current problem.
I sincerely hope that this problem is short lived, and that Governor Schwarzenegger and the California legislature solve this problem ASAP for the benefit of all of us.
As a transplant to California for 2 years now, grimly apocalyptic articles like this make me question staying. Thanks kevbin for framing California's Boom & Bust problem as actually defining the state through history. Perhaps being able to structurally and culturally handle endless Boom & Bust cycles make California a stronger state! You've got to love counter-intuition...
It's not just California, it's the whole country that's in a mess. How did it get there? In a word, greed. In a few more words, people failing to understand, tolerate, care for, and stand up for each other, especially people different from them. "Me, me, me" does not work. "We" works.
"Me me me" made us one of the richest countries in the world. In a bad recession, our unemployment is about as bad as most of the "we" countries. We are still far richer.
The fact that we have booms and busts (and are currently in a bust) is not evidence that our system doesn't work.
In a word, greed. In a few more words, people failing to understand, tolerate, care for, and stand up for each other, especially people different from them.
Greed wasn't just invented. Ditto for the rest. A scientific explanation requires that the dependent variable Y be a function of the independent variable X, if X is claimed to be causative.
Another thing I dislike about statements like this is that the speaker always comes out smelling like a rose. That may not have been your intention, but there it is.
The very concept of the "American Dream" is individualistic. Individualism is ingrained in our culture. We are all taught to think for ourselves, and thinking for ourselves usually winds up being thinking about ourselves for most people.
A couple of days ago there was a statement here by someone claiming that California got 1/3 of the worlds venture capital, it looks like that could be spent better than on the 'next hot thing' on the web. Unbelievable, what a scene.
1. VC do invest in a lot of things beyond "the next hot thing on the web", including hardware, cleantech, enterprise software, etc.
2. VCs have a responsibility to get returns for their investors, not fix the government's fiscal problems.
3. Those "next hot things" have at one time or another included companies like Google, Yahoo, Facebook, and others, which have together contributed billions of dollars and tens of thousands of jobs to the state of CA. Not bad for some stupid web 2.0 fad, huh?
"VCs have a responsibility to get returns for their investors, not fix the government's fiscal problems."
I realize this isn't what you were getting at, but its a good place to make the remark.
Its every American's responsibility to pay a certain amount of time and effort into ensuring government is run well. If your dance card is too full with making money and no time left over to watch over your government, it catches up with you. I'm not singling out VCs here. It is a general problem for an economy to be structured so most do not have time or inclination to pay attention to governance maintenance. There is a second problem which generally only applies to wealthy and/or well organized groups which is the inclination to "corrupt" governance in their favor. Both these problems have reached critical effect.
As evidenced by the state described in the article...
No, it's not bad, but apparently the wealth is not spread in a way that precludes conditions the likes of which should not be seen in third world countries, let alone the first.
Of course these problems are not there for the VCs to fix, it's just that California was mentioned rather loudly as 'the place to be'.
Money in CA is allocated more in ways that benefit politically powerful groups, rather than what is most efficient for the public as a whole. The public sector unions are the very worst. It's incredible how long it takes them to repair a road or build an overpass. They literally worked on the overpass at CA-237 and I-880 for 7 years. Unreal.
A nice example from California, a little bit north of LA (where I've lived for three months at the expense of one of my customers) there is an area with lots of really really fancy houses. They must be worth upwards of several million $ a piece.
The driveways are absolutely immaculate, the road they empty out on is worse than some of the roads in Northern Canada. I've seen the exact same thing in countries that literally qualify as third world.
In case you don't know what is meant by the term, but Colombia and Panama definitely qualify. By 'modern' standards some parts of Romania and eastern Poland do too, but I've been to plenty of other places that would count, either by that map or because of the local conditions. And I'm not talking package holidays here but stays of at least several months.
I'm using these roads as an example because at the time it struck me as indicative of what might be wrong there.
If your country is 'the richest in the world' by some measurements then that wealth should be translated to an increased higher standard of living for the poorest, and an increase in infrastructural spending that will benefit everyone, not just the rich.
If you can't manage that, in other words if your poor are still not provided health care, proper housing and education and if you have an underclass that basically has very few choices of making parity with those born into richer families (and hey, isn't that what that famous American dream is all about) as well as an enormous criminal problem then maybe we should propose redrawing that wikipedia map along more objective criteria.
And quite possibly, we'll find that California has much more in common with third world countries than with the first, no matter how rich the rich, and no matter how much the GDP.
Northern Canada is a good comparison because it probably has the lowest GDP per surface unit of any country in the world, but they also have one of the best health care systems, and their work on roads is nothing short of amazing, especially if you take in to account the effect of the climate on the roads there.
If everybody in California (including corporations) would be paying taxes relative compared to other 'first world' countries then such things would be taken for granted.
Until it is solved through taxation everybody, VCs included (who really are only in the game to turn a ton of money in to even more money) has a responsibility to look after their neighbours.
They were ground zero for a pair of US bubbles. This caused the state's revenues to skyrocket. Believing revenues would always skyrocket, groups which have essentially captured the state and municipality budgeting processes voted themselves large increases in benefits. It is politically impossible to reduce those benefits once enacted, yet they automatically snowball in costs every year. Its like the miracle of compound interest, except in reverse, and with the full principal being due every year.
The bubbles have burst and California no longer sees the potential for staggering revenue growth every year, but will see double-digit increases in benefits outlays for the politically powerful groups.
Bonus points: every time California has a short-term lack of funds they negotiate with their beneficiary groups to trade a lack of increase this year (note: not a cut, just less increase than they would have otherwise gotten) in favor of a new entitlement due in N years, whose NPV is astoundingly higher than the savings due to the lack-of-increase.