David R. Henderson  

Hanson on "Bankrupt California," Part Two

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I promised in yesterday's post to cover the parts of Victor Davis Hanson's article that dealt with other aspects of California. Immigration aside, I found myself agreeing with a number of them and wanting to extend some.

1. Gas prices. He points out that gas prices are higher in California than elsewhere, especially now, but only hints at the reason. I discussed the reason here in August and here in July 1999. State regulators and the EPA have made the previously national gasoline market into a series of "boutique" markets. Gasoline produced for Oregon and Nevada cannot be sold in California. So that makes the supply system in California more fragile than otherwise. One refinery goes down and supply falls; you can't bring it in from elsewhere. Result: gasoline prices have jumped by about 40 cents or so in the last 10 days. I pointed that out on a local TV news show, KION-TV in Salinas, last Friday.

2. U.S. Energy Secretary Chu. Hanson notes that Steven Chu has advocated substantially higher gasoline prices than California has now. When I was talking to the producer of the news show last Friday before going on the air, I mentioned that Chu had advocated prices close to double our current prices. She looked uncomfortable and said, "Well, we can't get political." I answered, "It's not political to point out that someone said something." Unfortunately, in the short time I got on the air, I didn't get to quote him.

3. "High-speed rail." Hanson notes the absurdity of building "high-speed rail," which I predict will not be, between two relatively small cities in California's Central Valley. This rail is not cheap and will further stretch an already bloated wasteful government. Which brings me to:

4. Taxes. On the ballot in November is a measure to raise the top marginal tax rate on income and the sales tax. The top marginal tax rate is already a whopping 10.3%. Under the bill, it would rise to 13.3%. The state sales tax rate is a hefty 7.25% and would rise to 7.5%. That means that, combined with local sales taxes, in some parts of California the sales tax rate would exceed 9%.

So, contrary to what I think some commenters thought, I was not dumping on Hanson's overall article.


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COMMENTS (14 to date)
Joe Cushing writes:

I really hope that California splits in two. If this ballot initiative to raise the top income tax passes, it will add fuel to the fire to get the state to split. It will be good for American freedom if this happens. California is too influential over the rest of America. So many laws are special to only California. All of America's industry, whether service or manufacturing, has to make special considerations for California. I've never been there but I'm sick of California's laws. They have even cost me money 1000s of miles away.

Anyway, the reason higher taxes on the rich means a greater chance of a split is because there is a part of the state where a number of rich people are concentrated. That part wants to break off from the rest. If this happened, the impact would be huge. It's these people who is funding government the rest of the state. If they leave and take their money with them, the rest of the state will be in even worse shape and that's a good thing. The government will never shrink on its own. It must just run out of money before it will do it. The sooner it runs out, the better. I say congrats to those who can escape taxes through secession.

Shayne Cook writes:

Dr. Henderson:

I'm familiar with California's unique gasoline blend stock requirements - I lived and worked in the Bay Area for a few years.

You mentioned Energy Secretary Chu advocated even higher gasoline prices for California, but weren't given an opportunity to expand on that during the "news" show. Would you do so now?

On what basis was Chu advocating even higher prices for gasoline in California? Was he advocating higher prices in the form of higher Federal/State gasoline tax?

J Storrs Hall writes:

"Somehow we have to figure out how to boost the price of gasoline to the levels in Europe," Mr. Chu, who directs the Lawrence Berkeley National Laboratory in California, said in an interview with The Wall Street Journal in September [2008].

The story here: http://sec.online.wsj.com/article/SB122904040307499791.html

Politico claimed: "Never mind that some energy experts say Chu had it exactly right, and that higher fuel prices would encourage consumers to buy more efficient vehicles, discourage suburban sprawl, make renewables more competitive and reduce U.S. reliance on imported oil."

Chu has since recanted, in response to a pointed question in a Senate hearing, in these words: "I think that right now in this, uh, in this economic very slow but, but, you know it's, return that we need to, uh, we need to have these prices well could have, well could affect the comeback of our economy and we're very worried about that. So of course we don't want the price of gasoline to go up we want it to go down."

IMHO no sane person could look at Chu's policies as Sec. of E. and believe he really wanted gas prices to go down.

Bostonian writes:

Henderson opposes raising income and sales taxes in California, but he supports the open borders that change the electorate to make such outcomes more likely.

In an opinion poll

Hispanics favored these tax increases, overwhelmingly, by 70% to 25%, whereas whites favored it narrowly, 49% to 43%.

The question was worded as follows:

“Governor Brown and others have proposed a tax initiative for the November ballot titled the ‘Temporary Taxes to Fund Education. Guaranteed Local Public Safety Funding. Initiative Constitutional Amendment.’

The poll also found that 81% of Hispanics favor "raising the top rate of the state income tax paid by the wealthiest Californians". Since relatively fewer of them are among the wealthiest, this is not surprising.

I do not favor importing large numbers of people who will vote to confiscate my earnings.

Hugh writes:

A question for the Libertarians out there:

Posit a libertarian USA with open borders (and all the drugs known to Man too, yeah).

Suppose a group of citizens gets together and decides to create a closed community with no drugs and new members to be admitted only after a vote by existing members.

Would you Libertarians approve of such a community? Or would you send the SWAT team in?

David R. Henderson writes:

@Bostonian,
I do not favor importing large numbers of people who will vote to confiscate my earnings.
Nor do I, Bostonian. Here's what I wrote in an earlier post:
At the same time, though, I've worried about whether the new immigrants would vote away the system that attracted them to the United States in the first place. My solution has been a 20-year residency requirement before one can become a citizen.

David R. Henderson writes:

@Hugh,
Suppose a group of citizens gets together and decides to create a closed community with no drugs and new members to be admitted only after a vote by existing members.

Would you Libertarians approve of such a community? Or would you send the SWAT team in?

I don't know if I would approve. I would have to know more. But I'm positive that I would allow it, which seems to me to be the most important issue here. At least the way you've set it up, it seems to be a simple issue of freedom of association. Of course that means no SWAT team.

Now, here's one for you, Hugh:
Suppose a group of citizens gets together, say in Pebble Beach, which is right next to where I live, and decides to create a community in which members are free to hire people, non-citizens, who are from Africa, Asia, and Latin America. Would you allow that or would you send in a SWAT team? Or ICE?

Hugh writes:

@ Dr Henderson

As long as the guest workers stay in Pebble Beach and create no problems (negative externalities) for non-Pebble Beach residents (including but not limited to requests for welfare), I suppose I don't have a problem.

Dr Henderson, I believe our common, shared problem is that neither of our scenarios are even remotely close to reality. A reality starly illustrated by Dr Hanson's essay.

Richard A. writes:

@David R. Henderson,

At the same time, though, I've worried about whether the new immigrants would vote away the system that attracted them to the United States in the first place. My solution has been a 20-year residency requirement before one can become a citizen.
I suspect that only a small percentage of Hispanics who vote are first generation Hispanics.

David R. Henderson writes:

@Richard A.,
I suspect that only a small percentage of Hispanics who vote are first generation Hispanics.
Your suspicion could well be correct. I don't know the data. But if it is correct, then touché.

R Richard Schweitzer writes:

Whatever became of an assimilation?

Ted Levy writes:

A simple modification of David's suggestion to take account of Richard A's (likely correct, I think) observation:

"My solution has been a [20] 200-year residency requirement before one OR ONE'S DESCENDANTS can become a citizen."

This gives us all the benefits of immigrants and none of the political risks. Plus--the real strength of the suggestion--as time passes a greater and greater percentage of the American populace find themselves in a position of taxation without representation. I seem to recall that worked out well as a stimulus for liberty last time around...

Shayne Cook writes:

J Storrs Hall:

Thank you for responding to my questions.

By the way, my humble opinion is in in concert with yours. Dr. Chu is reputed to be an accomplished physicist. But he's proven himself to be a dismal failure as an economic wonk and "investor". (See Solyndra, et.al.)

Ari Tai writes:

re: CA splits in two. Would be better if all congressional districts were split in three and each became a new state as sovereign as any of the Swiss Cantons. Granted, some will resemble the Housing-Association-From-H3LL (as do some of the Cantons) but they and our citizens can vote with their feet. And we won't have the bay area telling the central valley how to live - and v.v. Only Pennsylvania and Virginia had larger populations than this until the third decade of the 1800s. And today, it's arguably more efficient than giant states (most governance could be / should be self-service and automated - like most service businesses).

re: Sec. Hsu. oh my. I suspect he never studied history or economics. History shows that those that survive a catastrophe (vice those that don't) are wealthier and have more energy (esp. motive power) under their individual, family and/or neighbors' local control. Those that wait on the state die. Since catastrophe is unknowable yet guaranteed - anything that slows down growth in wealth and/or raises the price of energy (ability to move out of the way) is killing people just as certainly as the catastrophe itself. And there's no history of spending today to deal with a problem tomorrow ever paying off (save for perhaps if there was time travel and we could pre-empt a Hitler, Stalin, etc.). Tally discount rates for various investments and note what’s missing. And past panics worth the reaction-at-that-time. Alar. DDT. CFCs. Phosphorus. High Tension power lines (remember the screens / diapers used in CA?). Today it's "catastrophic" climate change.

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