For instance, more and more affluent people are leaving California because of the taxes and other high costs. Dennis Gartman wrote this note:
According to the always interesting and strong proponent of free markets and small government, the Mercatus Center at the George Mason University, California now owes a stunning $118.2 billion. However, when we add to this sum the pension fund shortfalls and other major concerns, California actually owes $757 billion. On a population of 38.8 million, that's a stunning $19.5 thousand per citizen... Children included!
California's problem is that the state is adding nearly $15 billion annually to its deficits, and as those deficits rise the state’s ability to add to its roads, its universities, its hospitals, its bridges, its all-important water supplies et al are falling rapidly.
California, according to the Investor's Business Daily, is a “massive welfare state.” According to the IBD, one/third of all US welfare recipients live in California, which, with its generous welfare benefits, has become a magnet for impoverished immigrants from around the world. A quarter of the population lives near the poverty line.
And the news from California just gets worse. This from Reason magazine:
Another year, another mess with California’s public employee pensions. The California Public Employees’ Retirement System (CalPERS) announced this week that the rate of return for its investments for the fiscal year ending on June 30 was less than one percent. It was .61 percent. As the Los Angeles Times notes, this is the worst returns it has logged since 2009, when the housing bubble burst and hit California particularly hard.
That’s a far cry from the 7½% CalPERS assumes it will get. And the newly passed $15 minimum wage in California will add almost $4 billion of annual cost for government employees as well as increase the state’s required pension payments. ...
....
I’ve been having this conversation with my friend Ed Easterling. He pointed out that the crunch I am expecting could come in a very different way. Let me quote a paragraph from a recent email he sent me:
Lots of folks [he left the “like you” unstated] have been worrying about a looming financial catastrophe following policies that have included Fed QE, ZIRP, etc., and near-trillion-dollar stimulus programs. Maybe, just maybe, we’ll look back in five or ten years, after no catastrophe, and applaud that such “good” actions saved the economy without negative consequences. When, in reality, the “catastrophe” will have been the loss of 20%, 30%, or more in our standards of living and wage growth. The anecdote of the Frog-In-Boiling-Water may again prove to be a truism of life….
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