100 US cities threatened by $2 Trillion debt crisis

[trefoil]

There are two parties in California.
The real root of the problem is Proposition 13. The terms of this are still unbelievably stupid, to wit:

Proposition 13 (officially named the People's Initiative to Limit Property Taxation) was an amendment of the Constitution of California enacted during 1978, by means of the initiative process. It was approved by California voters on June 6, 1978. It was declared constitutional by the United States Supreme Court in the case of Nordlinger v. Hahn, 505 U.S. 1 (1992). Proposition 13 is embodied in Article 13A of the Constitution of the State of California.[1]

The most significant portion of the act is the first paragraph, which limited the tax rate for real estate:

Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.

The proposition decreased property taxes by assessing property values at their 1975 value and restricted annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year. It also prohibited reassessment of a new base year value except for (a) change in ownership or (b) completion of new construction.

In addition to decreasing property taxes, the initiative also contained verbiage requiring a two-thirds majority in both legislative houses for future increases of any state tax rates or amounts of revenue collected, including income tax rates. It also requires a two-thirds vote majority in local elections for local governments wishing to increase special taxes.

source: http://en.wikipedia.org/wiki/California_Proposition_13_(1978)

Basically, this is an attempt to run a modern republic by prohibiting simple majority rule. California defaulting has been a subject of the news for a long time as a result.
If you deliberately make a state ungovernable, you have no right to later complain. You made it that way, and until you again make it governable by normal republican methods, nothing will happen the way it's supposed to.
California is a forerunner of what will happen to the US unless we get off this tax-cutting forever BS and end the filibuster in the Senate, which is bringing to the Federal government the supermajority logic of Prop 13.
The deal that was done between Obama and the Republicans was a budget busting piece of crap in the fine tradition of this idiotic law, done because the Republicans in effect made Prop 13's supermajority requirement Federal law through abuse of the filibuster. By next year, I expect the right to be in full cry looking to cut SS and Medicare, even though the share of GDP going to Federal taxes is the lowest its been in generations.
The right has to be stopped, and simple majority rule has to be restored in order to stop it, or it will bankrupt this country with its crazed illogic.

 

[jem]

Quote from trefoil:

There are two parties in California.
The real root of the problem is Proposition 13. The terms of this are still unbelievably stupid, to wit:



source: http://en.wikipedia.org/wiki/California_Proposition_13_(1978)

Basically, this is an attempt to run a modern republic by prohibiting simple majority rule. California defaulting has been a subject of the news for a long time as a result.
If you deliberately make a state ungovernable, you have no right to later complain. You made it that way, and until you again make it governable by normal republican methods, nothing will happen the way it's supposed to.
California is a forerunner of what will happen to the US unless we get off this tax-cutting forever BS and end the filibuster in the Senate, which is bringing to the Federal government the supermajority logic of Prop 13.
The deal that was done between Obama and the Republicans was a budget busting piece of crap in the fine tradition of this idiotic law, done because the Republicans in effect made Prop 13's supermajority requirement Federal law through abuse of the filibuster. By next year, I expect the right to be in full cry looking to cut SS and Medicare, even though the share of GDP going to Federal taxes is the lowest its been in generations.
The right has to be stopped, and simple majority rule has to be restored in order to stop it, or it will bankrupt this country with its crazed illogic.

arguing it is prop 13's fault is socialist propaganda....

prop 13 is not the problem... the CA legislature is the problem. they have set up such a ponzi state that only 35 percent of the population pays income taxes. CA already has massive revenues from taxes and property. CA has greater state and local tax revenues than all but a few countries.

it is the incredible spending the state does on welfare and govt workers, illegal aliens and the children of illegal aliens which cause the problem.

CA has to cut back on the give aways, and the salaries.

 

[Scataphagos]

Quote from jem:

"... this is socialist propaganda....

it is the incredible spending the state does on welfare and govt workers, illegal aliens and the children of illegal aliens which cause the problem.

CA has to cut back on the give aways, and the salaries.

Ditto... at the Federal level.

 

[EMRGLOBAL]

CA is finished. Smart money is leaving and has been since 2005.

Nothing CA can do, cuts, cutback, pray will save the state. It will be in junk bond mode as will many Key Cities in CA. However, the numbers will be hidden and of course no body will admit that CA is bankrupt....as The Comptroller did in IL recently. In fact he said that IL and Chicago are in the worse state ever, in the history of any city and state in the US.


However, who the fuck cares. Unless you live in these areas and need to rely on the State Gov.

This could be a huge Shorting potential for real traders. It could also be a huge buying potential in certain cases...HUGE! As in Drexel HUGE when they made 100s of Millions in Junk Bonds.

I have clients that are sitting on piles of cash and asking about possible defaults, buying and shorting opportunities. Foreign and Domestic clients. I'm not now well versed on Munis but I'm doing a shit tone of research right now.

 

[Mercor]

Quote from misterno:

How can a house be free and expensive at the same time?

Please explain

Same reason some States have refused federal stimlus money to build free high speed rail.
Because the maintenance of the rail is more costly then the building. And of course most of it is not needed.

 

[zdreg]

Quote from delaford321:

Yeah, I think MW is just trying to stir the pot and make a name for herself.

she already has the name. she has been raked over the coals like jim rogers was. the only difference is that in the jim roger's case many et
posters without a pot to piss in were calling him names. in whitney's case it is her colleagues on wall street who would lose the fat income stream from municipal deals who are haranguing her.

 

[dandxg]

Quote from jem:

I always wondered who was funding state city and muni bonds in CA.

I always laughed when I heard they would never default.
The state of CA legislature still seems to be acting like the money comes from the tooth fairy. They have been unwilling to make real choices and real cuts.

In fact my kids elementary school educations are still excellent. I have been waiting for the shoe to drop since about 2003. It still has not.

You are in SD correct? I am in OC visiting family and friends. No one I have talked with, over the last week, enjoys Kalifornia right now. I am glad we are living in Denver. We have our cons, sure, but our much better off economically.

At the same time, I remind people in CA that LA metro still has the 8-10th largest economy, depending on whom you ask, in the world.

I was surprised, a bit, that Illinois is so bad off. State Troopers being refused gas because lack of payment? :eek:

 

[trefoil]

Quote from jem:

arguing it is prop 13's fault is socialist propaganda....

prop 13 is not the problem... the CA legislature is the problem. they have set up such a ponzi state that only 35 percent of the population pays income taxes. CA already has massive revenues from taxes and property. CA has greater state and local tax revenues than all but a few countries.

it is the incredible spending the state does on welfare and govt workers, illegal aliens and the children of illegal aliens which cause the problem.

CA has to cut back on the give aways, and the salaries.

"massive revenues" compared to what? It also has 20% of the economic activity in the country. Does it collect 20% of the state revenue?
The rest - actually all of it - is the usual economics by anecdote and insult that gets done around here.

 

[trefoil]

Actual answers here: http://www.usgovernmentrevenue.com/state_rev_summary.php?chart=Z0&year=2008&units=b&rank=a

...for 2008, the last year for which there are definite figures.
CA collects 13.1% of the state revenue, while having 13.3% of the total GDP of the US (20% is what I always hear cited, but that's obviously another unsubstantiated anecdote).
So, its revenues aren't out of line with its economic activity. Obviously, there are other problems there.
Bottom line: democracy <> supermajority. Requiring a supermajority to get anything done is a guarantee of paralysis.

 

[jem]

294 billion in state and local tax revenues. and it does not have to provide for national defense or social security?

More revenue than any other state on list... it looks like by close to 30 percent.

I would call that massive.

How many countries take in that amount?

it is the 8th largest economy in the world and it taxes the hell out of it citizens.

The democrats have had control of the legislature for decades and they have purposely spend the state to oblivion in order to garner votes.

We have cops an firemen making six figures.... we have school teachers with big salaries and great retirements.

We have deputy district attorneys make well into the six figures.

I do not even want to know what the life guards are making.

we have unbelievable give aways to people who do not even have to be citizens.

it has to stop and it is not prop 13s fault. Blaming prop 13 for problem is insane. CA still gets massive revenue from property taxes as it is.