Another Summer of Recovery...
Despite 0% interest rates, $7 trillion in added debt, more than $1.5 trillion in stimulus, and the Fed creating more than $4.5 trillion in new money out of thin air, the US economy just stumbles along. Hope and change turned out to be national malaise as Americans come to faintly grasp the reality that bigger government is never the answer - to anything.
The California model is instructive. Every state has one set of people contributing to the coffer—namely, private sector workers—and another drawing from it—namely, government workers and welfare recipients. In healthy states, the contributors outnumber the users. In unhealthy states the reverse is true.
California is in trouble. For every 100 people employed in the private sector it has 113 people drawing benefits. A person working at Disney or Intel or a fast food franchise is carrying his own weight plus that of one other person. Many factors contribute to California’s budget crisis. The state has a big university system, an influx of needy immigrants and an expansive notion of how involved the government should be in people’s lives.
The California response is to double-down and spend more as businesses leave in record numbers. Of the fifty US States, California taxes more while being one of the the most unfriendly to business. In California, the State tax rate runs at roughly 10% for earners making over $47,000 per year. In neighboring Nevada, it's 0%. The State corporate tax rate in California is almost 9%. In neighboring Nevada, it's 0%. California seems to be following the path first trod by New York state, which dominated the nation's economy through the early part of the 20th century, only to see massive outmigration of jobs and people, and subpar employment growth as its taxes and regulations rose.
(NewsMax) [By the first quarter of 2014], Texas added 30,000 new jobs, while in February California lost 31,000 jobs. And that’s not all. Frank points out individual taxes are so much higher in California that when people move to Texas “most get a 10 percent pay raise — due to the lack of an income tax. The companies get a 10 percent rise in profits, due to lack of state corporate tax. It is win-win in Texas and lose-lose in California.”