The cuts are going to have to go deep:
Two short months ago lawmakers in California struggled to close a $15 billion hole in the state budget. It was among the biggest deficits in state history. Now the state faces an additional $11 billion shortfall and may be unable to pay its bills this spring.
The astonishing decline in revenues is without modern precedent here, but California is hardly alone. A majority of states — many with budgets already full of deep cuts and dependent on raiding rainy-day funds or tax increases — are scrambling to find ways to get through the rest of the year without hacking apart vital services or raising taxes.
Some governors, including Arnold Schwarzenegger in California and David A. Paterson in New York, have called special legislative sessions to deal with the crisis.
Others are demanding hiring freezes and across-the-board cuts. A few states are finding their unemployment insurance funds running dry, just as the ranks of out-of-work residents spike.
The plunging revenues — the result of an unusual assemblage of personal, sales, capital gains and corporate taxes falling significantly — have poked holes in budgets that are just weeks and months old and that came about only after difficult legislative sessions.
I would generally assume that the crisis at the state level will make the next “stimulus” package easier to pass, as most of the talk I have heard about a second stimulus pack involves sending money to the states to handle this sort of budget shortfall. Whether it works and is a good idea is beyond me.
Josh Hueco
OT, but Happy 70th Birthday, Gordon Lightfoot!
/return to general feeling of totally-being-fucked-with-no-end-in-sight
Tzal
A lot of this is due to prop 13. I know there are other problems, but prop 13 makes it hard for local governments in California to raise money.
Another result of California’s absurd initiative process.
Mike Jones
I’m not sure what the particular issues in California are, but in New York we’ve taken the biggest hit from the Wall Street meltdown. State revenues from various taxes related to Wall Street account for about 20% of NY state revenue.
mo
The feds should demand that any states which are bailed out have sane and reasonable state tax policies, which would eliminate California.
ezdidit
Saving jobs would be the only reason to bail out the states. Until Obama realizes that every penny of every bailout must be used to preserve jobs, we will have a longer and more unnecessary downward spiral than we need.
Of course, saving institutions that can attract and commit new capital should be preserved, but the theory that ALL the banks and investment houses must be bailed out is fallacious and an unutterable waste of taxpayer money. The ranks of these must be considerably thinned.
Chief among his priorities should be a government (taxpayer) stake in each and every bailout dollar invested. No other government system is set up to administer this kind of autocracy, but even democracy needs an autocrat, particularly at this time. America’s corporate boards of directors are a drunken joke. Restructuring the corporate entity as a non-profit organization might be a good start.
With bi-partisanship and transparency, Obama may give the markets the confidence they need for new capital formation. First among priority investments ought to be the auto industry.
Svensker
@Mike Jones:
Yup, and Mayor Bloomberg is raising NYC worker salaries by 8%, so he can be sure to get voted in for his illegal 3rd term.
We are all screwed except the big guys.
Tom Levenson
What these numbers illustrate is the compound nature of the degree of f**ktitude we face.
If you take your garden variety Keynsian economics seriously, then you respond to recession with an increase in govt. spending. The issue is that in this country, government spending is spread out over several levels of govt.
Last figures I saw, the federal level’s share of GDP spending excluding Soc Sec and Medicare was about 10 percent. State and local spending has accounted for more than that — 12 + percent. So a bump in federal deficit spending does not have much impact if state and local spending go down; we’re treading water from an inject-new-money into the economy perspective at best.
Remember: the Fed can print new money (issue debt); in essence, states and cities (counties, special boards) cannot. (That’s not quite true, but it is pretty close.)
So we have one level of govt., the feds, trying its best to helicopter cash into the system, and another, which is facing declining revenue and hence spending cuts as illustrated in the post above. All of which to say is that all federal action right now is pushing against very powerful headwinds.
Svensker
We are all screwed except the big guys.
Let me amend that. Except for the big guys and folks who work for the government and have guaranteed huge pensions and benefits. Here in NJ, I’ve got a bunch of friends who are retired state employees — in their 50s — who have very comfortable pensions plus plush health care benefits for their immediate families in perpetuity. And the way the contracts are written, the state has to raise taxes or de-fund other commitments in order to pay these union bennies.
As a self-employed person with my pension in a now-feeble-looking KEOGH, who pays $12K/year for shitty health insurance, and who pays over $9K/year in property taxes, I’m wondering how long this imbalance between the private sector and state government entitlements can go on.
MattF
I expect that pretty soon we’ll see feral packs of state legislators stalking the streets and cul-de-sacs, scavenging the neighborhoods for liquid assets… Hold on to your hats, people.
Comrade Stuck
@Tzal:
This why the Founders gave us a representative democracy, instead of direct rule by the mob.
Was listening to NPR this morning and they said it’s unlikely anything gets passed in the lame duck session, save for extending unemployment benefits. So it’s mostly for show that dems are trying to do something other than go home and eat Pumpkin Pie. And besides, all signs point to the wingnuts getting wingnuttier by the day.
Brian J
I don’t live in California, so I am not sure what the particular issues are there, but I remember reading about the state back during the recall process. The word "ungovernable" springs to mind, along with the idea that anyone who thinks that the budget problems can never be dealt with by raising taxes is particularly delusional.
In New York, as someone has pointed out, the state’s probably going to take a hit because of Wall Street’s problems, although the size of the hit isn’t clear. I remember reading that Gov. Patterson is cutting education aid and Medicaid spending, which seems like a short term plan to cut off the state’s nose to spit its long term face. I also wonder what sort of budget situation Pataki left Spitzer in, and what Patterson has done, if anything, to change it since he took office. Again, this is from memory, so don’t take it to the bank, but I think I remember reading that Pataki wasn’t the sound fiscal manager that all Republicans like to pretend they are.
Brachiator
@Tzal:
Well, no. The old property tax system, in which taxes on homes rose automatically whether or not people’s incomes increased so that they could pay the increased assessments permitted the worst kind of political cowardice. Politicians could take advantage of rise in taxes without putting them selves on the line by voting for a tax increase.
The cowardice was intensified over the years as legislators refused to remedy the hamfisted approach laid out in Prop 13 with proposals to balance the funding needs of the state with any requirement for fiscal responsibility.
Part of the problem here is that the $700 billion bailout plan has caused Congress to lose its mind. Having taken the leap in "rescuing" financial markets, Congress no longer sees the need for any restraint with respect to bailout spending.
But the last economic stimulus package did nothing except permit people to pay a few current bills and sock a few dollars away. I have not seen anything anywhere that shows that the last stimulus package achieved any of its announced results. And the sad thing here is that Pelosi and some other Democrats show that they can be as stupid as Republicans. They are stuck in old ways of thinking. Pelosi, Reid and others, for example, are stuck on the idea of adding an expansion of unemployment benefits to the stimulus package. Although I think that this needs to be done, this has nothing to do with economic stimulus. I keep hoping that Obama will bring younger minds with new ideas into his administration, since otherwise we will be in a world of hurt.
And the idea that an economic stimulus program can be expanded or enhanced to rescue states is fundamentally absurd. Some of California’s budget problems are structural — increased spending is built into the budget (pensions, salary increases, minimum spending levels for schools etc.). In addition, some past initiatives have mandated that spending be spent on specific items, making it legally difficult to redirect these amounts into the general fund. In one case (increased funding for some mental health issues), money has been allocated, but no programs exist, so the money is literally in limbo, in an untouchable budget account.
To put this into perspective: California law requires a balanced budget. The budget was supposed to be passed in July. After delays into September, and a hammered out agreement with spending cuts and some increases, current analysis suggests that the deficit could balloon to as much as $21 billion.
James
How about doing something about this little item first?
Comrade Kevin
One of the other big problems in California is that passing the budget requires a 2/3 majority of the legislature, and neither party has 2/3s of either house. Thus, every year the Republicans demand drastic spending cuts in everything, and refuse to find a way of raising the revenue needed (i.e. through taxes). They are quite willing to completely destroy the state so that they can parade around and say that they didn’t "raise taxes".
liberal
@Tzal:
Absolutely right.
By Proposition 13, the state started handing over even more unearned value to landowners than it did previously.
As J. S. Mill pointed out,
liberal
@Brachiator:
So?
(1) Taxes are paid out of wealth, not income. People’s whose property values increase have increasing wealth.
(2) If it’s unjust that homeowners have to pay increasing taxes when their property values increase (not the case, but let’s assume it is, for sake of argument), why is it not unjust that tenants have to pay more rent when demand for living space increases?
Brachiator
@James:
Yeah, this is crap, although the $26 million in lost use tax revenue amounts to about 1.86% of the most current projected budget deficit of $14 billion. But you really have to wonder what the California GOP is smoking.
I don’t have a problem with the 2/3 rule. It should not be easy to raise taxes. But a related part of the problem here are the rules that both parties have engineered to guarantee that incumbents have safe districts. The result is that extremes are encouraged in both parties: Republicans who refuse to back any tax increase and Democrats who never saw a tax increase they didn’t like.
So not only do we get budget deadlock, but we get a slew of initiatives every year because the legislature refuses to act like adults.
Added to this is the refusal of some voters to act like adults. People voted for Governor Arnold with the expectation that he would fight the entrenched interests in Sacramento, but then the voters essentially said, "you handle the mess while we tune out and go about our business." Partly as a result, even modest measures to deal with redistricting and various budget issues were defeated because the voters refused to back the governor against an onslaught of various special interest groups.
Comrade Kevin
The problem with that statement is that, while there are plenty of the former, there are none of the latter.
scarshapedstar
Honestly, are we still pretending that Ahnold was a rational choice? Or that Gray Davis’s removal from office was legitimate, given the role that GOP-Enron played in fucking over California?
Jason
Yes, it is a good idea to send the money to the states and cities. In a recession, local governments get reduced tax income, just at the same time they get MORE demand for relief services.
Which means that since they are forced to live on a budget, they have to cut back, or raise taxes. This makes the recession harder, but if they spent money helping people, that would make it softer, and if they spent money actually hiring people for useful work (roads, bridges, etc), that would tend to make the recession shorter and softer, and will improve economic growth at the end of the recession.
jon
I work in state government (and I work 4 ten-hour shifts, which is why I’m home today.) Things look horrible in the present and the future outlook is gruesome. We’ve been relying on sales and property taxes for so long that we’ve forgotten that other forms of taxation exist, our legislature and governor are of different parties, no one is willing to do anything other than not raise taxes, and the strain on needed services is well past the part where it shows. We’ve balanced our budgets on personal debt (consumer spending and mortgages) and now all the people are broke and the government is broke right with them.
Those of us who work in government are grateful for having a job. But at the same time, we’re all being asked to do more with fewer people, fewer supplies (staples like toilet and copy paper should not be a problem to acquire, but are,) turn off all the lights as often as possible, not use the heating and cooling, and much more. There’s been a hiring freeze for over two years now, and it’s hurting morale, our job performance, and our public image.
Someone somewhere is going to have to be a grownup and admit that government costs money and that the money has to come from somewhere. The free ride is over and some decisions need to be made. The longer states like California and Arizona (and probably everywhere else) wait, the less control we’ll have over our declining options.
The Republicans may be The Party that Broke America, as J.H. Kunstler says, but America let them do it.
Third Eye Open
Down here in Florida we have many of the same issues that California is wrestling with. We have our own wacky amendment systems, restraints on property taxatation, unfunded school mandates and a laundry list of dysfunctional and conflicting rules and regs. Not to mention our smoldering home market and service based economy.
Oh the prices we pay to live in paradise.
On the bright side, with the prospect of fewer private and federal dollars this time next semester, perhaps the parking lots won’t be so full. T.K.! go ahead and take the 5-story parking garage off the honey-do list. That’s money in your pocket, yessir.
Dennis - SGMM
@jon:
The party that never tires of reminding us that "Freedom isn’t free" is the same party that seems to think that government is.
Brachiator
@liberal:
(1) Taxes are paid out of wealth, not income. People’s whose property values increase have increasing wealth.
Huh? What? WHAT?
In the universe I live in, people have to pay their taxes with money. Prop 13 found easy acceptance by one group of homeowners in particular — retirees on fixed incomes who found that they often could not keep their homes because of increasing property tax valuations. A co-worker’s family is part of another group who jumped on the Prop 13 bandwagon. His parents’ income dropped precipitously while the value of their home increased. They sold their house and bought cheaper digs in part because they could not pay the higher property tax obligation.
But Prop 13 was a blunderbuss because it lumped together commercial and residential real estate and dropped rates for both to a similar extent. Rental real estate probably should have been considered separately as well.
But the bottom line is that the state legislature had numerous opportunities to address this issue but punted instead.
You’re comparing apples and kiwi fruit here. And taxes ain’t got nuthin’ to do with justice. But if there were no Prop 13, would you think it "just" that landlords eat any increase in their property taxes and not pass the increase along to their tenants?
I believe in tenants’ rights, but the notion that tenants should be magically immunized against rent increases is just plain bizarre. Go into a supermarket and demand that they keep the same price for all the items there, and see where that gets you.
It’s funny. I remember reading a dumb-ass LA Times pundit, George Skelton, making the argument that the only "legitimate" reason to dump Gray Davis was if he was convicted of something illegal, but of course, this was totally irrelevant to the perfectly legal initiative by which Davis was removed from office. People who want to argue otherwise don’t have the facts on their side. And Davis dug his own grave by panicking over the energy crisis and other issues and then pandering to the left in giving away the store. Davis totally misjudged the mood of the voters.
And unless I missed something, Ahnold was re-elected by a considerable margin (56% to 39% for challenger Phil Angelides).
kommrade reproductive vigor
Cali should tell the fRingeLoons that unless they cough up $26 b the state will re-institute equal marriage laws.
What? I bet the state gets at least $10 b.
Capelza Gradenko
I’m also going after "liberal" on this:
This is where I get so pissed off. My home is not "wealth", it is my home. The one I want to stay in till I die, if possible.
The amount of property taxes we pay has grown…as all those "wealth" fuckers jacked up the cost of housing.
I suppose it would be "wealth" if we sold it, but then selling one of my kidneys because someone was holding a gun to my head could be considered wealth, too. Hey, we should tax organs and blood, too! Afterall, there’s money to be made if we could sell them, but at what cost?
It’s one of the things that have made this whole housing crisis so insane. A house ceased to be a home, but an asset. That’s worked out splendidly hasn’t it?
And to defend CA a bit differently, yesterday I was reading that the SC Governor or some other SC pol said that states should take care of their own budgets and not expect a bail out. Which is pretty rich considering that CA’s contribution to the Federal coffers is more than they get back, where as SC is one of the parasitic states…
Objective Scrutator
Proposition 1 certainly didn’t help, yet the idiot residents of California approved it! The last thing they need is a $47 billion dollar transit. The transit will also reduce the amount of taxes paid by private enterprise to the government, so it’s a lose-lose situation for everyone except the unemployed and welfare queens.
Darkrose
I am darkly amused that on top of everything else, the state is now going to have to pay to litigate marriage-related cases, as they try to figure out whether Prop H8 is an amendment or a revision, and what it means for the 18,000 couples who’ve already gotten married. Plus, we won’t have same-sex couples coming here to get married, so the counties lose money, as do the florists and caterers and hotels and restaurants and all of the other wedding-related businesses.
Of course, I guess you don’t really care about the hit to the CA economy if you’re in, say, Utah…
Delia
I lived in California for almost thirty years. It gets more attention because it’s a rich state with a lot of people and cutting edge social issues and businesses, etc. And all the complaints people pointed out above are true. But as far as I can see, other states are in trouble, too. Oregon has the same disastrous initiative process as California. Public higher education here gets cut back a little more every year. People who need to go on state medical assistance have to enter a lottery to try to get it. My county doesn’t have enough sheriff’s deputies. I could go on. But when resources are scarce people are going to fight over them, and the philosophy of the Bush Administration has been to keep the states as hungry as possible and then make sure they find somebody else to blame when things fall apart.
Mnemosyne
This will tell you all you need to know about why California is so very fucked right now:
You need a 2/3rds majority to pass a tax increase or bond measure, but you can amend the state constitution with a simple 50.1% majority.
One of the big things that Arnold ran on was cutting the car registration tax back to its pre-internet bubble bursting level. And the people of California decided they’d rather get that extra $50 in their pockets than get back the millions that Enron stole from us.
pattonbt
Why is anyone shocked at these outcomes.
The hardcore monied interests of the Republican party have always said two things consistently:
1) Government / Regulation is inherently evil, and
2) We want to make the goverment small enough to drown it in a bathtub.
Well, they have basically gotten their wish. Why should anyone who isnt in the top 2% of wealth holders who voted Republican (or for any Republican backed proposition) be surprised that they are going to get totally screwed?
Ive always said, when you vote for a party that says it wants to destroy government, dont surprised when government fails massively when they get the reins.
[delurk]...[/delurk]
I’ve been watching this slow-motion train wreck for 28 years, aghast that no one could see the folly of Reaganomics and the government’s abdication of responsibility. I think it’s because they’re unable to put this economic "theory" pushed by the Orange County Anarchists that inflicted Sock-Puppet Ronny on us on a personal level.
Suppose every time a salary discussion comes up, you tell your boss: "Oh, please, cut my pay! I’m not really doing anything here that is of any conceivable utility to you or anyone else, and to be honest, you’d be much better off without me!" Meanwhile, you borrow money from loan sharks at insane interest rates in order to invest in every pyramid scheme that comes along, and put your boss’s name on the paperwork, so you wouldn’t get any benefit from it even if it came in, which of course it never does.
Your boss refuses to let you go, because the guys who actually, you know, know what the Hell they’re doing want more money. Meanwhile, his company is going bankrupt and he’s losing his house, but he just can’t resist that low payroll.
Run your life like this for 28 years and see where you wind up. Oh yeah: you just have to open your eyes! Too bad the Republicans poked their eyes out long ago.
mclaren
The wailing and whining from ignorant selfish kooks who live in California but don’t want to pay tax on the assessed value of their homes illustrates the moral and intellectual bankruptcy of America.
One particularly angry kook screamed:
This is where I get so pissed off. My home is not "wealth", it is my home. The one I want to stay in till I die, if possible.
The amount of property taxes we pay has grown…as all those "wealth" fuckers jacked up the cost of housing.
I suppose it would be "wealth" if we sold it, but then selling one of my kidneys because someone was holding a gun to my head could be considered wealth, too. Hey, we should tax organs and blood, too! Afterall, there’s money to be made if we could sell them, but at what cost?
Listen up, kook. If the value of your house skyrockets to such a level that you can’t afford to pay property taxes on it, this is an indication that you’re living in an area that has become too rich for you to afford to live in. Just as we wouldn’t accept the crazy argument that the government ought to subsidize fixed-income people living in Beverly Hills or Bel Aire, the government has no business subsidizing fixed-income people owning a home in Southern California where their income is so far below the median and the value of their home is far above the average for the U.S. that they can’t afford it.
Unlike a kidney, a house can be sold with no harm. In fact, when some fixed-income senior citizen sells a home that has skyrocketed wildly in value, they get a huge nest egg which they can then invest in a much smaller home in another part of the country where they can afford to live, along with tons of cash they can put in T-bills or money market funds and live off of for the rest of their lives.
When the area of the U.S. where you live becomes fabulously overpriced and you can’t afford basic fees like property taxes, then that means you need to move. But California destroyed its economy by shifting the tax burden from older greedy selfish homeowners like the kook who screamed his crazy rant above, to all new homeowners who bought homes after 1978. That’s insane. Many millions of Californians are paying $200 a year on houses which are now worth millions of dollars — because they bought those houses before 1978. That’s insane. The state government of Califronia is collapsing in order to give many millions of greedy selfish pre-1978 apartment and condo and rental owners a free ride, while everyone else gets screwed.
California is also collapsing because it’s developed a sick unsustainable master-slave economy. America isn’t doing anything about illegal immigration in the southwestern states because the dirty secret is that the entire economy of sick degraded societies like Southern California and Arizona and New Mexico depends on hiring illegal immigrants with forged green cards to work for peanuts. If you really seriously enforced immigration regulations, the Southern California economy would collapse. You can’t get legal U.S. citizens to work in fast food joints or big box stores or car repair shops or to serve as cooks or nannies or gardeners or do any of the other millions of jobs Californians parasitically depend on at the wages greedy selfish California small business owners are willing to pay. So you get a master-slave society, with millions of illegal immigrants working for minimum wage and kicking back most of that wage to their employers as a bribe not to call the INS on them, and then living jammed 5 families into a 2-bedroom apartment to pay the wildly exorbitant California rent.
This system is unsustainable because without a middle class, California can’t get enough tax revenue to avoid defaulting. That’s what is happening, and it’s been a slow-motion train wreck for the last 30 years.
If California is serious about creating a sustainable economy, they need to call a grinding screeching halt to their master-slave economy and pay people living wages, and at the same time shut down on illegal immigration with a massive border patrol effort that would make the Berlin Wall look like a walk in the park.
Of course, Southern California will never do this, because 1) its entire economy depends on this sick unsustainable degraded master-slave society powered by illegal immigrants who are willing to for peanuts just so their kids can be born U.S. citiznes; and 2) if America ever got serious about shutting down illegal immigration from Mexico, the brutal reality is that Mexico would fall apart. You’d have a revolution in Mexico within 6 months, because the single largest component of the Mexican economy is now the many billions of dollars per month illegal immigrants send down south to their relatives while working illegally in South California.
This sick degraded situation has been building ever since the bracero scandals in the 1950s — remember "Harvest of Shame"? It’s only gotten worse over the last 50 years. If California doesn’t do something about it, the entire state will collapse. And, of course, California has no interest at all in doing anything about this mess — so look for it get much much much worse in the near future.
Brett
I agree with part of the first part of your rant, McLaren. Proposition 13 is designed idiotically, and while some may praise the fact that having a 2/3rds majority to raise taxes is good because it makes it hard to raise taxes, that type of thing makes absolutely no sense in the context of having a proposition system where you can mandate spending with only a simple majority.
To be honest, I have mixed feelings about the whole proposition system. On one hand, I despise how it’s been used in California to mandate all forms of spending with requiring the funding to cover that spending (in a Balanced Budget state, no less), and I’m curious as to whether anyone has ever taken a suit to the US Supreme Court over whether the initiative system goes against US Constitution rules (i.e., the guarantee of a "Republican" government for the states).
But on the other hand, the California electoral system is totally fucked up and gerrymandered beyond belief. An initiative like Proposition 11 (which just barely passed, IIRC) is probably the only way to change that.
This is nonsense. Money sent back to relatives in Mexico is not the largest component of the Mexican economy – it’s not even the single largest source of foreign currency for Mexico (it’s the second, behind oil exports).
As for illegal immigration, it’s perhaps important to remember that it can be counter-intuitive. From the period in the 1960s when the Bracero Program ended, to the period of immigration reform in 1985, 28 million Mexicans came to the US – and 23.5 million of them went home.
Why? Because ironically, open borders made it less likely that they would stay in the US. Open borders meant that Mexican migrant workers could cross the borders, work seasonally or in various areas, then go back across once the work dried up to Mexican. Next season – repeat the cycle, with many only coming back until they had enough money to get things going down in Mexico.
But after the real clamp-down on borders in the 1980s, particularly in the safer city-area crossings like the San Diego-Tijuana border area, illegal immigrants started coming to the US and staying on the US side. Why? Because now, instead of crossing a relatively open border, you had to pay a coyote $2,000 to get you across, and that’s too expensive to do repeatedly, year after year. Also because of that, immigrants started bringing their families with them into the US, which further helped them sink roots into America. Couple that with a massive expansion on corporate America’s part to use illegal immigrant labor all over the US (particularly in the South and Southwest) for more things than agriculture, and you get a major demographic change.
You want to end illegal immigration? Clamp down on the employers doing it – but also develop an open guest worker program with plenty of guest worker passes, and with an ID card that guest workers can use to seek medical care and file grievances in case of abuse at their work sites. Channel it into legal channels of work, and couple it with an expansion of green cards. Otherwise, you’re going to have to be brutal to completely stop illegal immigration – and that won’t stand in American politics on the federal level, in my opinion. There’s too many hispanics living and voting in the US now.
Mnemosyne
California used to have one of the best public university systems in the country, but now they’re going to have to deny admission to qualified students just to keep the Cal State system running.
How embarrassing.
mclaren
Brett claimed:
This is nonsense. Money sent back to relatives in Mexico is not the largest component of the Mexican economy – it’s not even the single largest source of foreign currency for Mexico (it’s the second, behind oil exports).
With respect, Brett, the documented facts contradict you. Here’s a link to a newspaper article from 2005 which documents the fact that funds sent back by Mexicans who work in California have surpassed Mexico’s oil revenues.
Not only is my statement of documented fact not "ridiculous," it’s reality.
I can understand that the proven fact that money sent back by Mexican citizens with green cards working in California exceeds Mexico’s oil revenue would prove shocking…even appalling…indeed, unbelievable. But it remains a fact.
And because of this documented fact, the reality remains that shutting down illegal immigration into California and the other southwestern states would cause Mexico to blow apart. Remember: oil revenues in Mexico mainly get burned up in bribes and corruption, so that 20-plus billion dollars in remittances funneled back home by illegals working in California is actually much more significant to the real economy of Mexico than the oil money. Only the 35 wealthy families who own and control Mexico get to see much of the oil money. That 20 billion pouring back into Mexico from the green card workers who support their families is what really keeps the average Mexican family afloat nowadays.
20 billion? Not 16.6 billion? Yes, more than 20 billion — take a look at this article. As you can see, the Federal Reserve has actually created a new marketing program called Directo a Mexico for bank services expressly intended for Mexican citizens living in the U.S. to send funds to their families in Mexico.
This issue isn’t about Mexicans or Americans — it’s about an exploitive business environment in the southwestern United States that parasitizes illegal immigrants from Mexico, and in the process degrades and brutalizes the entire middle class across the board, American as well as Mexican, because wages for the bottom quartile of the education cohort (people who either didn’t graduate from high school or just barely did) get driven relentlessly down everywhere in the southwest. Meanwhile, wages for people who did graduate with a 4-year college degree or an advanced degree are getting relentlessly driven down by outsourcing to China, India, et al. A Chinese PhD who graduated at the top of his class costs a lot less to hire by the internet than a Cal Tech PhD who lives in America.
This is unsustainable. And when I point out that this situation is economically unsustainable, that’s not a rant, it’s an observation of fact. America cannot continue to drive wages down below a survivable level for both the non-college-educated bottom of the workfroce, and the 4-year-degree and advanced-degree middle 60% of the workforce. No wonder California’s collapsing. The rest of America will soon follow. You need a middle class capable of spending money to support a first world economy.
That’s just the reality of the situation.