California Governor Brown Admits: “We have lived beyond our means”

I came across nice example, albeit on the state level, of what I outlined a little while ago regarding which party would shrink and which party would expand government spending:

The government will not grow or shrink or exist because you voted for it. You voted because there is a government. The government will not grow and wage wars or shrink and get out of wars because you ask it to. The government grows as long as it can borrow from people and tax you. It will shrink once the interest payments on its debt eat up everything else it can still afford and people are too broke to get taxed. And luckily, what I’m saying here is testable. Observe events moving forward and watch what happens. I would gladly stand corrected if objective evidence proves me wrong! :)

One could arguably say that Governnor Brown got lots of support from Californian public sector and labor unions, and other Democrats who are usually not particularly keen on cutting benefits and welfare programs.

Over 3 years ago, back then under Republican Governor Schwarzenegger, I wrote:

California has to wake up to reality. Whether we like it or not, the state needs to stop paying unionized workers outrageous wages. Instead of reducing expenses for some departments and programs, it needs to dismantle and abolish entire departments and programs. It needs to stop funding unsustainable pension plans. In return it needs to drastically cut the overwhelming taxes and fees that are stifling its economy.

Now look what Brown said the other day (emphasis mine):

California Governor Jerry Brown and lawmakers have reached a deal to raise public employees’ retirement ages, have them pay more into their pension accounts, and cap retirement payments in a vast overhaul of the state’s pension system that he says will save $30 billion.

California faces a huge liability for funding the nation’s largest public pension system, but other states and cities also have enormous pension funding gaps and will be watching the state closely.

Brown did not get everything he wanted from lawmakers, such as a hybrid plan that would funnel some contributions into 401(k)-style accounts, and some of the deal’s measures will not affect current employees.

“We have lived beyond our means,” he said. “The chickens are coming home to roost and this is just one in a series of countermeasures that will be required over the next decade.

True that, Jerry. Glad you’re catching on to the obvious. Expect much more severe yet necessary cuts in the years to come on the state level, and at some not too distant point in the future on the federal level as well.

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California To Impose Internet Tax – Amazon Shuts Down California Retailers

Today I received the following email from the Amazon Associates Team:


For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to [ ], [ ], MYHABIT.COM [ ] or [ ]. Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule.

You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the near future, you can manage the details of your Associates account here [ ]. And if you relocate to another state in the near future please contact us [ ] for reinstatement into the Amazon Associates Program.

To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to California residents and will not affect their ability to purchase from [ ], [ ], MYHABIT.COM [ ] or [ ].

We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. We are also working on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.


The Amazon Associates Team

The government is a group of people that aggressively extorts money from a defenseless and largely disarmed majority. They use it to protect and cement the privileged position of established and campaign-financing organizations who fear competition from those annoying, small, and dynamic entrepreneurs who push down prices.

In the process it always cripples commerce to one degree or another. So long as the tax livestock remains productive and obedient, such occurrences can be shrugged off as regrettable but “necessary” collateral damage.

I submit the letter above as yet another piece of evidence in the long list of items that corroborate this thesis.

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Governor Brown Launches Effort to Raise Califnornians’ Taxes

After a lot of talk about change, governor Brown of California prepares Californians for tax hikes:

California Governor Jerry Brown said he’s willing to gather signatures for a voter initiative to extend $11 billion in expiring tax increases, blocked by Republican lawmakers, in order to balance the state’s budget.

Brown, speaking in Los Angeles yesterday, said he may bypass the Legislature and go through the ballot measure process to put the issue to a statewide vote, though he’d prefer that lawmakers act.

“We are going to put it before the people one way or another,” the 73-year-old Democrat said in an interview. When asked if it might be placed on the ballot as soon as November, he nodded.

As always, the solutions that politicians have to shortfalls and deficits at some point are tax hikes. California is already one of the most taxed and regulated state in the US.

Brown got huge support from teachers’ unions and other unions in general during the election. Here’s the inevitable payback:

Unions such as the California Federation of Teachers have indicated they may gather signatures to put a measure on a statewide ballot seeking higher taxes on the wealthy.

Brown got a standing ovation yesterday at the California State Parent Teacher Association’s convention in Long Beach when he said he would not support reduced spending on schools.
‘You’ve Got a Friend’

“I want you to know you’ve got a friend, an ally and a partner as we go forward together,” he said.

Leaving the podium, he held up a sign he was handed that read, “Cuts Hurt Kids.”

Like I said before, I applaud unions across the nation to do everything they can to turn off this young generation and self-destruct over the long run.

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California’s Looming Public Pension Crisis

Other state pensions are in a similarly bad shape. The choices for them will be one of the following, or a combination: raise taxes, cut “services”, lower pension payouts, or raise pension contributions.

As far as I know the only one who has actually started confronting public sector unions, teachers, and the like is governor Christie of New Jersey. I doubt he’ll succeed in the long run, but it’s interesting to see someone try.

Of course a good sign that he is taking steps in the right direction is that Paul Krugman, who is of course as always incapable of predicting any government induced crises in time, has nothing better to do but to bitch about governor Christie’s cancellation of a tunnel project.

Yes, this is not a joke. There are state governments passing budgets on one junket after another, making outlandish pension promises, putting future taxpayers on the hook for billions upon billions of dollars, paying public union workers outrageous wages, and Krugan’s really big concern is the cancellation of a tunnel project … he never fails to amaze me! :))

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Marijuana Prices are Crashing – Panic Among California Growers

Here’s the NPR story:

Here’s the article:

For decades, illegal marijuana cultivation has been an economic lifeblood for three counties in northern California known as the Emerald Triangle.

The war on drugs and frequent raids by federal drug agents have helped support the local economy — keeping prices for street sales of pot high and keeping profits rich.

But high times are changing. Legal pot, under the guise of the California’s medical marijuana laws, has spurred a rush of new competition. As a result, the wholesale price of pot grown in these areas is plunging.

Demand Not Meeting Supply

In 1983, the Reagan administration launched a massive air and ground campaign to eradicate pot and lock up growers in northern California. Charley Custer, a writer and community activist, had just arrived to Humboldt County from Chicago. With the Reagan crackdown, Custer recalls, wholesale prices shot up — to as high as $5,000 a pound. That sudden and ironic windfall for those growers willing to risk prison time transformed the community.

“A lot of people were living on welfare and peanut butter and banana sandwiches for a long time before pot made it possible to be part of the middle class,” Custer says.

Nearly 30 years later, Custer says that boom may be over.

“Outdoor growers are having a hard time unloading their fall harvest,” Custer says. “And this is six months later and when some people do move it, they don’t get nearly the price they were hoping for.”

That goes for both legal growers who cultivate limited quantities of pot under the medical marijuana laws and illegal operators who often grow larger amounts.

Prices are now much less than $2,000 a pound, according to interviews with more than a dozen growers and dealers. Mendocino County Sheriff Tom Allman says some growers can’t get rid of their processed pot at any price.

“We arrested a man who had … 800 pounds of processed,” Allman says. “Eight hundred pounds of processed. And we asked him: ‘What are you going to do with 800 pounds of processed?’ And he said, ‘I don’t know.'”

‘Only The Good Ones Make It’

As recently as last December, things were still pretty upbeat. At Area 101, an events and healing center near Laytonville, local growers gathered to celebrate the Emerald Cup, an annual competition for the season’s best pot buds. But the event’s host, Tim Blake, says the mood has darkened since then.

“There’s a tremendous amount of concern, borderlining on fear,” says the former underground grower who now cultivates medical marijuana.

He says the drop in pot prices is in part the result of more growers and a more tolerant legal landscape. But he says another factor is quality. Indoor-grown marijuana is increasingly favored by dispensaries and consumers for its looks, consistence and potency. It costs more to produce than pot grown under the sun, but commands as much as double the price. That’s one reason retail prices haven’t hit the skids.

“What’s happening is the people that don’t have quality product aren’t selling it,” Blake says. “So they’re the ones that are creating this panic. So it really comes back down to that, just like in every other agricultural industry. When you get too many vineyards and too many people growing vines out there, then only the good ones make it.”

Matt Cohen is one of those growers who are making it. On an organic farm near Ukiah, Cohen raises chickens, grows vegetables and cultivates high-grade medical pot. He has avoided the downturn by distributing marijuana directly to patients. But other growers who rely on middlemen and dealers for legal and illegal sales are in financial trouble.

“And I know people, and they’re living from credit card to credit card,” Cohen says. “They’re not even making money. It’s just a lifestyle that they’re in and the alternative is to go do what?”

Instability And Anxiety

In recent weeks the upheaval has spurred a series of unprecedented public forums about where things are headed for the marijuana industry, especially if Californians vote to legalize pot this fall.

“The displacement of persons deriving supplemental income through clipping, gardening and distribution of marijuana dwarfs the number of growers who will lose their income entirely,” says local activist Anna Hamilton, who organized a gathering in Garberville. She says the broader community is already feeling the ripple effects of falling pot prices.

“There are business foreclosures, storefronts closing. There’s a lot of instability and anxiety,” she says.

Still, amid the turmoil, Custer says some locals haven’t lost their sense of humor. He recalls a recent musical revue where three performers in miniskirts, sunglasses and spiky heels mocked the plight of local pot growers all to the beat of the ’60s hit “My Boyfriend’s Back.”

“‘My dealer’s back and I’m gonna get ready/Hey now, hey now, my dealer’s back,'” Custer sings. “It was a song of hope in this hopeless situation. ‘It’ll happen to you. Your dealer will come back.'”

Or maybe not. California’s pot economy is transforming, and it’s starting to resemble a real commodities market where only big players can compete. It’s a shift that could leave some growers in the dust.

What’s interesting about this story is this: Prices are crashing as a a result of the potential legalization of marijuana in the Golden State. This is hurting a lot of sub-par quality sellers.

This goes to show us once again: The war on drugs and government meddling in the business helps nobody more than the guys who produce and sell drugs.

Once the state withdraws, the market becomes open, more competitive, subject to more scrutiny, less subject to gray areas, and thus prices come down. As a result, the return on investment in getting people hooked on drugs via free samples declines, so that fewer and fewer people will fall into the trap of drug addiction and drug abuse.

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