In the immortal words of Laurel and Hardy: “Here’s another fine mess you’ve got me into.”

And there’s probably no better way to describe the situation that California, this once prosperous state, which from the days of the gold rush has attracted millions to its Pacific shores has found itself in. Its golden image, once a magnet for the ambitious, talented or simply enchanted by the beauty of its land and people, is now tarnished by years of fiscal mismanagement and irresponsible government spending.

It is wondrous indeed to note how a state with such riches in natural resources and richness in the diversity of its people can find itself in such financial ruin. The state of California (which if it were a country would be the 8^th largest economy in world) has found itself unable to fund its current fiscal deficit exceeding $24 billion and service its debt of over $72 billion to its bond holders. By any standard definition of insolubility, the state of California is bankrupt. And while teetering on the brink of being in default of its obligations, interestingly the state’s constitution explicitly does not allow it to declare bankruptcy – a curious dilemma.

The reasons which have brought California to this sad financial state are well known and documented. Summarized, it could be captured in the simple premise of having made too many promises without the wherewithal to deliver on them. These include promises made to government employees, such as in cases of retirees ending up with multiple pensions, some in the six figures. They include overly generous social programs, extending across citizens and non-citizens alike; lax enforcement of state entitlements; increasingly hostile tax burden on businesses including a state sales tax approaching double digits. Also most would target the ineffective state constitution which mandates a 60% majority in the state senate to enact major financial reform. By all practical terms such majority has been virtually impossible to achieve, resulting in stalemate on any attempts to curb the state’s insatiable spending appetite.

Whereas the causes of the states virtual collapse can (and will be) studied by many social economist and political analysts, the practical matter of how to address the dilemma and provide a sustainable solution to the California crisis remains. Prior attempts by its governor Schwartzenegger to seek a federal bailout have fallen on deaf ears of President Obama, and rightfully so as the precedent set by such action would be dangerous and ridden with consequences beyond our ability to predict. Furthermore, no constitutional authority has either originally or through any amendments been granted to the federal government to provide for such a bailout.

So what options exist for California? The ones most commonly discussed include:

1. Providing government credit guarantees of California’s debt have been floated (CBS News Story) but generally discounted as too temporary and not addressing the core of the state’s fiscal crisis. Furthermore, guarantees of such an amount could negatively impact on the credit rating of the US government, which itself is struggling with mounting debt and looming inflation. As traditional with the democratic liberal wing, its chief democratic rep. Barney Frank of Massachusetts, chairman of the House Committee on Financial Services is in support of such measures.

2. Allowing the state to default on its obligations has also been floated, but appears to have the support of only the most extreme faction of constitutionalists. Opponents argue that this would undoubtedly create a dangerous ripple effect throughout the US economy, the cost of which would potentially exceed any bailout which would be offered to the state.

3. Aggressive tax increases (primarily in the form of sales taxes) to compensate for the precipitous fall in tax revenues have the support of many of the liberal democrats in the state senate. However, under the terms of the state’s Proposition 13, their enactment has become a virtual impossibility due to the 60% majority provision. Furthermore, California residents have over the last years become increasingly more vocal against that state’s excessive tax rates, further diminishing the possibility of any such actions.

What is discouraging is that no significant momentum exists behind a movement to address what is the root cause of the state’s troubles – state government inaction and excessive tax burdens. In order, first the state needs to procedurally address the ineffective provisions of its state constitution, including Proposition 13. Armed with new powers to reduce the tax burden on its citizens and enterprises, a well targeted reduction in state business taxes, and either personal income taxes or sales taxes would restore vibrancy to the California economy and begin to again attract new investments and spur an influx of productive sectors of the population back to the state.

While in 2005 the US Census was projecting California as one of the states with highest growth rates, in the recent years of financial turmoil the opposite has begun to occur, with residence relocating to less tax onerous states, among them Florida, Nevada or Texas, each with no state income tax.

Tax incentives (instead of tax penalties) have time and again shown that the empowered individual and the entrepreneurial nature which he harnesses are the most effective tools to bring about economic growth and financial health. California would do well by heeding to one of its greatest son’s prolific advice:

“I don’t believe in a government that protects us from ourselves.”
“The best minds are not in government. If any were, business would hire them away.”

 Ronald Reagan (1911 – 2004)

It would be wise for the California governor and state senators to read their state motto (“Eureka”) and in it recognize that the solution to their state’s woes has already been found, tried and proven. All they need to do is act on it.

* * * * *

We welcome your comments and suggestions, either directly inline, or via email to editor@nakedliberty.com. If you would like to have your article published in Naked Liberty, please contact the editor at the above email address.

Subscribe to Naked Liberty by Email

At first it seems quite funny … until you realize the awful truth of it.

Be sure to read all the way to the end and share this with your friends using the above email button!

Tax his land,  Tax his bed,

Tax the table at which he’s fed.

Tax his tractor, tax his mule,

Teach him taxes are the rule.

Tax his work, tax his pay,

He works for peanuts Anyway!

Tax his cow, tax his goat,

Tax his pants, tax his coat.

Tax his ties, tax his shirt,

Tax his work, tax his dirt.

Tax his tobacco, tax his drink,

Tax him if he tries to think.

Tax his cigars, tax his beers,

If he cries tax his tears.

Tax his car, tax his gas,

Find other ways to tax his ass.

Tax all he has, then let him know

That you won’t be done ’till he has no dough.

When he screams and hollers, then tax him some more,

Tax him till he’s good and sore.

Then tax his coffin, tax his grave,

Tax the sod in which he’s laid.

Put these words upon his tomb,

‘Taxes drove me to my doom…’

When he’s gone, do not relax,

Its time to apply the inheritance tax.

AND TO PUT THINGS INTO FURTHER PERSPECTIVE, CONSIDER THE FOLLOWING PARTIAL LIST OF TAXES PAID BY MOST AMERICANS:

Accounts Receivable Tax, Building Permit Tax, CDL license Tax, Cigarette Tax, Corporate Income Tax, Dog License Tax, Excise Taxes, Federal Income Tax, Federal Unemployment Tax (FUTA), Fishing License Tax, Food License Tax, Fuel Permit Tax, Gasoline Tax (42 cents per gallon), Gross Receipts Tax, Hunting License Tax, Inheritance Tax, Inventory Tax, IRS Interest Charges IRS Penalties (tax on top of tax), Liquor Tax, Luxury Taxes, Marriage License Tax, Medicare Tax, Real Estate Tax, Property Tax, Personal Property Tax, Real Estate Tax, Service Charge Tax, Social Security Tax, Road UsageTax, Sales Tax, Recreational Vehicle Tax, School Tax, State Income Tax, State Unemployment Tax (SUTA), Telephone Federal Excise Tax, Telephone Federal Universal Service Fee Tax, Telephone Federal, State and Local Surcharge Taxes, Telephone Minimum Usage Surcharge Tax, Telephone Recurring and Non-recurring Charges Tax, Telephone State and Local Tax, Telephone Usage Charge Tax, Utility Taxes, Vehicle License Registration Tax, Vehicle Sales Tax, Watercraft Registration Tax, Well Permit Tax, Workers Compensation Tax.

STILL THINK THIS IS FUNNY?

Not one of these taxes existed 100 years ago (see our article on the effects of the 16th Amendment), and our nation was the most prosperous in the world. We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.

What happened? Can you spell ‘politicians’ ?

And I still have to ‘press 1′ for English!

. . . . . . . . . . . . . . . . . . .

The “Tax Poem” is widely circulated, but I have not been able to identify its original author to provide attribution. If your care about the consequences of high taxation (and you and everyone else should), forward this post to your friends using the email link at the top of this article.

Article may be freely distributed with or without attribution

by Norbert Sluzewski
Editor – NakedLiberty.com
April 25, 2010

Ouch! That was pretty much the only sound I could make getting out of bed that March morning after having overdone on the previous day’s lawn work. My back didn’t want to cooperate with what I otherwise needed to do, which included attending several business meetings and other private events. So without considering many alternatives, I dragged myself to my car, painfully scrambled into the driver’s seat of my SUV and drove off to see a local specialist.

I’ve not seen this doctor before, but he came highly recommended by my primary care physician. The office was pleasantly quiet and subdued and the chairs meticulously aligned in the waiting room were all properly hard so as to accommodate folks arriving in conditions similar to mine.

The doctor was quick to call my name and we soon found ourselves in an appropriately sterile but functional examining room, which comprised of nothing more than an examining table, wooden chair and a small supply closet. In a few quick and efficient motions, the doctor felt around my lower back, checked my knee and ankle reflexes and showed me an impressively realistic model of the human skeletal structure, exposing the nerves and arteries which criss-cross its length. I was duly impressed with the doctor’s description of my condition (a story which he likely has memorized from repeating dozens of times a day) and I was prescribed an anti-inflammatory, muscle relaxant pill and a dose of physical therapy. From arrival to departure, the entire episode lasted exactly 11 minutes.

I am fortunate to have a reasonably good medical insurance plan, so the bill for the doctor’s services went directly to the insurance company. At no time was I concerned about the amount of the fee, nor did the pleasant medical administrator in the doctor’s office disclose to me what the fee for the doctor’s services would be.

And so several weeks have passed. My back has recovered to its nimble self (at least until my next gardening adventure) and all is again well in the world. Ah, but there is more.

A letter from the doctor arrived a few days ago, which politely explained that the insurance company will be applying the doctor’s fee against my annual deductible (hmm, how conveniently I’ve forgotten about that part of the coverage provisions). As a result, they are requesting payment of the full amount of the doctor’s services which (now take a deep breath) amounted to $575.

Ok, now this got my attention. At no time was this amount disclosed to me. Frankly, at the time, I didn’t really care. I was in serious pain and, after all, I wasn’t really going to be paying for it myself, right? If I had been told, would it have changed my intention and would I have walked out of the office? I don’t know – maybe, maybe not; but perhaps I would have considered alternatives, like a hot compress or an “Icy-Hot” patch.

Now that it looks like I am going to be out of pocket a few hundred bucks, I am beginning to question the value ascribed to the services rendered. Sure, in the end they provided me with medicine to ease the pain, and the physical therapy (for which I haven’t received the bill yet, but am sure it’s en route to my mailbox) did help me get a bit more strength into those achy back muscles, but $575 for 11 minutes of service? That’s a whopping $3,136 an hour. My expensive lawyer would gasp at an opportunity to bill his clients that kind of an hourly rate. Is there any profession that can top this? (No, not even that one – and I know what you’re thinking).

So it’s clear to me that the doctor’s fee is not driven by market forces, but instead by an opportunity to “get away with it” since in most cases there is very little vested interest by any of the parties in the transaction to keep the amount of the fee consistent with the effort expended or value of service provided.

Is there something broken in this type of a fee-for-service system? You bet there is.

The answers to bring sanity back into the doctor-patient relationship (particularly the financial part of it) are so glaringly simple and have been so widely discussed. Among these the most significant and most consequential solution includes removing employer co-sponsorship of medical insurance coverage for its employees and replacing it with tax deductible health savings accumulation accounts (HSA’s, FSA’s or similar). In this case each individual is directly responsible for maintaining their personal financial reserve for medical care. Supplemental insurance could certainly be offered for extraordinary expenses and catastrophic events, including government subsidies for those not able to afford them directly. Employers could easily continue to sponsor employee health maintenance benefits for their employees by offering contributions to the employees Health Savings accounts, similarly to how they incentivize retirement savings through 401k contributions.

One thing is irrefutably true and has been tested time and time again. The best way to keep costs at a reasonable level is to have parties in a transaction directly involved in agreeing on the cost and value of the transaction itself. Whether for medical services, education, housing or groceries at the local farm stand, the market is the optimal arbitrator of the value of any transaction. The more intermediaries are introduced into the transaction, and particularly when it’s the government acting as a proxy for what it determines to be common good, the less optimal (ergo, expensive) each such transaction becomes. At the scale of a society, these incremental costs attributed to involvement of the intermediaries add up pretty quickly and dramatically.

Now that I have a strong incentive, I am writing to my doctor to request a reduction of the fee charged to an amount that we can both agree is more reasonable for the 11 minutes of time (and yes, his 6 years of medical school and overhead, etc. etc.) he devoted to me on that painful day in March. Instead of being angry at him for the clearly inflated fee, I actually appreciate this opportunity to engage with him in a conversation about cost and value. We’ll see if he feels likewise.

Stay tuned. I’ll post an update to this article once we’ve resolved our billing differences.

Article may be re-printed with full attribution to the author and NakedLiberty.com

As part of the stimulus spending package approved by the government earlier this year, funding in the amount of $1.1 billion was included to sponsor research into comparing the relative effectiveness of one form of medical treatment to another. Such research, as the program’s sponsors and supporters argued, would over time reduce the net cost of medical services by determining which medical procedures offer the lowest cost treatment to address common ailments. Armed with such information, it was further argued, doctors and medical professionals would apply this additional economic data in their decision to prescribe specific medicines and treatments.

The Constitution lays the foundation for a relationship between the people and their government. This relationship is, to a significant degree, founded on the trust that each citizen places with their elected representatives. These representatives, whether local, regional or national, by being elected to their posts, accept the responsibility of supporting their constituents’ ideals, goals and principles. They become servants of the people, an extension of their individual voices in the collective government they comprise.

There is a game we used to play as kids called “echo,” where each player would whisper something in their neighbor’s ear, who in turn would whisper what they thought they heard to their neighbor, and so on. Inevitably, a humorous concoction of snippets of the original sentence would emerge at the end of the line. A completely innocent game of listening and interpretation, with each player having only one objective – to relay the message with as much accuracy as possible. Even with only three players – a source, middle and recipient – very rarely would the recipient receive the original message intact.

Now let’s inject an agenda into the game. How would the outcome be affected if the middle player was induced by the school bully to distort the message and to influence the recipient’s apprehension of the original message’s content? Surely meaning would be lost. In the innocence of the game, one might even ascribe humor to the outcome. But what if the stakes were higher, much higher?

In the dynamics of communications between the people and their government, a highly biased and results-motivated middle man agent is injected. He is called The Lobbyist and he enters directly into the path of the people’s voice. His intentions are indeed highly motivated. His agenda has nothing to do with accurately communicating the people’s voice. His intentions are in fact highly distortive to the communications process.

Most sources attribute the birth of the Lobbyist to the administration of Ulysses S. Grant. Grant would often walk to lobby of the Willard Hotel not far from the White House to enjoy his favorite cigars. His routine was quickly picked up by politicians who would find this time a perfect opportunity to solicit him with special requests for support of various matters. The term “lobbyist” emerged from these interactions.

Political lobbying has historically been regarded as an “unclean” activity, shunned away from by most politicians who otherwise prided themselves on the purity of their intentions and reputation. This attitude changed dramatically in the 1980’s as political lobbying became more and more lucrative (and thereby corrupted), and professional lobbying firms sprouted all across the political landscape, backed by large enterprises and their financial sponsorship of various causes. According to a Washington Post article, “The number of registered lobbyists in Washington has more than doubled since 2000 to more than 34,750 while the amount that lobbyists charge their new clients has increased by as much as 100 percent. Only a few other businesses have enjoyed greater prosperity in an otherwise fitful economy.”

In the first 2 weeks in office President Obama nominated 17 professional lobbyists to several key advisory positions in his administration. These included Eric Holder as attorney general, Tom Vilsack as secretary of agriculture, William Lynn as deputy defense secretary, and fourteen others. Notwithstanding his campaign promise to keep his administration clean of ex-lobbyists, he continues to follow, with perhaps even more vigor than his predecessors, the practice of surrounding himself with influence-peddling bureaucrats. As HotAir.com points out, the president has conspicuously offered himself “For Sale” to all interested (and willing to pay-to-play) interest groups, and his actions since then, including the scandalous deal with the UAW in connection with the GM bailout, are a testament to the fact that he is indeed a player.

Are all lobby activities necessarily bad? Don’t lobbyists sometimes also represent the people’s interest on important issues? Doesn’t the NRA, for example, do good work on behalf of citizens concerned about protecting the 2^nd Amendment of our Constitution (our right to keep and bear arms)? What about the lobbies that work to protect the rights of the underprivileged, to protect our borders, to promote education?

Inasmuch as many such lobby organizations may be motivated by righteous ideals, the institution of the lobby system is by its own formulation corrupt. When influence is bought with currency, if not directly into a politician’s pocket, then through the barter of monetize-able influences, good intentions are quickly polluted by commercial transactions and ethical compromises. The lobbyist necessarily becomes the undesirable relay agent a political game of Echo, placing himself in line of the people’s communication path with their government.

In a government “of the People, by the People and for the People” (Lincoln’s Gettysburg Address) there is no place for a translator of the people’s voice in government. Our elected representatives are our channel of communication. With the rise in the influence of the lobbyist, it seems we’ve empowered a commercially incentivized third party to interpret our voice. And while our elected representatives have become too lazy to directly listen to our needs and calls for action, the lobbyist-translated messages do not reflect our original interests, meaning and intent.

There is increasing peril in allowing our representative form of government to continue to be warped by the influences that a financially motivated and ethically tainted system of lobby influences has on our relationship with our government. While attempts to reform the present system by imposing registration requirements, disclosing contributions and other transparency measures are a good first start (see Ethics and Lobbying Reform Act of 2006 and Lobbying and Ethics Reform Act of 2007, they fall far short of tangibly reducing the influence the lobby industry has on the activities of our government and re-connecting the people back to their elected representatives.

If our elected officials want our respect, trust and vote, then engage with us in a real and direct dialog without the middle man. Playing “echo” was fun when we were kids. Now let’s grow up and take responsibility for having a serious, adult conversation.

Mr. Government Representative – please look me straight in the eyes, listen to me and tell me what you stand for. You might be surprised to find out that I might actually believe you.