Most people don’t know this, but Californians have been overtaxed by $600 billion dollars at the state government level. This is documented in California’s Comprehensive Annual Financial Report (CAFR). Clint Richardson details $577 billion in investments and cash in this annual public document.
Let’s consider what this means:
This public evidence makes Governor Brown’s claim of a ~$16 billion budget deficit with no option than “austerity” a lie. This is similar if the governor claimed the public checking account didn’t have enough money for our children’s schools while he covered-up a savings account with over 30 times the claimed shortage. This charge applies to previous administrations and both political parties’ leadership.
Clint notes on page 107 of California’s CAFR that the $6 billion annual interest cost and $164 billion in state debt are also cover-ups when contrasted with taxpayers’ investments. A sharp irony is that many of California’s “investments” are in other government debt securities. This means a net loss to taxpayers as one group pays another interest minus the cost of creating and managing the debt.
The state of California claims these funds are “designated” and cannot be used for other purposes, and necessary to fund pensions.
Let’s look at this official claim:
“Designated” lasts only as long as our representatives say; and these are the same people who “designated” austerity for our schools, roads, and and other essential infrastructure. When I last invested the time to slog through the state’s CAFR in 2009, the difference between current employee contributions and pension payments in a depressed economy with laid-off employees was $1.8 billion. This means the state claims they need 320 times the budget deficit to solve this problem. That is, the state claims they need to overtax Californians 320 times over to pay a bill.
Californians do not know about these funds revealed in the CAFR. If they did, would they choose the state’s management of austerity while investing in debt and Wall Street’s scraps from corporate dividends? Or would they demand to know their other options?
If this $600 billion were returned to California’s 12 million households, each would receive $50,000. Or, if you prefer the money returned per average household income of $50,000 since this sum represents an overtax, each household could receive a proportional amount (if your household earns $150,000/year, you would receive $150,000).
But wait, there’s more: the state is just the largest of literally thousands of government entities in California, with each having investments and “rainy day funds,” the collective total of what Californians have been overtaxed has been sampled and estimated at the astounding total of $8 trillion.
If this figure is accurate, then each California household has been overtaxed by a present-day value of over half a million dollars. And if we take our example of $150,000/year income, well, you’ll be happy to understand you’re owed a credit of ~$1.5 million. Of course, these colossal investments should be considered by multiple and independent cost-benefit analyses to discover our options; we can’t simply all cash them in.
I therefore apologize for the lie in my article’s title; I thought it best to break this news more simply and gently.
These tragic-comic cover-ups of what the public has the right to know, and that state has legal fiduciary responsibility to clearly communicate for public consideration also include California’s policy option to issue its own credit, and the national policy option to issue money (not credit/debt) to directly pay for public goods and services.
And what does this mean?
A future of credit and money brighter than you imagined possible:
If California had a state-owned bank optimized for public benefit, a possible structure to pay our entire state tax burden would be 2% mortgages. This interest charge, as homeowners understand from typical 30-year mortgages, is significant money; it could be a public benefit rather than the privilege of our “too big to fail” bailed-out banks (more public banking information here).
Public banks could provide at-cost credit to cover any budget shortfalls from year-to-year, and eliminates the need for overtaxation “rainy day funds” in these thousands of government accounts. These facts at the state level in California are repeated by the two main political parties’ “leadership” in all states (explore here).
At the national level, we could create debt-free money rather than allow the private banking system’s pinnacle bank, The Federal Reserve, lend to us. Here are three simple points to explain:
- The US does not have a money supply; we have its Orwellian opposite as a debt supply. This is because the US leading banks won legal right through passage of the 1913 Federal Reserve Act to have private banks and the Fed create debt for what we use as money, and then charge the 99% for its use.
- The policy choice of a debt supply compounded with interest causes ever-increasing aggregate debt that can never be repaid. It can’t be repaid because this is what we use for money. The US national debt now pushing $16 trillion has a gross annual interest payment over $400 billion a year; ~$4,000 per US family of $50,000 annual income (if your household earns $100,000, then your gross annual interest payment is ~$8,000 every year).
- Monetary reform creates debt-free money that extinguishes the debt (details here), and allows government to become employer of last resort for infrastructure investment (hard and soft). This creates full-employment, optimal infrastructure, and falling prices because infrastructure historically creates more value to the economy than cost.
The Claremont Colleges held a conference to explore monetary and credit reform last month, for which I was one of the presenters. For those who want to review the papers and filmed talks meant for the general public to understand as clearly as I hope I’ve written here, explore this link.
And for even better news, consider resource-based economics as a predictable future beyond monetary and credit reform.
Finally, you might wonder about the six US corporate media giants with literally massive investment in these government investments funds buying their stock, and their prima facie conflict of interest to report what you’re reading here. It’s not as if these are new ideas; Benjamin Franklin is among America’s brightest minds who wrote on credit and monetary reform.
I’ve wondered about corporate media’s commitment to factual reporting too, but that’s another story.