As California has continued to run deficits during this recovery, the state has managed the shortfall by internal borrowings from its trust funds. Since California still uses U.S. dollars as units of account and holds its money in dollars, these internal borrowings have involved what could be called - for lack of a better word - "real" money. To deal with the current projected deficit, California's Governor has proposed a further tax increase. Since it involves paying more money to schools, the measure has broad public appeal; after all, education is now, by far, our largest single enterprise. The proposed "TEMPORARY TAXES TO FUND EDUCATION. GUARANTEED LOCAL PUBLIC SAFETY FUNDING. INITIATIVE CONSTITUTIONAL AMENDMENT." will increase personal income taxes on annual earnings over $250,000 for five years and increase sales and use taxes by 1/2 of 1 per cent for four years. The measure will allocate 89% of the new tax revenues to K-12 schools and 11% to community colleges. The latest Public Policy Institute poll has 72% of respondents supporting the measure.

But, there may not be any substantial new revenues from the tax rate increases. There will be at least some additional money raised (increasing sales tax rates brings in more revenue until you get to 30% plus levels; then, for some inexplicable reason, every further increase leads to a slight reduction in collections). But the increase in California's highest income tax rate may be a disappointment - as it has been in the past. Only a very small number of taxpayers have incomes that will be subject to the new rate; and in the past much of those large incomes has been money made from the capital gains from IPOs. To pay the school teachers, California will needs the Facebook IPO. (Historical aside: a half century ago (1963-1964 FY), the personal income tax generated only 18% of General Fund revenues.)

Eddy's Mom - the brains in the outfit - predicts that California will not only need Facebook's IPO but also its currency. Consider this: if you go on unemployment in California now, you receive a debit card; and you become a customer of the Bank of America

The next logical step, says the EM, is for salaries and pensions to be paid in debit card credits. Those of us who amuse our small brains by spending too much time watching the California legislature on public access cable would have agree (actually, it is less watching than listening; politics in California really has become show business for people too ugly to work even behind the camera). The theme for the legislature this year has been a discussion of how important it is for California's great wealth to be "invested" in the state - i.e. spent on the schools and school teachers.

If the latest attempts to soak the rich fail because the rich hide their money, the legislature could find itself wanting to require people to be paid in debit cards. When people decided to download their debit card balances to their checking accounts, as the unemployed now can, the state will want to place exchange restrictions on the debit card accounts. The DeLongistas (worshipers at the Keynesian pump) would certainly approve of such a policy; their models will prove beyond all doubt that California's economy will increase dramatically if only California's money is only being spent in California.

But why stop there? Shouldn't California have its own currency?

Silicon Valley will approve; my God, they will be wildly in favor it - provided people can pay their taxes in Facebook credits.

There would, of course, be a downside. The out-of-state retirees (and in-state recipients as well) will be tempted to find a black market for their debit cards. But think of the advantages: not only would California finally be able to show the rest of the country just how much more Progressive we are but we would also be getting rid of all the people who refuse to see the wisdom of mandatory electric vehicles. Of course, there would be people who saw such changes as the worst kind of mercantilist thought-control; but they are the very people who should not be here in the first place. They should leave, just the way the Jews, Protestants and free-minded Catholics did when they took their skills and evil Coin and went to the New World to found that evil place now called "America".


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