Hoarding Tax Dollars
California is headed for the fiscal cliff even sooner than was expected, as the budget deficit has suddenly grown from a projected $9.2 billion to $16 billion. Governor Brown, who helped put California on its current unsustainable path during a prior term as governor, wants to raise taxes even higher, which will further cripple the economy of this already over-taxed state.
Of course, Brown and the Democrat-controlled legislature can't find any legitimate areas where spending could be cut and instead threaten to slash spending for schools and public safety. This is akin to an alcoholic who, when confronted with a lower income, claims he can no longer feed his children while pushing a shopping cart full of booze toward the cash register.
I'm an electrical contractor in California, and if the level of construction activity is indicative of the health of an economy, this state is on its deathbed. I recently gained not only a tiny glimpse of the true state of the economy, but also another example of why California and the federal government are always broke, no matter how much additional money is confiscated in the form of taxes.
I was recently invited to a job walk for a very small residential remodel in a small Northern California city by one of the general contractors I frequently work with. It was for a federally funded city program that provides zero-interest, zero-payment 30-year "loans" for low-income households.
Given the size of this project (no more than $60K), what I first found striking was that there were eight general contractors present to compete for this small amount of work. This was the kind of project where if the economy were even remotely healthy, the owners would be forced to offer cash incentives just to get people to show up to offer a proposal. Not exactly a ringing endorsement for current economic conditions.
Once I set foot in the residence, I quickly forgot about the hordes of competitors surrounding me and was instead focused on conditions that made me think I was suddenly stuck within an episode of Hoarders. These were some of the worst living conditions I had ever personally witnessed. There were piles of junk everywhere, and the filth was unimaginable. One of the city inspectors even commented on how the owners had done a good job of cleaning things up so far and that we "should have seen it before," but that some dumpsters would be brought out so the clean-up could be continued. I was totally shocked.
The existing bathroom, which was going to be remodeled, unfortunately had carpet on the floor. I say unfortunately because the stench of urine was almost unbearable as I surveyed the necessary electrical requirements. This is a house that should have had the doormat placed on the inside so that people could wipe their feet before returning to the outdoors.
The money for this program comes from HOME (Home Investment Partnerships Program) and is given to the cities by the State and to the State through HUD. A "low-income" family of four that lives in San Francisco County can earn up to $88,800 per year and still qualify for this program. The loans are secured by the property and are supposed to be repaid after 30 years of zero interest and zero payments.
While I question the validity of this program's existence in the first place, why is taxpayer money being used to "improve" a property when it's clear that the "investment" will be totally trashed once complete? Just because someone is poor doesn't mean he doesn't have the ability to take care of what he does own. And how many truly poor people own their own homes -- in California?
As bad as the above scenario may sound, the situation gets even worse from a taxpayer's perspective. City and county building departments have been hit hard by the housing bust, which means the associated government employees have much less work to do these days. A small "free-market" project like the one described would require the pulling of the appropriate permits, and after that, several inspections by building officials would take place once various milestones had been met. Even with residential projects much larger than this one, there is really no reason for a building official to come out for a job-site pre-bid meeting such as this.
This felt more like a job-walk for a large public works project, as there were no fewer than three building officials present at the meeting for this one tiny project. There may have been a fourth, but I'm not 100% positive. Believe me: there is no reason why one person couldn't have handled this job-walk. There is no way permit fees alone could cover this level of involvement on the part of city employees.
So according to Governor Brown and the Democrat-controlled legislature, there is no room for austerity, yet we have federal money being given to the states to be handed out in the form of loans for "low-income" housing rehabilitations that are supposed to eventually be repaid (unless the "investment" is turned into a worthless pile of trash) and then recycled for the same purpose. But in addition to the initial cost to U.S. taxpayers, there are also the hidden costs that the state and local governments (which are already broke) are incurring as a result this program. So what are the true costs to California? How many other examples of fraud, waste, and abuse are out there?
Federal, state, and local governments have been hoarding more and more of the taxpayers' money, yet you won't find a giant pile of this money stashed somewhere. The only thing that is truly piling up is an enormous mountain of debt.
Just a little something to think about the next time a politician tells you're not paying your "fair share."
Scott blogs at www.politiseeds.com.