More on Seiler's Law

I always like the replies to my posts from StevefromSacto. Even though I usually disagree with him, he gets me thinking a little more, a little deeper, about what I write. He wrote a reply to my recent article, “CA budget tops sensible limits.” I thought I’d put his reply, and my answer, here as well.

My article was about my observation that California’s state general-fund budget never for long rises above 6.2% of personal income.

StevefromSacto replied:

“Then, in 1990, voters passed Proposition 111, which was sold as a way to build more roads. In fact, it effectively gutted the Gann Limit.”

But it also built needed roads, John. State budgets are not just numbers; they are about meeting the needs of the people of our state.

I would be thrilled if Californians and their political leaders would sit down and decide the following: What public services do we need? How do we pay for them? What services can we do without? How do we get rid of them?

But we can’t have that conversation as long as one side refuses to pay for the programs we need. We can’t make rational decisions when one side declares that health and human services programs are unnecessary but that unlimited spending on prisons is essential.

I’m sure the elderly Alzheimer’s patient who is deprived of home care or the low-income worker who loses child care will feel better because they are helping us get closer to your magic 6.2 percent.

I answered:

Steve, you are right when you write, “I would be thrilled if Californians and their political leaders would sit down and decide the following: What public services do we need? How do we pay for them? What services can we do without? How do we get rid of them?”

I would be thrilled, too. And that’s what’s going to happen now that the state is broke.

You mention my “magic 6.2 percent.” But it isn’t magic. It’s an empirical observation. As I mentioned, it’s like Moore’s Law in physics.

It’s not cut in stone. So, if you wish, refute it. Find some flaw with it, and I will print it here on CalWatchDog.com, including any graphs you may come up with. I like graphs.

What’s curious is that my theory now has been tested and validated. I first noticed it back in 2002-03. Since then, we’ve had a major boom-bust cycle with the economy, yet the 6.2% limit has held up well. Spending, for example, has not risen to 8% and stayed there with no budget deficits.

You write, “I’m sure the elderly Alzheimer’s patient who is deprived of home care or the low-income worker who loses child care will feel better because they are helping us get closer to your magic 6.2 percent.” Well, I’m sure the Alzheimer’s patient doesn’t like it when he falls and breaks a hip. Or the low-income worker doesn’t like it when his child falls down and breaks an arm. Yet the law of gravity is not changed because of their likes and dislikes.

One of my points was that Seiler’s Law works even if taxes are increased, as they were last year. So, your call to increase taxes again, if heeded, will not bring higher budget revenuess. The budget general-fund spending, whatever you raise in taxes, will not rise for long above the 6.2% of personal income earned by Californians.

Supposed you quadrupled the income tax rates in California, so that the middle-class tax rate of 9.55% would go to 38.2 percent. Would you get quadruple the tax revenues? Obviously not. The state soon would be hit with 50% unemployment. People would flee even faster than they already are.

If you want to spend more tax money, you have to expand the tax base. One way would be the revenue-neutral (let me emphasize: it would raise the same amount of money) flat-tax idea of Art Laffer that I wrote about several months ago: http://www.calwatchdog.com/2010/01/15/new-flat-tax-idea-revived/

But that is highly unlikely to happen, even though Jerry Brown proposed a national flat tax in his 1992 presidential bid.

The main point of my article is this: There are limits in life. Seiler’s Law is one of them.

— John Seiler