California, we are told, will have a $25 billion budget deficit over the next 20 months. However, they seem to be caught in a trap. If they were to actually “balance” their budget, that is, actually cut $25 billion dollars in spending, there would be massive layoffs and reductions in services, which would lead to a massive fall in tax revenues. This means that the budget would not, in fact, be balanced. Indeed, it might make the situation worse by collapsing the economy completely.

On the other hand, if they attempt to solve the problem through “revenue enhancement” (wonderful term), they would negatively impact business, leading to a fall in revenues. This means that the budget would not, in fact, be balanced. Indeed, it might make the situation worse by collapsing the economy completely.

Can’t go forward, can’t go back. So what to do?

Dmitri Orlov, that specialist in the mechanics of social collapse, has come up with a rather intriguing idea, one especially intriguing to the readers of this blog: California could secede from the Union.

Orlov doesn’t expand on this, but let’s look at some numbers. In 2005, the latest year for which I could find reliable numbers, California paid the Federal Govmint $47 billion dollars more in taxes than it received in payments. Let’s call this the “State in the Union Penalty,” or SITUP. Let us assume that with the economic problems and whatnot, the SITUP has narrowed by a third, to a mere $30 billion/year. This means that over the next 20 months, the SITUP costs California $50 billion. Were the state to secede, they could appropriate the Federal Taxes to their own ends. They would be able to fund everything the feds fund, clear their own deficit, and still have $25 billion to fix the deficits at the city and county level, and maybe fix a few pension funds besides. And they might still have funds left over to finance a tax reduction, which seems to have become the whole object of our political discussions. Further, as they take over federal programs, they might even find one or two that they don’t really want, squeezing out even more billions.

It is interesting to note that the SITUP is almost entirely a Blue State phenomenon; the Red States, by and large, get a SITUB, a State in the Union Benefit, receiving more than they pay. Note to the Tea Party: Be careful what you ask for; you might get it.

Of course, it is difficult to see Jerry Brown as the next Jefferson Davis. But as Shakespeare—or somebody—said, “Necessity is the mother of strange bedfellows.” And he might have less of a problem than Davis, since right at the moment the Army is off in Dunundastan fighting for whatever it is they are fighting for. And they may even get new tasks in North Africa. Jerry might only face a few companies of the Army Marching Band.

As unlikely as this sounds, Orlov is right about the process. The periphery experiences problems which the center cannot solve, but which the perhiphery could solve by ignoring commands from the center. And California certainly could solve its own problems by itself. On its own, it is the 8th largest economy in the world.

The good citizens of this new Republic would likely call themselves “The Republic of California”; the rest of us would likely refer to them, affectionately or otherwise, as the Left-Coast Republic.


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John Médaille is a businessman in Irving, Texas, and also an Instructor in Theology at the University of Dallas, where he teaches a unique course on the Social Encyclicals for Business Students. He is the father of five, grandfather of two, and husband of one. He is the author of The Vocation of Business: Social Justice in the Marketplace and is finishing up another book, Equity and Equilibrium: The Political Economy of Distributism. John also blogs at The Distributist Review.


  1. I think of all this as the Third Wave revisited. Kissinger was contemplating ‘Chicano Quebecs’ in the southwest. But maybe we’ll see a split up before that happens.

    We need a Union that makes sense. America’s founders designed one that made a lot of sense. dude, what happened?

    A few anecdotal impressions. I remember returning to these United States, picking up a newspaper at LA-X and finding the governors of the ‘sage brush rebellion’ states openly threatening secession, to the absolute delight of the ‘the patriot movement’ so-called.

    Just a little over a decade later there were whimsical and wishful thoughts about Blue State secession to perhaps join Canada or to form a ‘progressive archipelago’ made up of the Democratic cities that the red rural hinterlands are economically dependent on. Let’s call it Jane Jacobs meets Antonio Gramsci, that kind of thinking. Pretty good stuff actually.

    And now here we are again. The mainstream of Tea Parties in most states make the gray-and-silver hairs of the League of the South look like the only folks on the Old Right who are fit to govern.

    I’d like to see us keep our Union. The only way I see that happening is returning enough economic sovereignty to the several states to give the states a route around the damage that is Washington D.C. There is no need for Washington D.C. to exercise a monetary monopoly on behalf of its paymasters on Wall Street or to keep the Wall Street/NARAL conspiracy to divide the American people going on any longer. Even so, California and each of its siblings have a healthy menu of options it may exercise regardless of the present conspiracy of inertia. The public banking option is not a shabby option at all. Chris Cook’s Open Capital concept of peer-to-peer credit and investment can be brought to Main Street California’s situation as well.

    Not to mention Wisconsin’s situation.

  2. “Blue States receiving more than they pay”…in taxes. Excuse me?
    Perhaps the Blue States are firmly attached to the Federal Teat via their urban areas whose economies float around 60% non-profit but I don’t think the Blue States are nearly so much on the Federal dole as their loudly complaining Southern Compatriots. Connecticut may not provision the Federal Effort with the goods she once produced but this rumpled little state is tax farmed but good and gets very little in return. Arms contracts notwithstanding.

  3. The context (i.e. the preceding paragraph) says John accidentally put the wrong color jerseys on the wrong teams D.W. His point is clearly that California heavily subsidizes those smug states most loudly clucking at us about our budget problems, hypocritical cluckers whose own state budgets don’t look far worse than ours only because money stolen from the golden state via their over-representation in D.C. helps balance their books and allows them to be the fiscally responsible, up-by-the-bootstraps, low-tax, business-friendly heavens they delusionally insist that they are.

    Anyway, it’s nice to see a sympathetic (and true!) big-picture view of the mess my state faces. CA is fabulously wealthy and our budget mess is actually pretty small relative to our resources. It’s the poor relations with their hands in our pockets (and crazy-ass Uncle Sam) that make the problem seem so intractable.

  4. If California should secede, it would bring more clarity to our political situation. Those smug Red states would have their eyes opened to their subsidization (as well as to who the real capitalists are), and California would have to face up to its decades of rising income inequality.

    A question: the exodus of the wealthy due to higher taxes is greatly exaggerated. Would raising the income tax for the highest earners put a significant dent in the revenue gap? Likewise, is the negative impact of higher corporate taxes exaggerated as well? I really don’t know.

  5. “It is interesting to note that the SITUP is almost entirely a Red State phenomenon; the Blue States, by and large, get a SITUB, a State in the Union Benefit, receiving more than they pay. ”

    This is not true, at least from any data I’ve seen. Consider this:

    Top 10 federally subsidized states: New Mexico, Mississippi, Alaska, Louisiana, West Virginia, North Dakota, Alabama, South Dakota, Kentucky, Virginia.

    Top 10 “SITUP” states: New Jersey, Nevada, Connecticut, New Hampshire, Minnesota, Illinois, Delaware, California, New York, Colorado.

  6. There’s a pretty good existing model for a pre-Lincoln level of state sovereignty: The Indian reservations. If many states could unilaterally and simultaneously assert a rez-style sovereignty, we’d be on the way back to the Articles of Confederation.

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