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Analysis: ‘CalExit’ – People Fleeing the State Without Secession

February 12th, 2017 Leave a comment Go to comments

Feb. 12, 2017 original publish date
Feb. 19, 2017 update / expanded report

Analysis: ‘CalExit’ – People Fleeing the State Without Secession

written by Net Advisor

Somewhere in California. Although this not likely to occur anytime in the near future, but when you hear talk on both (political) sides about states pushing secession, one might want to look at the actual implications, who is pushing for the move, and what is already taking place without legislation.

As for the small group in Oregon who petitioned to secede from the USA in 2016? Well, that ended faster than it started. The massive group of two people withdrew their petition after allegedly receiving personal death threats and seeing violence on the streets in Portland.

In California, the move to secede the Golden State is backed by one American living in Russia and another who fled Iran.

[1] ‘CalExit’ Backed By American Living in Russia & an Iranian Investor.

The founder of the organization Yes California, hopes to push California to succession in 2019.

Who is the founder of this succession push?

The founder of Yes California is Louis J. Marinelli, an American-born citizen currently living in ***Russia*** and is allegedly teaching English.

Marinelli has apparently been in Russia for about 10 years (since 2007). He has pushed for five California ballot measures – all succession-related, and failed to get enough signatures to even appear on the ballot.

Marinelli ran for public office in 2016 for the California 80th Assembly District, and got a whopping 4,753 votes or 6.4% – so, he lost badly.

Another major player who pushed California secession is Shervin Pishevar, born in Iran, and fled to the U.S. after controversial statements to Iranian state media. Pishevar is known as a successful venture capitalist living in San Francisco. He was reportedly a top fundraiser for President Obama and backed Hillary Clinton.

After the 2016 election, along with a reported 100 tech company “power players,” Pishevar wanted ‘to help California secede from the US.’

“If Trump wins I am announcing and funding a legitimate campaign for California to become its own nation…”

Shervin Pishevar. Source: Business Insider, Nov. 15, 2016.

About a week later, Pishevar suddenly reversed his position.

As a high-profile public figure, Pishevar then deleted this and this secession statement, and apparently now hides his social media feed so only he can select who can read what he says.

Next, another venture capitalist Paul Holland, hosted Hillary Clinton’s VP pick, Tim Kaine who “spoke about the secession idea,” according to a report by ABC News, New York.

The guy who seems to be doing the most public work on pushing California secession now is the American living in Russia, Louis J. Marinelli, and that is where we focus our analysis here.

[2] Foreign Political Influence & Succession

U.S. Constitutional Forefather Alexander Hamilton, cautioned about foreign intervention (non-citizens?) gaining influence in the USA, and to perhaps attempt to create their own union (state secession?).

“…most deadly adversaries of republican government might naturally have been expected to make their approaches from more than one querter, but chiefly from the desire in foreign powers to gain an improper ascendant in our councils. How could they better gratify this, than by raising a creature of their own to the chief magistracy of the Union?”

Alexander Hamilton wrote in Federalist No. 68, Mar. 14, 1788.

President Abraham Lincoln (R-Ill.) warned about the dangers and legality of secession in the 1860’s.

Secession didn’t work out at all in the 1860’s, and eventually led to The Civil War.

There are huge risks of economic, military and other unintended consequences that even today’s secessionists fall completely clueless. The secessionists don’t really have any specific plans. Rather they rely on a general narrative backed by an ideology that would be found in Fantasyland, rather than reality.

[3] CalExit First Fantasy

Marinelli’s organization YesCalifornia.org, published a CalExit book that boasts California as the ‘6th largest economy in the world.’ We’ll show you in point 4 below why this is misleading, and how the state could not survive without being in the Union.

The YesCalifornia organization uses false logic to try and say the British Exit from the EU or “BrExit” would not be much different than a ‘CalExit.’ Well, Britain was an independent country prior to BrExit with their own government, own currency, own structure and before the U.S. even existed. The United Kingdom’s first formation of laws began 482 years ago (since 1535).

Marinelli makes the assumption that in a CalExit, everything in California would legally and economically stay the same as it would be prior to any secession. Nothing could be further from the truth.

[4] California Highly Dependent on Federal Funds

To share in just part of this lunacy, YesCalifornia.org claims (p6) that the state is actually subsidizing other states, when in fact it’s the other-way around.

The U.S. Federal Government (all other U.S. states) provided California with $54.827 Billion in subsidies in a single year. In 2013 alone, that accounted for 25% of the state’s annual budget. That’s right America, 25 cents of every Federal Dollar allocated to California came from your state’s work.

Thus, California could not operate independently without major federal funds.

[5] Tax Free Fantasy

Marinelli’s organization continues with this fantasy that California could phase out the current income tax system (p7).

As a separate country, a former U.S. state may have to develop their own currency. Which I would predict would collapse within 1-2 years. Why? The state would have to push (sales, property, business and income) taxes substantially higher to make up for the billions of dollars in lost federal subsidies.

“In California in fiscal year 2014, 55.7 percent of total tax revenues came from income taxes. Sales taxes and gross receipts accounted for 36.2 percent of total state tax collections.”

— Source: Ballotpedia (PDF), Data retrieved 02-07-2017

Following the Marinelli organization’s tax logic: Subtract 55.7% of the state’s income tax revenue because we won’t need that anymore? Don’t forget to subtract 25% of the state’s gross budget because those federal funds would not be legally required to be allocated to a now foreign entity.

California took in $138.1 Billion in tax revenues in 2014 and was projected to spend $252.6 Billion for 2015. So state spending is 54.76% higher than revenues received. Obviously a business model for financial independence?

Thus, California could not possibly eliminate or “phase-out” state taxes based on the state’s existing debt, current debt spending, unfunded pensions, and unfunded healthcare to state employees.

California Total Pension Debt: $969.5 Billion or a cost of $75,111 per household.

CA Pension Tracker Stats (Nov. 30, 2015) (PDF). Rank / Debt by California City (PDF)

California Pension Tracker (current data)

California’s pension debt is a huge problem. The St. Louis Federal Reserve found that the medium HOUSEHOLD income (total income for everyone living in a single residence) in Californian is $63,636 (data as of 09-13-2016).

With a cost of just the pension debt per household in California at currently $75,111, not even the citizens have the money to cover the state’s pension debt. The state will continue to finance their debt to perpetuity.

How the state could survive on its own paying just this debt requires a booming economy, with a booming stock market, making the right investments, minimizing losses, or increase taxes on Californians.

U.S. Citizens/ Permanent Aliens Still Subject to Federal Taxes in Succession

If lawful U.S. citizens and Permanent Aliens remained in a state post succession, such citizens and permanent aliens would still be obligated to pay federal income taxes so long as they maintain their U.S. citizenship.

So thinking that U.S. citizens or aliens as permanent U.S. residences would be exempt from federal taxes is a myth, unless each person surrendered any U.S. passport, and legally proclaimed they are no longer U.S. citizens.

At that point, anyone wanting to travel to the U.S. from an independent California would fall under U.S. Federal Immigration laws and customs.

[6] Fantasy Immigration Math

Marinelli’s organization blames the other 49 U.S. states for its immigration polices (p7): “As a U.S. state, our immigration system was largely designed by the 49 other states thirty years ago.”

Actually the way the law works, states have no legal jurisdiction over other states. So there’s that fact. Each state is sovereign from each other, but not from the federal government. For example: Citizens in (say) Nevada could not pass a law that raises income taxes for California and such are to be paid directly to another State Treasury.

With regard to immigration law, there are existing state and federal laws including immigration which California has been ignoring for years. According to FairUS.org, illegal immigration cost just California state taxpayers $25 Billion in 2013 alone.

An independent state would be subject to all these immigration-related costs, plus enormous new burdens to secure their own borders from invasion from other governments, foreign aliens including but not limited to terrorism. The U.S. would no longer have any legal obligation to protect or defend a state that is no longer part of the Union.

Traveling to the U.S. From a Former Separate State 

Traveling to other U.S. states from a separate country (former U.S. State) would require a passport. Such a passport must be prior approved as valid and accepted under U.S. law which would first have to be passed by Congress and signed by the U.S. President [U.S. Constitution, Article 1, Section 8].

If already a U.S. citizen with a current U.S. passport, that person could travel to other U.S. states unless the federal government decided to revoke those passports, and require existing holders to apply for a new passport reflecting current citizenship status.

U.S. Aliens/ Permanent Residence Risk Revocation of Green Cards

U.S. Permanent Aliens are under federal jurisdiction. This means the “Green Cards” that have been issued to non-U.S. citizens who have been granted temporary or permanent residency in the U.S. is based on stay in the USA – not based on living in a NON-U.S. state or separate country.

In the event of a secession, California would then no longer be part of the USA, and thus the U.S. federal government could revoke all green cards issued in California.

As a separate country, California could issue its own different looking Green Cards, but they would be valid ONLY in California. A separate state would have no legal authority to create any law, issue or grant any rights or status that would apply to any other U.S. state or to the U.S. federal government.

That would kind of be like Syria passing a law that says everyone now has U.S. citizenship, passports, green cards and can freely travel to the U.S. It just doesn’t work that way which is why a separate state would have instant immigration problems under current federal laws.

[7] Risks Act of War

Marinelli’s organization thinks California would just get rid of the federal government and the new separate government would just take over all federal interests in the former state (p7).

This gets complicated where the federal government owns military bases and land in the state. A secession could mean that the U.S. may have a “foreign” occupational force in a former state.

The state could not just seize the land in a secession, because such could be deemed as an act of war on the United States.

[8] Fantasy Trade Policy

Marinelli’s organization blames the federal government for “a burdensome trade system” that is hurting California business (p6).

Under President Obama part of that may be true.

But the state has its own burdensome and ridiculous regulations that is sending business away from the state, not to the state. Despite all the environmentalists running a Nanny State, “California cities still have nation’s worst smog, report shows.”

Surprisingly, Marinelli’s organization is against TPP, which it took a Republican President Trump to pull the U.S. out of that one-sided trade deal.

[9] Fantasy Healthcare

Marinelli’s organization claims (p8) “the Affordable Care Act (ACA) was enacted by the U.S. Government to lower the cost of health care…” which we all know was going to be untrue even before the law was passed.

“The average family premium for people getting insurance at work is nearly $3,000 higher than it was when the President (Obama) took office.”

— Kaiser Family Foundation survey (2013)

As for the government’s promise that one could ‘keep their doctor and their healthcare plan if they liked it’ was named by Politifact as, The Lie of the Year.

The truth is healthcare costs have soared higher, not lower.

California opted out of ACA or Obamacare for its own state-ran exchange, and like the federal government, costs have gone up, not down, and more people have become uninsured since the healthcare law was enacted.

California’s state healthcare enrollment for low income people shot up 50% since Obamacare was passed.’

California has a huge liability just on healthcare costs for current and retired state employees and it reportedly has little money to cover such costs.

“Current and retired (State of California) workers have accumulated $71.8 Billion in healthcare benefits,” which is more than double than it was 10 years ago. The state has no very little money set aside to cover these costs.

The Los Angeles Times

California’s State Insurance Commissioner said in 2015, (healthcare) costs are up 55%. So, tell me how a CalExit is going to lower healthcare costs and provide better service again?

[10] Education Fantasy

YesCalifornia.org does correctly note (p8) that California has some of the best Universities – two of which Stanford University (#1) and USC (#17), by the way are privately funded (not state ran or state funded).

CalExit education fantasy: “Independence means we will be able to fully fund public education, rebuild and modernize public schools, and pay public school teachers the salaries they deserve (p8).

What does “fully fund public education” even mean? There is no math provided by YesCalifornia.org to figure any of this out.

How does an independent state fund education when it loses 25% of the state’s annual budget from federal funding, and “phasing out” (p7) the state income tax that accounts for 55.7% of the state’s budget?

Where will all this magic money come to “rebuild and modernize public schools?” And teachers, expect a huge pay cut because the state won’t be able to pay you much when federal funding is eliminated.

The state currently could and does modernize schools with local school bonds and state bonds. All of these costs come from taxpayer money. So the state could not eliminate any tax if it plans to operate independently.

Under Prop 98 (1988), California is required by state law to allocate 40% of the state budget to education every year. So, yes, California’s education is ‘fully funded’ by law already.

[11] Fantasy Constitution

There is fault after legal fault in the YesCalifornia.org arguments. Let’s look at (p10). The secessionists think that the U.S. Constitution would still apply to California as an independent state. The U.S. Constitution would no longer apply to a state that is no longer part of the Union.

The U.S. Constitution only applies to U.S. States, U.S. citizens, lawful persons and even illegal aliens inside the United States. The U.S. Constitution does not apply, nor has jurisdiction in any foreign countries or legally separated state(s).

If not sure about this, go set up anti-government demonstrations in China or North Korea and then ask for a free lawyer to defend you for your “1st Amendment” (free speech) rights.

Next, the 9th Circuit Court and all federal courts would be eliminated that had prior federal jurisdiction. Again, as a legally separate state or a separate country, such have no legal authority over the United States. Only existing State courts would exist to uphold laws for that particular (former) state.

[12] Fantasy Arguments

YesCalifornia.org argues what Aristotle once ‘said’ and separately what King George III ‘said’ some 240 years ago (p10). As if Aristotle or King George’s past statements have any legal precedent under U.S. law.

The YesCalifornia.org arguments have no actual plan other than to just separate from the union and then figure out what to do next. This is kind of like driving 130 MPH in a car, crashing into a stone wall, and then the thinking might be, should I should have worn a seat-belt? Never mind the fact that one was probably just killed in a car crash.

[13] What a U.S. State Exit Would Look Like (Example: California)

Republicans and maybe taxpaying Democrats and Independent in other U.S. states might enjoy seeing politically Left-leaning California Secede from the Union. Here are some more risks the state would likely lose.

  • Reminder, all U.S. Constitutional protections would NOT be extended to its citizens unless the country’s new legislators or new government decided to integrate exact language into the new country’s new Constitution. Such would be defended ONLY by the independent state, not by the U.S. federal government or any other state remaining in the Union. With a liberal state legislator (CA), the U.S. Second Amendment would also likely be eradicated; and there begins the real revolution. If not sure on that, read about what finally led to the American Revolutionary War (related articles).
  • Next, the state would lose 100% federal funding. Roads, public assistance, education, pet projects, etc., instantly get reduced by 25% (based on Federal Government’s 2013 subsidy to CA, relative to the state’s budget).
  • State Education Law Collapses Economy. CA “Prop 98” (1988) requires the state to maintain a minimum 40% of the state’s budget for education. Thus the state would shoulder 100% of this obligation. With no federal funds, state taxpayers will flip the entire bill. The state could not survive without federal funding unless raising taxes to make up for the $54 Billion it gets from federal funding (2014). The state would have to more than double the state sales tax or almost double the state income tax or a combination there of to make up that lost federal revenue at 2014 levels.
  • The California economy plunges into recession. After federal funding gone, huge new tax increases to off-set losses only would accelerate the recession as people and their money flee the state. Housing prices crash with more sellers than buyers. Questions of what legal jurisdiction holds mortgages, and other financial transactions, and who can enforce it and where? Will banks want to lend money to uncertain high risk situations? Thus, credit lines are cut, loans are nearly halted and wallah, a California Credit Crisis. Address that mess separatists. (See Subprime/ Housing/ Credit Crash 2007-2009. U.S. Stock market also takes a huge hit).
  • Bankruptcy risk. All of the state’s bonds would be placed at immediate risk. Credit agencies could downgrade the separate state’s debt rating and bonds which would reduce or eliminate the state’s ability to borrow money. With $400 Billion in existing debt (current debt stats), the state would not last very long before it defaulted on outstanding bonds to investors. Banks, insurance companies and other lending institutions could pull money out of the state to a state that was more stable. A massive financial exodus would mean the state economy would collapse, just like the U.S. economy nearly did in September 2008. Don’t expect other states or the Federal Government to bail it out a separate state/ country that decided it no longer was going to be part of the Union.
  • Lose 55 (generally Democratic) Electoral Votes: California separating from the Union means zero voting influence in federal elections. Marinelli’s organization thinks California’s 55 electoral votes don’t matter and the election is decided without the state (p6). Well, national elections work like this. (Sarcasm coming): There is this thing called “time zones.” The east coast is 3 hours ahead of the west coast. That means voting booths all close from the east coast first, eventually getting to the west coast based on the same local time, generally 8:00PM. So votes in most every state will be counted before California based on time zones. It seems Marinelli doesn’t like it that California doesn’t control all other 49 state’s votes, so we should just leave the union? If the time zones were reversed, would this make Marinelli happy?
  • State would lose 100% of direct (both) U.S. Senators and 53 Congressional Representatives, (Mostly Democrats) to the Federal Government. Does Marinelli’s organization still think having zero U.S. congressional representation, who together lobby for tens-of-billions of dollars each year from the federal government would have no impact on the state?
  • State would have an ambassador to the UN, but would have no legal say on U.S. policy or U.S. law. With the loss of all U.S. representation, California could only send an Ambassador to the UN representing its independent state. Lobbyists in California would also be deemed as “foreign lobbyists” subject to those rules and regulations.
  • All interstate, federal and international contracts broken, breached or invalid because California would not be part of the United States. Everything – all business contracts outside the state, and many inside the state would have to be renegotiated and re-written. Contracts generally written, “signed in the state of California…” were under the U.S. State of California law, not signed under a separate state. We’ll if the state (as part of the Union) no longer exists, how does the contract remain valid when the original state enforcement authority no longer exists either?

[14] ‘CalExit’ Occurring Without Legislation

In 2016, for every one home buyer moving in California, three are selling to get out.

“For every home buyer coming into the state, there are three Californians selling and moving elsewhere, according to data analysis firm CoreLogic.”

— Source: CNN Money, Nov. 7, 2016 (PDF)

Higher taxes make the state far less competitive which is already the case now (PDF). In 2016, California ranked #49 out of 50 for business favorably; education ranked #38 out of 50; roads/bridges (infrastructure) ranked #33 of 50. (2016 Report PDF).

People with moderate incomes or higher would likely continue to flee the state in greater numbers as they are now.

A Conservative on-line news publication said, “California Top Export Is the Middle Class.” This comment was based on a 2016 California population study by Real Clear Markets (PDF).

From 2004 to 2013 alone, some 5 million people did their own personal “CalExit.” The result of the state’s harsh business climate, high regulations, high taxes, and costly housing took out $26 Billion in annual income that state used to have according to the Sacramento Bee (PDF).

Thus we can argue as more people leave the state with taxable state incomes, all that money will go to another state, or kept in the taxpayer’s pocket if move to a lower tax or income tax free state. If California continued its reckless spending, more and higher taxes would be placed on the remaining people living in the state to make up the losses.

[15] CalExit Unconstitutional

YesCalifornia.org’s website as of our post date still has no specific plans on how to address any of the legal or economic issues cited above. The organization tried to hedge their argument acknowledging the U.S. Supreme Court’s 1869 ruling that such secession action is deemed unconstitutional.

“The (Supreme) Court held that individual states could not unilaterally secede from the Union and that the acts of the insurgent Texas legislature–even if ratified by a majority of Texans — were “absolutely null.” Even during the period of rebellion, however, the Court found that Texas continued to be a state.”

— Texas v. White 74 US 700 (1869) (Quick read).

So good luck with all that.

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