Welcome to Shrinkflation: Government Edition

After a truly wonderful event over the weekend in Austin, Texas with about 130 of our Total Access members, I hopped a plane to San Diego, California for a flurry of meetings today.

It would be hard to imagine a nicer place. California has extraordinary nature, from its breathtaking coast to inland treasures like Joshua Tree, Yosemite, and Redwood.

The weather, especially here in southern California, is pretty perfect. The sun shines constantly, seemingly everyone is fit and beautiful, and it’s loaded with so many of the things people crave — wealth, celebrity, etc.

Economically there has been a history of natural resource abundance in this state, including the legendary gold rush in the mid 1800s, oil and gas, and incredibly fertile land.

It’s no accident why some of the most productive people in the world moved here and established world-dominating industries, especially Hollywood and Silicon Valley, which have generated trillions of dollars of wealth.

California has so much going for it that it would be nearly impossible to screw it up. Nearly.

And yet they managed to do it! It’s incredible.

We can start with the crime rate, which really started soaring in 2020.

But many prosecutors are unwilling to do anything about. Several district attorneys in California actually promised voters to be soft on crime.

What’s even more incredible is how much financial supports these prosecutors are receiving.

In Los Angeles County, the ultra-progressive district attorney there received a whopping $12.4 million in political donations (including heavy contributions from a George Soros fund) for his 2020 campaign.

$12.4 million is a ridiculous sum of money for a local political campaign, especially something that should be a mundane public service job like district attorney.

Yet LA’s district attorney has been among the most vocal in the nation about NOT prosecuting crime… because that’s what fits with the woke left’s social agenda.

San Francisco’s government effectively decriminalized shoplifting for amounts under $950. So now people simply take whatever they want and waltz right out the store.

Automobile theft is also soaring. In some parts of San Francisco, police registered a more than 700% increase in car break-ins last year.

But it’s not just crime. California was among the worst states when it came to COVID.

Public health officials imposed some of the worst restrictions in the country and even threatened to shut off the electricity of homes and businesses which didn’t comply… all while politicians gladhanded with their friends and donors, maskless, at private dinners.

California was also one of the worst in the country when it came to re-opening schools. They turned their backs on the kids because of COVID.

And then when the kids actually did finally return to the classroom, they were tormented with a revised curriculum that said 2+2 = white supremacy.

(This is the same state, by the way, where the supposedly progressive media called a black political candidate a “white supremacist” because he espouses conservative views.)

Economically, California officials keep raising tax rates, chasing away productive individuals and businesses.

It’s no surprise the state has lost millions of residents over the years — an exodus which sharply accelerated in 2020 and 2021.

More importantly, California is losing some of its biggest taxpayers… wealthy individuals and profitable companies who are relocating to places like Nevada, Wyoming, and Texas.

This is a huge problem for the state Treasury; the top 0.5% of taxpayers in California pay a whopping 40% of the state’s tax revenue.

Even Hollywood, perhaps the most famous symbol of California, has fallen victim to the state’s political stupidity.

Thanks to a host of absurd taxes, labor regulations, and union rules, more and more film and TV productions are taking place out of state.

Georgia overtook California as the #1 feature film production location as far back as 2016 due to the state’s generous tax credits.

And according to a nationwide survey of CEOs by Chief Executive Magazine, more than 13,000 companies constituting 275,000 jobs, $76.7 billion in capital funds, and 133 million square feet of office space, left California between 2008 and 2017.

That trend has only accelerated over the past five years.

Losing their biggest taxpayers is going to leave the state, and many of California’s biggest cities, short of cash. So they’re coming up with bizarre ways to fund the deficit.

Recently, for example, the city of Sacramento declared a “water alert” asking residents to reduce water consumption by 20%.

The city also limited outdoor watering and car-washing to two days per week, and doubled the fines for wasting water, “such as letting water flow onto sidewalks and streets.”

Yet the Sacramento City Council has approved a deal to sell up to three billion gallons of water for about $5 million to other cities and states.

The state is suffering a terrible drought. The city wants its citizens to sacrifice. But local officials are selling off the water.

This is totally nuts. And it’s similar to the shrinkflation phenomenon we’ve all experienced, or what I call value deflation.

Shrinkflation is a form of inflation where you pay the same amount of money for something, but receive less than you used to.

We’ve seen this in 10oz packages of food selling for what 12oz packages recently did. And we’ve seen it in reduced staff, longer waits, and worse service.

Sacramento residents now pay the same taxes, but can’t use as much water and are told to take quicker showers, while the city ships their water to non-residents.

(To add insult to injury, the city actually priced the water deal at BELOW the rate they charge their own citizens… essentially selling the water at a discount to non-resident buyers. It’s genius!)

This is how governments across the land are going to deal with inflation (and declining tax revenues). They’ll keep raising your taxes, but provide you with fewer public services while demanding that you make more sacrifices.

About the author

Simon Black

About the author

James Hickman (aka Simon Black) is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.

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