Monday, January 19, 2009
California In Crisis-3
"California, first in many things, is facing America's worst budget crisis. The gap between projected revenues and spending during this fiscal year and next amounts to $41.6 billion, which is almost half the total sum that the state expects to raise next year. Unlike the federal government, California is not allowed to get out of the jam by running a deficit. It is finding it hard to borrow to meet even short-term needs. ... Recession triggered the crisis but did not cause it. California relies heavily on income taxes, especially those paid by the top 1% of earners. These veer up and down with the markets. But instead of saving money in boom years, the state locks in higher spending on public services and embarks on projects that need long-term investment", my emphasis, Economist, 8 January 2009, link: http://www.economist.com/world/unitedstates/PrinterFriendly.cfm?story_id=12903483.
California's budget crisis deepens. No mattter what conditions, real per capita spending increases. California has a budget crisis because: it can't print its own money. Yet. California needs its own monetary policy and a flexible exchange rate with the other 49 states! Why not? Robert Steel, "formerly" of Goldman Sachs, the Treasury and Wachovia is available. Let's see if he will help California set this up, pro bono of course.