Monday, January 18, 2010

California Death Watch-3

"California is deep in red ink again, according to a new report projecting that the cash-strapped state faces a $21 billion budget shortfall through June 2011. ... The state's Democratic controller, John Chiang, said on Wednesday that California could have trouble making payments as early as Spring 2010 if tax revenue remains below forecasts, among other reasons. Until at least June 2015, the report projected California will face annual budget shortfalls of about $20 billion. ... At one point, California was so close to insolvency it was forced to issue IOUs. ... Republicans, including Gov. Arnold Schwarzenegger [AS], opposing tax increases. ... 'The numbers cry loudly for California to focus on rebuilding our tax base,' said Democrat Darrell Steinberg, the Senate president. ... The new budget report said $6 billion of the projected shortfall in the current fiscal year is largely due to unrealistic budget assumptions about tax revenue and spending on schools and prisons", Stu Woo at the WSJ, 19 November 2009, link:

"Facing a $21 billion shortfall through June 2011, California leaders want billions of dollars in budget relief from Washington that could head off deep cuts expected to state programs. Gov. [AS] will ask the White House to waive rules that require the state to spend its own money on certain programs to receive federal funds, according to California officials briefed on the Republican's coming budget proposal. ... His message: The national economy will depend on California's recovery. ... 'Under President Clinton, we got 94 cents back on every dollar we sent,' said gubernatorial spokesman Aaron McLear, citing data compiled by the nonpartisan Tax Foundation. 'Now it's 78 cents on the dollar. It makes no sense that California should be subsidizing programs in other states.' ... If the state doesn't receive federal aid, health and welfare programs could be eliminated, the officials said", my emphasis, Stu Woo at the WSJ, 31 December 2009, link:

Absent a federal bailout, I don't see how California can avert defaulting its bonds.

Are you arguing against "progressive income tax rates"? That California gets back less than say Alabama results from California's higher average incomes. Look at The Guvernator's argument, it amounts to California is the Vampire Squid.


Anonymous said...

So Coakley may fail to gain Teddy's old seat and the California economy slides into the ocean.

Time for a new calculus anyone?

How do we evolve from an economy that is overburdened with debt and creates the majority of economic activity by servicing each other?

Even though the service sector is substantial a majority of the people are obese, unhealthy and poorly educated.

Well... will Pres-O just bail out the California status quo and queue the line for a series of states bailouts?

Will he give AS time to make the federal tax "inequality" argument more full throated? That's a Pandora's box that the fedgov may want to contain...

When Americans start focusing on the sums sent to Washington you will get many an unhappy citizen of New Jersey, New York, Colorado, Minnesota, Nevada, Connecticut...

So will AS drive the CA bondholders over the cliff with a wave from the Pres-O??


Think about all the campaign donations that Pres-O hoovered up in CA last election... that's the calculus...

CA bond holders sleep well tonight... you're guaranteed!

Independent Accountant said...

If "He" bails out California, New Jersey, New York, Illinois, Michigan and other states will each demand its due. The result: high or hyperinflation hits the US a few years sooner.


Svend said...

Are democracy and fiscal conservatism impossible to have at the same time? Pity our limited government republic was cast aside.