Thursday, November 13, 2008

Governor Wants A Federal Bailout, But Don't Call It That

The Governator gave a speech at the Fresno Chamber Of Commerce yesterday, and of course the dire California budget situation was the number one topic. Here, the Gov explains our problem:

And you know what we proposed. We have been told by our Finance Department that we are actually falling short on revenues by $11.2 billion for this fiscal year -- not next fiscal year, this fiscal year, which ends on June 30th. So we have just in these last budget negotiations -- which have just ended, literally two months ago -- we have already made severe cuts of $9 billion. So it was very clear to us that we could not make another additional $11.2 billion in cuts, so it has to be a combination of cuts and tax increases, looking for additional revenues.

And that's, of course, always something that I don't like, because I'm anti-tax. I always felt that California has been living way beyond its means and that we have a spending problem in California, but not a revenue problem. But that has changed, as I have explained to the press in Sacramento just these last few weeks.

And that's why we called a special session, because when you have a drop in revenues, in anticipated revenues, by $11.2 billion, then you don't have anymore a problem with the spending, you have a problem now with the revenues. And this is why we have proposed a combination of revenue increases, which is some taxes on services and also a sales tax increase and an extraction tax on oil companies.
So, the state is no longer "living way beyond its means" and has "a problem now with the revenues" instead. Well, it sounds like some hard choices are on the way. Unless something amazing happens. From the Q&A:
I think the other thing I wanted to add is that we are also asking the federal government to help, because I think that we all know, and this is another thing that we have been fighting for the last five years since I have come into office, because they are giving us only 80 cents on the dollar. There are some $40-some billion that they're holding back, so it's not like we're asking them for a bailout, because it's our money. We're just saying hey, give us some of our money back. And so the legislative leaders, as a matter of fact -- Mike, when are you going back there, next week, to Washington?
To be clear, the Governator is talking about federal per-capita tax rates vs per-capita spending. I love this plan! In fact, all people should pay federal income tax based not on their actual income, but on a per-capita averaged basis by state. Of course, the difference will be confiscated by the state government to spend on whatever it wants, but wouldn't you rather have a high-speed rail than an interstate highway?

Don't get me wrong: I think spending is out of control at all levels. But calling this idea anything other than a bailout request requires more mental contortion than a Circ du Soleil show at a pretzel factory.

14 comments :

Anonymous said...

Reminds me of Kelly Brothers comments this morning... "GM is not a car building company (with a $2 bil market cap) its a benefits management company ($50 bil in benefits liability)"

The state's largest service recipient is its retires, directly and indirectly (service districts, municipalities, police and fire)

Raise retirement ages and service lengths, increase contributions....

DJ - in my mind you're right. At my first career job in 198X, I hung a picture of a red M1 BMW on the wall while driving the '76 Corolla to work hoping to gawd that I didn't sneeze and kick a hole through the door or get passed by the muscle car I had sold.

Sippn

Anonymous said...

Reuters
Soros says deep recession inevitable, depression possible
Thursday November 13, 11:01 am ET


WASHINGTON (Reuters) - George Soros, chairman of Soros Fund Management, testified at a House Oversight and Government Reform Committee hearing on Thursday. Highlights:
* Said "a deep recession is now inevitable and the possibility of a depression cannot be ruled out."

patient renter said...

George Soros, chairman of Soros Fund Management...testified at a House Oversight and Government Reform Committee hearing...a deep recession is now inevitable and the possibility of a depression cannot be ruled out.

Let me guess - Soros then went on to call for additional government "support" and advised the Committee that they could save on overhead by making out a check directly to Soros Fund Management. Bada bing!

Anonymous said...

Thank you Mr. Soros, will you also be predicting a real estate slow down?

Sippn

Soros said...

If it slowed down any more the time-space continuum would be disrupted.

smf said...

State budget 1998 = $70 Billion
State budget 2008 = $140 Billion

They overspent, specially in salaries and benefits.

And the losses in their pension system stock portfolios has them shaking.

Structural changes are required.

Max said...

State budget 1998 = $70 Billion
State budget 2008 = $140 Billion

They overspent, specially in salaries and benefits.

And the losses in their pension system stock portfolios has them shaking.

Structural changes are required.


IMO, the only way out of this is bankruptcy. The electorate is too divided and their interests too diverse to yield representatives that can fix this thing. The overspending goes way beyond personnel issues. Billions are wasted on failed programs and useless spending initiatives approved by voters. We'll continue down this path until the bond market refuses to buy state debt. Then it's lights out.

Deflationary Jane said...

Max or someone, please look at MLS #: 80101597 - there has to be a story in there (asking 170k over their 2005 buy price).

Anonymous said...

DJ - its says remodeled in the public website.

People often underestimate the cost of major remodeling.

Sippn

Max said...

(asking 170k over their 2005 buy price).

Yeah, looks like a hopeful renovator. I'm amazed at the amount of $$ people are sinking into Land/Curtis remodels.

The place looks well staged, though for $700K+ they could use a better photographer. Sheesh!

Anonymous said...

I'm sure the feds will be sympathetic with Ahnolds request for a federal bailout. How did he get in office? Let's see, by promising to cut the VLF. He did this his first day in office, punching a $4B hole in the budget that he promised to fill by rooting out "waste, fraud and abuse". The size of the budget problem is exactly equal to the VLF times the number of years he's been in office. Now he wants a democratic president and congress to fix the goof that bought him his job. Good luck.

Anonymous said...

The Feds have been easy picken... why not ask. Actually, the $28 billion loan rewrite program sounds like a bargain to the $700B tarp!

DJ - in Maslow's 5, did housing come before banking? I know drinking was close to #1!

Its Friday

Sippn

Deflationary Jane said...

LOL Sippin,
Housing before banking - that's easy but drinking is lvl 1# only if you are a function alcoholic!

There has been lots of discussion over the last 20 years about how to update the scale to reflex changing times.
http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs
http://findarticles.com/p/articles/mi_m0FCG/is_3_26/ai_62980759

Funny that you brought this up as I was just talking about this about 2 hours ago. Am I thinking like Sippin? Now I'm afraid, very afraid >; )

Anonymous said...

I think a 28 Billion US loan is good for the California economy, these days it needs as much federal money as posibile, to get things in working order It needs to be addresed as to where these people are going to get there lender to go out on a limb even if their rating is not good!