Wednesday, July 22, 2009

DC Dems to California: Drop Dead; State's Federal Representatives and Media Take it Lying Down

In a narrative you might not have believed if you read it in a novel, an Administration headed by a Democrat has blithely handed out tens of billions of dollars to Goldman Sachs, Deutsche Bank and other large financial companies (via the AIG conduit) but has left California to financially cut off many working people and the needy and weaken one of the once-great public education systems in the nation. The Democrats who controlled Congress since 2007 were thrilled to give George Bush and Hank Paulson (and their successors, who they expected to be a Democrat) $750 B of TARP money to use with few questions asked, but even California's Democratic Senators appear to have been unaggressive in requesting just a few billion bucks please from Barack Obama and/or their fellow Congresspeople. What's a reliable 55 electoral votes anyway?

Further along the amazement road is the lack of complaint from the major news organizations in the state. Apparently if a Democratic President disses their state, it's OK. Every night lately I have checked in on the LA Times online, and often the SF Chronicle. The LA Times appears to care more about sports and Hollywood goings-on that about this financial crisis. It does feature an amazingly lame interoperable calculator that offers the reader a chance to "fix" the crisis by choosing which cuts to make. For some reason, another news organization headed by an Aussie has some interest in California's plight.

Consider the following from the (non-California-based) Wall Street Journal:

State's Cities Brace for More Sacrifice:

California cities and counties, already reeling from their own fiscal problems, are about to take a new hit: Gov. Arnold Schwarzenegger and legislative leaders plan to take more than $5 billion from them over the next two years under the state's tentative budget deal.

If California's legislature approves the compromise reached Monday, the state will take as much as $1.7 billion out of local gasoline-tax funds, another $2 billion from local property-tax receipts and $1.7 billion in redevelopment funds that now go to cities and counties in a move to close an estimated $26 billion budget shortfall.

Local officials up and down the state were scrambling Tuesday to plan how to further cut their budgets to account for the state's rare move. Meanwhile, some cities and counties began laying the groundwork for possible lawsuits against the state.

The city of El Monte in Los Angeles County just closed a $9.5 million budget deficit for the fiscal year that began July 1 by action including furloughing most of its 375 employees, laying off 17 police officers and shutting down its aquatics center during all but four months of the year. Now the city faces an estimated additional $2 million loss in gasoline taxes and an as-yet-undetermined amount more being taken by the state. "It's devastating," said Jim Mussenden, city manager of the community of 125,000. "We've already worked very hard to reduce our budget, and now we will have to look at more cuts."

The state's cut into local funds, economists said, could have an outsized effect in delaying California's recovery.

Los Angeles city officials in said they expect to lose about 2,300 construction jobs because of a proposal in the budget agreement to take $72 million of its funds for redevelopment projects. . .

Further amazing is that the WSJ is running not one but two articles on this topic, leading with Budget Agreement Deepens California's Pain, which begins with the following:

The budget deal struck by California Gov. Arnold Schwarzenegger and statehouse leaders is expected to hurt a broad band of state residents and crimp the state's recovery from the current, deep recession.

Fiscal experts said the negative effects of the budget plan, crafted in an attempt to keep the state solvent, will offset much of the intended beneficial effects of President Barack Obama's federal stimulus package.

California's economic decline, economists predicted, will last longer than downturns in other states. They said the proposed cuts in the budget deal will compound the continuing impact from other recessionary blows, including an 11.6% state unemployment rate, widespread foreclosures on homes and depressed real-estate values.

Mr. Schwarzenegger and legislative leaders Monday evening agreed to close the budget shortfall by slashing $15.6 billion in spending. The major cuts include $6 billion from kindergartens and community colleges, $2.8 billion from other higher education, $1.3 billion saved through state-worker furloughs, $1.3 billion cut from a state health-care plan and $1.2 billion trimmed from prison spending.

Another New York paper has taken note with two articles. The Times writes in Denied Tax Revenues, Local Officials in California Are Fuming that (among other points):

. . . the budget would cost 4,000 jobs in public works departments statewide. In suburban Contra Costa County east of Oakland, the public works director, Julia R. Bueren, said her department would lay off more than a third of its staff by the end of August. . .

That situation may be worse in rural areas like Calaveras County, a sprawling triangle that runs from the foothills of the Sierra Nevada to higher elevations. Tom Garcia, the county’s newly appointed public works director, said he was bracing for a loss of about 20 percent of his budget, meaning many snow-packed mountain roads could go unplowed this winter.

“In order to get anywhere in our county, its all on local roads,“ said Mr. Garcia, adding that resorts in the Sierra region could take a hit as well. “If they can’t get to the services in this county because the roads aren’t open, we’ve lost our winter income.”

The Times is also running a news analysis titled Pinch of Reality Threatens the California Dream which is pedestrian. Why are New York papers more interested in California than its own major press organs?

California chronically sends more money to Washington than it receives. Now it's amongst the needy states. It's time for the Feds to help it and other needy states. From a national policy standpoint, money sent to California will help the country more than the same money sent to Michigan (a state I was once a resident of and bear no animus against). Sorry, Michigan, but California routinely changes the world through technology innovations, moving pictures, etc.; Michigan is just too chronically depressed. And it's too cold in winter! A thriving California will help revive America and the world.

Just imagine the outcry if this happened when a Bush was President. This news is breaking the very same week that Neil Barofsky, Inspector General for Congress in overseeing TARP ("SIGTARP") reported that direct and guaranteed expenditures for the financial "system" totaled $23.7 TRILLION dollars. That's TRILLION as in TRILLION. Does the Administration really believe that with all the "stimulus" money not yet spent that it could not allocate more to directly assist states in their time of need?

Of course, California overspent. (But it did not under-tax.) California did not, however, cause the current economic financial crisis. New York-based financial companies, Washington politicians and the Fed, and the big North Carolina banks caused it, with an assist from scamsters and speculators in California, Florida and elsewhere involved in the real estate bubble (amongst other causes).

In my humble opinion, it borders on lunacy to be sending tens of thousands of additional soldiers to one of the most horrid places on Earth and to have sent tens of billions of dollars to non-needy large complex financial companies while simultaneously not assisting a temporarily needy populace of the single most important State in the Union, as well as continuing to back-end a "stimulus", when there are so many needy people throughout this country who have been harmed and at times driven to tent cities because of cheats and speculators linked to the same Big Finance that Barack Obama has aided with the people's money: money that the people now need back.

In addition to being terrible policy, it is bad politics.

Copyright (C) Long Lake LLC 2009

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