Call me crazy, but if they committed to cutting all unnecessary spending and lowering tax rates (especially corporate tax rates) wouldn’t that instill enough confidence among investors to sell bonds to cover the budget gap?
I mean, that’s how governments raise dough without raising tax rates in the short-term: borrow it. But nobody loans to a financial mess. So why wouldn’t they just try to get their house in order to attract investors? What’s all the hemming and hawing about?
They won’t, and S&P just downgraded California’s bond rating to the lowest in the nation.
CA has borrowed so much money, it becomes a joke.
All spending is necessary according to our state government. You wouldn’t believe the redundancy that exists across regulators. If California and the counties would hire some efficiency experts to examine every aspect of regulation in this state they would find $10 billion in savings.
The solutions they have put forward are absurd. They will drive unemployment up and create an even bigger budget cap in 18 months. They have no clue that they are creating giant disincentives to start new business, encouraging other businesses to close or leave. That of course means less capital and less willingness to take risks to start new businesses here, and will only result in more hardship for people and of course the state. We are on a course for ruin. We already have higher unemployment than the national average and the largest budget shortfall of all the states which is some 25% of the budget itself! This cannot be fixed by tax increases as California is already one of the highest tax states and on the wrong side of the Laffer curve - more taxes will result in diminishing returns at this point. Our problems can only be fixed by a massive rethink (reduction) of the purposes and endeavors of the state itself, more outsourcing, and more consolidation of services and regulators.