Posted on 05/21/2009 2:18:53 PM PDT by SeekAndFind
Tuesday night was tough for Sacramento: State lawmakers were handed a decisive defeat as voters rejected a series of ballot initiatives that would have allowed lawmakers to raise taxes and raid designated state funds to close a massive hole in the budget. Now the state legislature must work with Gov. Arnold Schwarzenegger to craft a budget that reduces spending to levels that neither wants to accept. Their only alternative is to beg President Obama for a bailout on top of the stimulus funds Congress has already approved.
Proposition 1A offered the carrot of a spending cap in exchange for the stick of more than $16 billion in tax increases. Voters realized, however, that the spending cap was toothless, designed to allow lawmakers to forgo meaningful cuts. Voters also rejected propositions that would have allowed lawmakers to borrow against the lottery and to take money from specially designated education and health-care funds. The only proposition voters supported was a measure forbidding lawmakers from raising their own pay during deficit years.
The rejection of further tax increases appeared to have the positive effect of forcing the Obama administration to abandon its threat to withhold California’s stimulus money if the state cut the pay of home health-care workers. The workers in question belong to the Service Employees International Union, a major contributor to Obama’s campaign, and the administration had been hinting for weeks that any move to cut their wages would have consequences. The day after voters rejected the ballot initiatives, however, the administration announced that it would not withhold the money.
Perhaps the administration realized that even with the relatively small budget cuts the state legislature is willing to countenance, California might be in imminent danger of defaulting on its debt. Yes, Schwarzenegger will work with the state legislature to make more cuts, but the deficit they are trying to close is enormous — $21.3 billion — relative to lawmakers’ willingness to scale back state spending. From their point of view, it might just be easier to get in line for a federal bailout; unfortunately, it is hard to see Obama rejecting their petition.
A federal bailout for California would do for the states what the feds’ implicit backing of Fannie Mae and Freddie Mac did for the financial sector — create an unacceptable level of moral hazard that encourages every state to binge on unaffordable spending without raising taxes. Allowing California to default would carry the downside of making it more difficult for all state and local governments to borrow money — but maybe that’s not such a bad thing.
California has historically been a good place to start a tax revolt. The 1978 passage of Proposition 13, which mandated a two-thirds majority for any tax increase, prompted similar measures in other states and heralded the ascendancy of Ronald Reagan. But we doubt that the defeat of Proposition 1A signifies a similar sea change. For one thing, the top marginal income-tax rate in 1978 was 70 percent. Across the country, excessive taxation had strangled economic growth and contributed to stagflation. Now tax rates are low, but the government borrows and spends at unsustainable levels. Californians have voted down a tax increase, but that won’t mean much if the state just borrows the money from Washington, which in turn borrows it from somewhere else.
It is good to see that Californians still have a strong aversion to tax increases, just as it was good to see so many people attend anti-tax tea parties across the country last month. But we have yet to see a true revolt against the endlessly growing size and scope of the government, and we are unlikely to see such a thing until necessity compels us to start paying for the government we have.
Is there anyone here willing to bet against this?
There's some doubt that they won't get it. About 1 in 10.
It's getting to be Tea Party time again.
IMO, politicians think they are dictators and the American people have no choice; they are in office for life they think. Time to show them otherwise. Vote all the Congressional dictators out in 2010.
Despite the gloom and doom from ahnold and the unions, I seriously doubt the majority of people here will see much change at all from the budget cuts.
The worries about schools are completely unfounded. If a student wants to learn, it won’t make a difference that they are in a class of 50; if a student doesn’t want to learn (a significant portion of CA HS students) a class size of 5 won’t help.
IF CA would get a bailout, which I doubt will happen, and I would be very much opposed to... what type of restrictions do you think 0bama and his crew would impose on the government of CA, etc.? It is sort of interesting to think about.
No bailout, Kully-phonya. Get your own house in order.
“IF CA would get a bailout, which I doubt will happen, and I would be very much opposed to... what type of restrictions do you think 0bama and his crew would impose on the government of CA, etc.?”
Extrapolating from the Chrysler bailout, they will give the teachers unions 55% say in whatever fiscal decisions are made going forward.
Geithner is proposing emergency loans that may or may not require congressional approval. Depends, as Obama could simply make an executive order to that end. After all, it's an "emergency"...*gag*
Below is the link to the current Yahoo Poll re bailing out Kalifornikator:
http://js.polls.yahoo.com/quiz/quiziframe.php?poll_id=45602
Bailout for California?
. The state’s dire $21 billion budget shortfall is threatening severe cuts in education and state layoffs. Some are speculating the desperate times may necessitate the desperate measure of a federal bailout similar to the ones doled out to banks deemed “too big to fail.”
Do you support a federal bailout for California?
Yes. We cannot let a state so big go bankrupt. 12%
Somewhat. The government should provide some funds if the problems persist. 6%
No. The state’s voters and lawmakers need to fix this problem on their own. 81%
Not sure/No opinion. 1%
5673 votes
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