Will California bring us into a full blown recession?

Hammer · 08-17-2008, 10:56 AM

California nightmare for the global economy?

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Will the California budget crisis tip the United States into recession? The California economy is certainly large enough to inflict such damage. It's the seventh-largest economy in the world and home to close to 38 million Americans.

California's budget deficit is by any reasonable measure enormous. This budget deficit is estimated at $17.2 billion and represents more than 17 percent of the state's general fund expenditures (about $101 billion). In contrast, New York, which faces the second-worst budget gap in the nation for fiscal year 2009, has a gap of about $5 billion, which represents less than 10 percent of its budget.

In closing its past budgetary gaps, California has acted more like the federal government rather than merely one of 50 states. Indeed, unlike the federal government (or sovereign nations), each state is required to balance its budget each year; and no state, at least in principle, has the authority to engage in the kind of discretionary deficit spending both the federal government and nations around the world routinely use to stimulate their economies.
In the past, a profligate California has gotten around this balanced-budget requirement by using a technique that effectively allows the Golden State to administer its own fiscal stimulus. In particular, California - under both Democratic and Republican governors - has simply issued new bonds every time that it has spent far beyond its means.
California's problem this time, however, is that its deficit is so big, its balance sheet is so bad, and world credit markets are so tight that issuing new bonds alone is no longer a viable option. Instead, California's politicians are inexorably being forced toward a solution that will prominently feature both a large tax increase and significant spending cuts.
Indeed, this is not a partisan matter of choosing one's poison. The budget deficit is so large that it cannot be eliminated without raising taxes, anathema to the state's Republicans, and spending cuts, equally unpalatable to California Democrats. Of course, the faster the state Legislature accepts this harsh reality, the faster the deadlock can be broken.
Viewed from a macroeconomic perspective, there is an even harsher reality. Increased taxes and reduced spending will send a very nasty contractionary shock through a California economy that is already reeling from a housing market meltdown and punishing gas prices. Should Gov. Arnold Schwarzenegger's budgetary medicine - including firing many state employees - trigger a recession, this may well serve as a tipping point for a national recession and, in the worst case scenario, even a global recession.
In considering these dangers, it is worth noting that California provides close to 13 percent of America's real GDP growth. In contrast, the second-largest contributor to U.S. gross domestic product is Texas, and it provides only half that stimulus. It also worth noting that California is an important destination for both U.S. manufactured goods and world imports, particularly from Asia. Already, California's unemployment rate is more than 6.8 percent and well above the national average of 5.7 percent. At least some economists believe California may already be experiencing negative growth. The economy is likely to get a lot worse before its gets better.
If there is any one civics lesson to be learned from this fine mess, it is that the state's politicians must learn to resist overspending in good times so that the state won't face bankruptcy when bad times hit. It should be equally clear that any damn fool can issue bonds to balance a budget. However, it takes real political courage and economic foresight to put a state budget on an even keel through fiscally conservative tax-and-spend policies. At this juncture, California is nowhere close to that - and the rest of the country, and perhaps the world, may soon pay the Golden State's piper.

luvtolean · 08-17-2008, 11:46 AM

Our budget deficit would turn into a budget surplus if we went 1:1 for federal dollars spent in Cali for those we contributed to the fed. (wonder if the author of this article is from a state Cali helps pay for?) Instead, Arnie is talking about raising our sales tax to 11.25%, a 1% hike/yr, over 3 years. Yet, we'll continue to pay for the infrastructure of many other states...

He's very misleading with:

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In particular, California - under both Democratic and Republican governors...

It is true, the governor's office has changed parties. But that is not reperesentative of politics in this state. The majority of the state's offices are firmly (D). The blame is shouldered by one party only. This is a democrat created problem. Period.

Then he says:

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The budget deficit is so large that it cannot be eliminated without raising taxes, anathema to the state's Republicans, and spending cuts, equally unpalatable to California Democrats.

There aren't enough elected republicans in this state to even slow down the entitlement democrats. Here's some reality:

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Originally Posted by Wiki

For the 2007 — 2008 session, there are 48 Democrats and 32 Republicans in the Assembly. In the Senate, there are 25 Democrats and 15 Republicans....

Overall, the trend in California politics has been towards the Democratic Party and away from the Republican Party. The trend is most obvious in presidential elections. Additionally, the Democrats have easily won every U.S. Senate race since 1992 and have maintained consistent majorities in both houses of the state legislature.

The fucking unchallenged democrat control of our state legislature and judiciary, and almost 20 years at the fed represeting us, has devastated the state. Yet the state keeps voting in these WAFL entitlement losers. Blows me away.

Arnie recognized the problem and tried to redistrict the state in a special election. Unfortunately he was still relatively new to politics at the time and made the mistake of believing people would vote for his logical bill (he was going to have the judiciary, which is at least supposed to act non-partisan do it) on its own merits, and without massive campaigning on his part.

Of course, I haven't yet mentioned my favorite bill, which to make a few property investors more rich, wrecked our schools and municipal infrastructure, prop 13...

Funny thing though, I didn't hear everyone bitching about Cali house prices when investors and companies across the country (and world) were making a mint on unjustifiable loan practices here.

CBRVFR · 08-17-2008, 12:28 PM

Sounds like the administration is seeking to share the blame, since nobody is buying their story that the fed deficit built over 7 years is completely the fault of the ineffectual Dems who have had the reins of the dead horse for about a year. - "Don't pay any attention to that man behind the curtain!"

$17B is a weak piss in the waterfall of the federal deficit. I'd have far more regard for the bleatings of conservative economists if they'd put the blame where it lies - at the feet of Bush and Cheney and the republican legislature that rolled over like a prison bitch for 4 years while they spent our children's future.

.... which doesn't excuse the Cal legislature for gaming their own system and failing to balance the budget as required by state law, except to the extent that they expected more federal money (which will not be forthcoming) and property taxes, which have decreased significantly due to the piss-poor regulation the feds gave their fuck-buddies in the Banking sector.

Federal Budget Deficit Hits $102B In July, Gap Nearly Triple Over Last Year, Boosted By Stimulus Checks And Failed Banks - CBS News

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For the 2009 budget year, which begins Oct. 1, the administration is now projecting a deficit of $482 billion, which would be the highest in dollar terms in history, surpassing the old mark of $413 billion set in 2004.

Through July, government revenues total $2.094 trillion, down 1 percent from the same period a year ago. Revenues have been weaker this year, reflecting the sharp slowdown in the overall economy.

Government spending so far this budget year totals $2.466 trillion, 8.5 percent higher than a year ago. That's in part due to the $168 billion stimulus package Congress passed at the beginning of the year in an effort to keep the country out of a deep recession and because of increased spending for the wars in Iraq and Afghanistan.

Yeah, it's all Callifornia's fault...

luvtolean · 08-17-2008, 12:39 PM

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Originally Posted by CBRVFR

Sounds like the administration is seeking to share the blame, since nobody is buying their story that the fed deficit built over 7 years is completely the fault of the ineffectual Dems who have had the reins of the dead horse for about a year. - "Don't pay any attention to that man behind the curtain!"

I'd say the dems have chosen to be ineffectual to make sure the (R)s get blamed, and to avoid pissing anyone off before this national contest.

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I'd have far more regard for the bleatings of conservative economists if they'd put the blame where it lies - at the feet of Bush and Cheney and the republican legislature that rolled over like a prison bitch for 4 years while they spent our children's future.

It's been terrible. But nothing in Obama's plans change the handout system, which rests on the central tenet of handing out more money, so maybe it's not a (R) problem, but a bloated fed problem in general...

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.... which doesn't excuse the Cal legislature for gaming their own system and failing to balance the budget as required by state law, except to the extent that they expected more federal money (which will not be forthcoming) and property taxes, which have decreased significantly due to the piss-poor regulation the feds gave their fuck-buddies in the Banking sector.

Property tax revenues in California are fucked up not by anything the fed or the banking sector did, but prop 13. That is the real handout to rich guys!

ND4SPD · 08-17-2008, 01:25 PM

Maybe I'm ignorant - but what does California spend its money on? Seventh world largest economy, you have Hollywood actors making tens millions of dollars year after year(and increasingly so), housing is insanely expensive so I'm guessing property taxes also reflect that. Is money literally being pissed away?

jose_jimenez · 08-17-2008, 04:02 PM

Quote:

Originally Posted by CBRVFR

$17B is a weak piss in the waterfall of the federal deficit. I'd have far more regard for the bleatings of conservative economists if they'd put the blame where it lies - at the feet of Bush and Cheney and the republican legislature that rolled over like a prison bitch for 4 years while they spent our children's future.

Yet people continually point the finger at democrats and cry foul. We can have these threads, like this one, but where are all the threads about the current administration fucking every American in the ass? The debt accrual under this current administration is the biggest American fucking I have ever seen. People that voted for these clowns continually defend them, or just don't want to talk about it.

I don't understand why they don't understand to quit spending money we don't have. The whole government needs an overhaul. 20k toilet seats, unnecessary wars, they are just the beginning.

Hammer · 08-17-2008, 07:20 PM

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Originally Posted by ND4SPD

Is money literally being pissed away?

Yep on keeping illegals in the state and funding programs to find out what causes cancer and then banning products.

luvtolean · 08-17-2008, 08:56 PM

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Originally Posted by jose_jimenez

Yet people continually point the finger at democrats and cry foul. We can have these threads, like this one, but where are all the threads about the current administration fucking every American in the ass? The debt accrual under this current administration is the biggest American fucking I have ever seen. People that voted for these clowns continually defend them, or just don't want to talk about it.

I don't understand why they don't understand to quit spending money we don't have. The whole government needs an overhaul. 20k toilet seats, unnecessary wars, they are just the beginning.

Funny how the current federal legislature "leadership" are the same assholes that "lead" California into budget crisis after crisis...

Please, show me the Obama message, "we have tighten up the belts kids, less social programs, balanced budget, more work".

It'd make me quite happy to vote for him. (as if it matters.)

SheepOfBlue · 08-17-2008, 08:59 PM

Quote:

Originally Posted by jose_jimenez

Yet people continually point the finger at democrats and cry foul. We can have these threads, like this one, but where are all the threads about the current administration fucking every American in the ass? The debt accrual under this current administration is the biggest American fucking I have ever seen. People that voted for these clowns continually defend them, or just don't want to talk about it.

I don't understand why they don't understand to quit spending money we don't have. The whole government needs an overhaul. 20k toilet seats, unnecessary wars, they are just the beginning.

Spending bills in the federal system MUST originate in the House of Representatives. A president can ask for things and veto things (the power of impoundment was stolen in Nixon years). Thus the blame needs to be laid at the feet of the previous and current House majority rather than the president.

As to the 20K toilet seats the majority of items that nature are really high tech (the toilet seats most often pointed to fit in high performance jets). Yes the government wastes money but the bigger issue is the things it does that are far beyond the original (and arguably constitutional) scope.

CBRVFR · 08-17-2008, 11:36 PM

Sorry - On our planet, the Administration begins the process. The congress can try to alter that but for the first several years, they didn't. The lack of restraint came from the Bush administration, though he tried to obfuscate it with a smattering of reductions that would apply to people who would never vote for him anyway.

Yes, I'm simplifying, but the congressional leadership in determining spending presupposes there are people in Congress who will buck their parties.

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The way in which Congress develops tax and spending legislation is guided by a set of specific procedures laid out in the Congressional Budget Act of 1974. The centerpiece of the Budget Act is the requirement that Congress each year develop a “budget resolution” setting overarching limits on spending and on tax cuts. These limits apply to legislation developed by individual congressional committees as well as to any amendments offered to such legislation on the House or Senate floor.
The following is a brief overview of the federal budget process, including:

the President’s budget request, which kicks off the budget process each year;

Introduction to the Federal Budget Process, Revised 12/3/07

Mojave954 · 08-18-2008, 08:07 AM

Yeah that's it, blame it all on CALI.... Gotta be our fault...

SheepOfBlue · 08-18-2008, 08:18 AM

Quote:

Originally Posted by CBRVFR

Sorry - On our planet, the Administration begins the process. The congress can try to alter that but for the first several years, they didn't. The lack of restraint came from the Bush administration, though he tried to obfuscate it with a smattering of reductions that would apply to people who would never vote for him anyway.

Yes, I'm simplifying, but the congressional leadership in determining spending presupposes there are people in Congress who will buck their parties.

Introduction to the Federal Budget Process, Revised 12/3/07

Lack of constraint was EVERYONE one of the basids! A president can SUGGEST anything but cannot introduce a single thing. Further it is debated on whether this applies to tax and/or spending "Section 7: All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills." However it seems to be ignored in either case

I know Bush is the boogyman but reality is that the majority of them (both parties) spend like drunken morons and use the money to buy votes and personal favors. Checks and balances only work when they are not all pulling in the same direction

CBRVFR · 08-18-2008, 11:01 AM

Quote:

Originally Posted by SheepOfBlue

Lack of constraint was EVERYONE one of the basids! A president can SUGGEST anything but cannot introduce a single thing. Further it is debated on whether this applies to tax and/or spending "Section 7: All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills." However it seems to be ignored in either case

I know Bush is the boogyman but reality is that the majority of them (both parties) spend like drunken morons and use the money to buy votes and personal favors. Checks and balances only work when they are not all pulling in the same direction

Quit trying to spread the responsibility, dammit! The buck stops at the top, where the initiative and the power of veto reside. This particular mess is Bush's.

Now repeat after me - "Bush and Cheney have betrayed the principles of conservatism and have bankrupted the whole system - morally, financially, and intellectually- to benefit their friends and benefactors."

And as a drunken moron, I resent your implication...

luvtolean · 08-18-2008, 11:12 AM

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Originally Posted by CBRVFR

This particular mess is Bush's.

Now repeat after me - "Bush and Cheney have betrayed the principles of conservatism... - morally, financially, and intellectually-

I agree with that.

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to benefit their friends and benefactors."

Now you're stepping out a bit far IMO. The war is not for their "benefactors". I doubt there is a distinct political leaning for those who gained from the housing bubble either.

The real tragedy isn't that they violated their principles and blew money like entitlement democrats, it's that they're handing the government over to the highest spending entitlement democrats there has ever been, already in debt.

So instead of the normal swing back and forth on government spending as parties shift in and out of control, we go from spending too much...to spending too much.

CBRVFR · 08-18-2008, 11:26 AM

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Originally Posted by luvtolean

Now you're stepping out a bit far IMO. The war is not for their "benefactors". I doubt there is a distinct political leaning for those who gained from the housing bubble either.

Huh- seems to me that without donning a tinfoil hat, a lot of those no-bid contracts were much appreciated by the conglomerate that 'happened' to get virtually all the business.. I can understand that might have been necessary in the beginning, there being no real plan in place,

but at some point, GAO standards should have begun to apply...

Quote:

The real tragedy isn't that they violated their principles and blew money like entitlement democrats, it's that they're handing the government over to the highest spending entitlement democrats there has ever been, already in debt.

So instead of the normal swing back and forth on government spending as parties shift in and out of control, we go from spending too much...to spending too much.

I hope you're wrong, but I fear you're not. If a president were to come in with the makeup of the congress slightly in favor of the opposition, that would be an ideal balance for our government.. but the 'Republican brand' (which sounds like something Ann Coulter has on her skinny ass) is so damaged by these gangsters that the dems may end up with a veto-proof majority.. which bodes ill for either candidate and the rest of us. If Obama wins, he's going to have to try to keep these guys in line (good luck with that), and if McCain wins, it is going to be a legislative circus for at least two years.

It will be interesting... in sort of a 'Lorenzo highside highlight film' kind of way.

luvtolean · 08-18-2008, 11:40 AM

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Originally Posted by CBRVFR

I hope you're wrong, but I fear you're not. If a president were to come in with the makeup of the congress slightly in favor of the opposition, that would be an ideal balance for our government.. but the 'Republican brand' (which sounds like something Ann Coulter has on her skinny ass) is so damaged by these gangsters that the dems may end up with a veto-proof majority.. which bodes ill for either candidate and the rest of us.

Yep.

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If Obama wins, he's going to have to try to keep these guys in line

Not only is Obama (and the latest McCain rev) a wet noodle, so even if he wasn't one of "them", his passive agressive, stop at the first media criticism style is not the type to stand up to a Feinstein or Pelosi who will bully his ass back to his Ken and Barbie mansion.

"Smile for the camera poster-boy movie star, let us politicians do the work"

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(good luck with that), and if McCain wins, it is going to be a legislative circus for at least two years.

Got that right. At that point Congress will realize it's no use, as even as they've tried not to piss anyone off, their rating is half that of Bush's...

CBRVFR · 08-18-2008, 11:51 AM

Quote:

Originally Posted by luvtolean

Not only is Obama (and the latest McCain rev) a wet noodle, so even if he wasn't one of "them", his passive agressive, stop at the first media criticism style is not the type to stand up to a Feinstein or Pelosi who will bully his ass back to his Ken and Barbie mansion.

"Smile for the camera poster-boy movie star, let us politicians do the work"

Oh, I have no doubt that his full-contact Chicago political training would serve him well, and no president would kowtow to a legislator.. the question is whether he would stand up for any kind of restraint in spending... I think the best he'd offer is a shift in priorities.

luvtolean · 08-18-2008, 12:34 PM

Quote:

Originally Posted by CBRVFR

I think the best he'd offer is a shift in priorities.

Complete agreement, unfortunately.

08-17-2008, 01:25 PM	#5
ND4SPD I'm BATMAN!!! Join Date: 12-12-2006 Bike(s): Trek Posts: 8,138 Images: 25	Maybe I'm ignorant - but what does California spend its money on? Seventh world largest economy, you have Hollywood actors making tens millions of dollars year after year(and increasingly so), housing is insanely expensive so I'm guessing property taxes also reflect that. Is money literally being pissed away? __________________ "This is your life - are you who you want to be?" Learn all you need to know about Mac OS X

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