California fiscal crisis threatens millions with ruin: "the general motors scenario"

[Hannah Bell]

California Governor Arnold Schwarzenegger is giving the state until June 15 to balance its budget...

The message from the banks and hedge funds is that there will be no loans until the Governor and the Democratic Party-controlled legislature come up with an austerity budget...

Late last month, the Fitch bond rating agency lowered its outlook for California’s indebtedness from stable to negative...the state government is locked out of the credit market until it restructures its economy to meet Wall Street’s requirements.

The state’s fiscal meltdown is being used to fundamentally restructure class relations in the state...The claim that there is no way out of the crisis—except by these means—is a lie, designed to protect the interests of the financial aristocracy, the wealthy and big business.

The Obama administration...has denied requests for direct financial aid to California. It has also denied requests to underwrite the state’s loans...insisting that California resolve the “structural” problems with its budget...

...the governor singled out more than 20 programs that would either be eliminated or greatly reduced...& an immediate halt to funding for most state contracts.

- the state’s welfare-to-work program, CalWorks
- the health insurance program for children...

...affecting half million mothers and their one million children... eliminating these grants for these families will result in their “immediate descent into homelessness—not poverty, because they are already in poverty, but complete destitution.”

- plans to close more than 200 state parks,
- eliminate funding for HIV/AIDs counseling,
- reduce state grants to low income elderly, blind and disabled to the federally mandated minimum
- slash in-home care for the elderly
- divert funds away from mental health programs (didn't the voters say no to this, btw?)
- $6 billion will be wrenched from the public education system
- Nearly 50,000 teachers will lose their jobs by next September
- 5,000 state workers
- Hundreds of workers in local governments

The Schwarzenegger administration has proposed seizing nearly $2 billion from local governments, most of which are already under enormous financial strain.

- Los Angeles has recently approved layoffs for 400 & mandatory unpaid furlough day twice per month.

Schwarzenegger defends the cuts as necessary. In other words, in order to insure the interests of bondholders, the Schwarzenegger administration is engineering the bipartisan California version of the ‘General Motors scenario.’

In the same manner that the restructuring of GM was premised on sacrificing autoworkers’ jobs and living standards and bankrupting entire communities, the restructuring of California will require a wholesale attack on living standards for state employees and an end to social programs on which millions of Californians depend.

This was made clear by Schwarzenegger on Saturday June 6. In response to questions from the Sacramento Bee, Schwarzenegger denounced the “unbelievable benefits” paid to public employees.

The 2010 revenue projections, which include a year over year increase of $6 billion, hinge on a rapid economic recovery in the state. However, there is every reason to believe that the current crisis will continue, with tax receipts continuing to decline.

California has the fourth largest unemployment rate at 10.2 percent, while also having the country’s largest number of unemployed workers in absolute terms. In the very likely event that the recovery does not happen this year, the budget cuts will be even more drastic.

http://www.wsws.org/articles/2009/jun2009/cali-j10.shtml

[Prometheus Bound]

1. The world's 10th largest economy; 10% of the world's billionaires.

And the place is basically bankrupt?

The sky really is falling.

[dkf]

4. It is their own ridiculous vote requirements that don't allow taxes

to be raised. And I don't think the citizens of California are going to get rid of that provision any time soon. Heck if they want to pay extra taxes I'm sure they could do that all on their own.

[aquart]

7. They refuse to rationally tax the rich.

It never occurs to the rich that ruining the poor will destroy them, too.

[FreakinDJ]

13. "World Socialist Web Site ??? - Gimme a Break

Like they have any thing positive to say about any Capitolist Society

You guys need to start questioning the source before you proclaim the "Sky is Falling" chicken little

[Prometheus Bound]

14. So California's okay then? That's a relief.

Damn socialists spreading lies as usual. Glad you set me straight.

[dkf]

2. Yes it is bad...what is the solution then?

There aren't easy fixes for state governments because they have no military budget to cut.

I would think most other cuts would mean laying off state workers and they would have to be paid unemployment anyway.

What else is left?

[ContinentalOp]

3. A federal loan -nt-

[dkf]

6. That was already requested and refused.

Also, other countries are beginning to question our debt levels and our Treasury auctions are being heavily scrutinized. And having too much supply of Treasuries is bad for mortgage rates.

[ContinentalOp]

8. Yep, if Obama fucks us over he's going to pay.

$13 billion for GM to eliminate jobs and go bankrupt. $0 for the biggest state in the Union. We see how it is.

[dkf]

11. All the states are in trouble. But Cali is the only one with such a stupid tax policy.

[pnwmom]

12. If anyone is screwing you, it's the minority of legislators (and voters) who

have veto power over any tax increases; and it's all the voters who approved the propositions that gave this minority that power.

Should the rest of the country have to pay for the state tax system -- and the minority veto power -- that is making California's problems worse than they should be? Or should California set up a more responsible tax system?

Other states can raise taxes in an emergency, but California voters approved a 2/3 requirement, so that a small minority of voters can hold the rest of the state hostage. Proposition 13 also reduced income from real estate taxes, so that California is overly dependent on income taxes. And California doesn't have a "rainy day fund" allowing it to save money in good years that can help with balancing budgets in the lean years.

I'm in favor of aiding California -- if the state holds a constitutional convention and revises the constitution to revoke Proposition 13 and the 2/3 requirement.

[PufPuf23]

5. This scenario has zero moral compass or common sense

The approach is to accelerate a descending cascade with the ill, poor, and once middle class to bear the brunt.

There are plenty of stressed yuppies who willingly took the ride.

The financial elite are protected.

The cost cutting measures are worse than short term impact as they will result in greater long term costs or catstrophic failure.

Yet California pays more than its share of federal tax paid out versus returned. The Federal government owns and manages nearly 30% of the state landbase and more of the mineral and biological resources, often with insanity to public interests.

[pnwmom]

9. "In order to insure the interests of bondholders"?

If CA doesn't protect its bondholders, how can it expect the credit it needs to run the state's economy?

The solution is for the legislature to agree on a budget and then for the state to rescind the 2/3 requirement for raising taxes. Why should 1/3 of the voters have veto power over the majority?

[PufPuf23]

10. Long term my druthers would be to split California

into two or three states; the northern most new state including some counties in SW OR (Jefferson).

There are self-defeating opposed interests due to the social and environmental diversity in the state.

Arnold was/is an Enron stooge; the Davis recall was a negative fiasco. Welcome to 21st century California.

There is no excuse considering the natural and human wealth of this state except for assholes.

[corpseratemedia]

15. ive thought about that also because the interests are almost antagonistic

I'm afraid that Arnold's attempt to rid the state of the poor with these drastic cuts will become a wave racing across
the whole country..states going bottom up and quickly attempting to get rid of it's debt=poor, unemployed, elderly, and disabled people.

its like the Depression, only in a reverse direction