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Schwarzenegger Girds for Deficit Fight as Borrowing Costs Soar

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Joanne98 Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 08:13 AM
Original message
Schwarzenegger Girds for Deficit Fight as Borrowing Costs Soar
Source: Bloomberg

Jan. 5 (Bloomberg) -- California Governor Arnold Schwarzenegger is entering his last year in office the way he began: presiding over a government in financial turmoil.

Schwarzenegger, 62, tomorrow is set to give his final State of the State speech, setting the stage for one more fight with the Legislature over a budget that will total $89 billion this year. With a $21 billion deficit forecast over the next 18 months, the governor of the most populous U.S. state has said he won’t boost taxes again, leaving him reliant on spending cuts and federal help to balance the books next fiscal year, which starts July 1.

The financial strains facing California show how local governments are still dealing with the recession that began in 2007 even as the national economy recovers from the worst slump since the 1930s. The latest struggle comes after legislators already erased $60 billion in gaps in the past two years by raising taxes, slashing school spending and borrowing, in a political battle that pushed the state close to insolvency.

“This is much worse than anyone thinks,” said Marilyn Cohen, president of Los Angeles-based Envision Capital Management Inc., which manages $250 million on behalf of wealthy individuals. She is moving clients out of California debt. “I have no confidence in the state Legislature.”

U.S. states and Puerto Rico expect to have $83 billion less than they will need to pay for their programs in the current and coming fiscal year, the National Conference of State Legislatures estimates. Illinois is borrowing $3.5 billion to make required pension payments. New Jersey Governor-elect Christopher Christie may slash spending by as much as 25 percent.


Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=a6t6UValMibM&pos=9




He needs to get rid of prop 13
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cowcommander Donating Member (679 posts) Send PM | Profile | Ignore Tue Jan-05-10 08:19 AM
Response to Original message
1. He can't
California is a clusterfuck of a government. Between the stupid proposition system and the idiots at Sacramento, there's not much he can really do at this point.
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icee Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 10:40 AM
Response to Reply #1
7. He could resign, and leave California with his arrogant wife
with him. That would be fine with me. I've lived in Calfornia since 1966. Arnold has been by far the worst governor we have ever had. The people hire actors to political office and those actors screw up royally, and then the people wonder what happened. Well, duh...
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LiberalFighter Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 08:48 AM
Response to Original message
2. So nice that Arnold will be remembered for this.
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tularetom Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 09:16 AM
Response to Original message
3. He can point fingers at the legislature all he wants
but everybody remembers all his big talk when he ran for the office. He wasn't about to get pushed around by a bunch of girlie men.

Everybody in this mess has some blame to shoulder, but it was ahnold's idiotic refusal to even consider raising taxes that has caused a lot of the problem. And even that was bullshit - remember the big promised cuts in the "car tax"? They got tossed over the side as soon as the shit began to hit the fan.

But I guess he accomplished what he was elected for - he got the state to drop its lawsuit against Enron and the other energy thieves who plundered it in the 2001 energy crisis.

He's sunk a long way since his chest thumping entrance on the political scene. How long has it been since anyone suggested amending the constitution so this piece of shit could run for president?
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MindPilot Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 09:19 AM
Response to Original message
4. Get rid of prop 13?!
He got elected because people thought their license plates cost too much.

Half the people who live here seem to think all this shit is free.
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Bluenorthwest Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 09:20 AM
Response to Original message
5. Does anyone remember when he was running? The hubris?
As we look at how things have played out, let's remember that Arnie ran saying basically that CA's financial problems were just a matter of tightening things up, cutting some waste, no need for tax increases of any kind. He said that he'd be able to fix all of it basically by doing some oversight, and not being 'girly'.
He claimed not only that he could and would fix the mess, but that it would be quite easy, relatively quick, and not require any new funding.
Instead he made it worse, worse, worse.
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MindPilot Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 10:20 AM
Response to Reply #5
6. Most certainly! He was going to come to the rescue.
Just a few cuts, this won't hurt a bit.

If I wasn't actually having to live through it, I would kind of enjoy watching.
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natrat Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 10:52 AM
Response to Original message
8. California's scary sneak preview
All of this, however, has been visible for a long time. Polarization isn't a new story, nor were California's budget problems and constitutional handicap. Yet the state let its political dysfunctions go unaddressed. Most assumed that the legislature's bickering would be cast aside in the face of an emergency. But the intransigence of California's legislators has not softened despite the spiraling unemployment, massive deficits and absence of buoyant growth on the horizon. Quite the opposite, in fact. The minority party spied opportunity in fiscal collapse. If the majority failed to govern the state, then the voters would turn on them, or so the theory went.

That raises a troubling question: What happens when one of the two major parties does not see a political upside in solving problems and has the power to keep those problems from being solved?

If all this is sounding familiar, that's because it is. Congress doesn't need a two-thirds majority to get anything done. It needs a three-fifths majority, but that's not usually available, either. Ever since Newt Gingrich partnered with Bob Dole to retake the Congress atop a successful strategy of relentless and effective obstructionism, Congress has been virtually incapable of doing anything difficult because the minority party will either block it or run against it, or both. And make no mistake: Congress will need to do hard things, and soon. In the short term, unemployment is likely to remain high and the economy is likely to remain weak unless Congress can muster another round of serious stimulus spending. The economist Karl Case, co-founder of the famed Case-Shiller housing index, now believes that earlier optimism about our economic recovery -- which he shared -- was misplaced. "The probability is very high of a serious double dip like 1982," he told the New York Times. The housing market seems to be sagging again, and the government's interventions -- not just the stimulus but also relaxed standards at Fannie Mae, Freddie Mac and the Federal Housing Authority -- are set to end.

Further out, the long-term deficit problem, which is driven largely by health-care costs, is startling. The Center for Budget and Policy Priorities estimates that debt will reach 300 percent of gross domestic product come 2050 -- and that estimate might be optimistic. But solutions seem unlikely. No one who watched the health-care bill wind its way through the legislative process believes Congress is ready for the much harder and more controversial cost-cutting that will be necessary in the future.

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/31/AR2009123103487.html?hpid=moreheadlines
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DBoon Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 01:47 PM
Response to Reply #8
10. I think you meant "intransigence of the minority Republicans..."
Who because it takes a super-majority to pass a budget, have the entire state by the balls.

If a simple majority could pass a budget, we would be out of the woods, regardless of the governor

Do you know that the Republicans actually required a tax *cut* for large corporations as their price for passing the last budget.

Yes, the state is facing bankruptcy, and they held the budget hostage for a multi-billion dollar cut for the likes of Intel
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Confusious Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 04:19 PM
Response to Reply #10
11. Ahhh, republicans

State going down the shitter, and they expect tax cuts to be the rope that saves them.

Sorry repugs, that's no rope, it's a thread, creating by all the tax cuts to corps you've already given out.
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bemildred Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-05-10 11:18 AM
Response to Original message
9. California is a "failed state". nt
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