Saving Grace – California Fiscal Crisis

July 14, 2009

By Padmini Arhant

The beautiful Golden State pawned over obstinate leadership and legislature in Sacramento. If the minority representatives and the head of the state confined to their political dictum and ideology, the majority on their part let the myopic view of the state of affairs undermine the social challenges confronting the constituents.

There were too many opportunities aided with pragmatic solutions to resolve the ever-rising budget shortfall (previously at $24.3 billion and now increased to $26.3 billion deficit) without draconian cuts hurting the weak and the most vulnerable in the society.

Sometimes, when there is intellectual deficiency in the leadership to deal with crisis, a wise option for the authority in power is to display humility, heed to genuine concerns and adhere to remedy offered to the problems rather than a Kamikaze approach headed for a disaster. Although, the leadership ignoring sound advice implies personal egocentric satisfaction, the false notions and misguided policies rejecting the population’s misery have led to the status quo.

Sacramento could have averted California fiscal debacle back in November 2008 when the path towards the state budget appeared difficult and beckoning swift reactionary measures to reign in on the economy tumbling downhill.  Instead, the legislature and the leadership stalled action with no respect for the constitutional rule of law mandating the state budget reconciliation by a deadline. The reality being the deadlines have come and gone with no state budget in place.

To reiterate earlier statements, the embarrassing performance by the entire legislative force with the head of the state leading in this respect squandered taxpayers’ valuable resources in political bickering, finger pointing and even assigning the duty to the taxpayers/voters through Special elections on May 19, 2009.

Since Sacramento abdicated their legislative responsibility to approve a functional state budget and a rescue plan for the following year, California is in dire fiscal state with a direct impact on the national economy. The only action from Sacramento seen thus far is the sedative talks to calm anxious residents dependent on social programs and services and the rest of the population eager for the state’s economic recovery.

Contemporary politics seeks comfort in lip service rather than concrete action focused on relief to the victims.  With no end to the on-going tug ‘o war, the ruthless slashing of funds continues with respect to education, health care, environment and the overall economy wounding the present and the future of the society.

In the absence of state budget for the fiscal year, the state treasury forced to issue IOUs declined encashment by the major bailed out banks defaulting on their lending commitment during taxpayer bailout to stimulate the local and national economy. The cumulative effect of the incompetence in Sacramento obvious in the degradation of the once stellar credit rating of the Golden State possibly reduced to junk status in the near future.

As experienced by the national economy, budget financing and legislative funding for reform and economic revival depend on both revenues and savings through spending cuts. The recommendations to raise income taxes from the following sources at the bare minimum slighted when it could have adequately provided for the budget shortfall.

Tobacco and alcohol tax, Vehicle registration fee and most importantly closing loopholes for the Corporations evading state income taxes through tax havens, collecting hefty fines from the environmental polluters i.e. oil, aviation and automobile industry, overhauling of the criminal justice system viz. the state prisons absorbing enormous amount of the budget to name a few.

The administration’s cavalier approach in demolishing the society’s foundation i.e. education, health care, and small businesses…with merciless withdrawal of funds from the budget indicates governance in the barricades, the elitists out of touch with the plight of the populists.

Why California is important for the Naitonal Economic Recovery?

Source: Wikipedia.org – Thanks

Gross domestic product (GDP)

California is responsible for 13% of the United States’ gross domestic product (GDP). The state’s GDP is at about $1.7 trillion (as of 2006).

The GDP increased at an annual rate of 3.1% in the first quarter of 2005.[13]

According to the California Department of Finance, if California were an independent state, it would have had the seventh largest economy in the world.
————————————————————————————————–
California is the epicenter for Science, Technology, and Entertainment besides representing every other sector —
Finance, Manufacturing, Construction, Health, Education, Hospitality, Energy as the pioneer of Green Technology, Environment, Trade, Transportation and Utilities, Information dealing with Motion Picture Broadcasting, Publishing, Internet businesses and Telecommunications to Agriculture and Mining are some of the many core activities creating jobs and contributing to the National GDP.

The impressive growth in California during the Silicon Valley boom stunningly boosted the National GDP with the state experiencing labor capital depletion in many industries. Subsequently the profit earnings in the California technology sector from 2002 to 2007 contributed to the stock market rally with the trend continuing until date. One of the reasons for the current enlarged National Unemployment figures is the double-digit jobless rate in California and the budget crisis exacerbating the national productivity.

With the escalating job losses and the stalemate in Sacramento holding the state budget and the children’s future hostage, the national economy will further deteriorate if the California budget shortfall not met immediately.

The taxpayers’ bailout of the finance sectors and the automobile industry with no accountability or transparency deprived the states like California from receiving generous federal funding to various programs. These bailouts primarily passed to enable liquidity in lending and job protection across the nation. Again, the proof of the pudding reflected in the dismal unemployment figures arising from defaults by the finance sector withholding lending to small and medium businesses as well as the average consumers.

Such violation of trust by the finance sector has attributed to poor consumer spending adversely affecting the retail sector with a ripple effect on the entire economy.

So much for the free market integrity and reliability in turning the economy around through capitalist mechanisms, that is generating job losses rather than job creation.

California on the other hand could emerge out of the existing crisis with federal assistance and approval of $26.3 billion in borrowing at nil interest rate. The amount returned progressively through state bonds over a set period would benefit both the state and the national economy in alleviating the financial meltdown. The Federal Reserve and Treasury could lend the necessary amount to California recovery plan from the residual amounts of the previously approved financial bailouts and TARP funds returned by some Investment banks like Goldman Sachs.

Meanwhile, the citizens of the great Golden State must engage in changing the political system with efficient bipartisan legislature and leadership in Sacramento. When the programs and services restored to benefit the people of the state, the interim relief and long-term stability to the nation’s largest GDP growth state is inevitable.

If the Federal Reserve or the Treasury unable to provide any relief to California then,

Considering the grave fiscal scenario facing the state of California, the SOS from the citizens of this state require urgent action by the Congress, Senate and the White House in the swift approval of the amount – $26.3 billion. Unfortunately, any opposition to the financial aid will have serious political backlash in 2010 and 2012 elections – demonstrated by the electorate during the special elections on May 19, 2009 rejecting both political parties for their insensitivity to the crisis.

As for the head of the state – The actions or the lack thereof until now evidenced in the areas identified below –

Following the electorate dismissal in the Special elections on May 19, 2009, the Governor appointed committee has business representatives with deep pockets favoring their own agenda against the less fortunate citizens to resolve the budget crisis, confirming the authority’s allegiance to the special interests.

The disingenuous remarks on the immigration issue related to the undocumented workers without any progress in issuing drivers license that could have not only generated state revenue but also moved the matter from the back burner is yet another political gimmick.

Recently the Governor’s controversial posturing threatening to fingerprint i.e criminalize the food stamp recipients targeting the disabled, the jobless and the elderly as the means to detect alleged fraud and forgery in an effort to saving costs against above mentioned nominal tax increases is beneath the humanitarian character and deplorable on all accounts.

The opposition minority has no time left to procrastinate by wasting taxpayer dollars to defend the ‘so-called’ fiscal-responsibility when the exercise proven counterproductive.

Similarly, the ruling majority must review and revise the union based workers’ and state employees’ disproportionate employment benefits costing taxpayers excessively, more relevantly in the public safety employment, and other government jobs.

A dilemma for the California voters is, if the right pledged to the appeasement of the Corporations investing thousands of dollars in political campaigns and legislative matter, the left compensated with the Unions and Corporations’ influence on the legislative issues.

Therefore, it is in the best interest of the nation to reform private contributions in political campaigns and promote public financing to implement checks and balances apart from maintaining costs at all levels of the electoral process. Also, the open primaries in the state elections will facilitate moderate representation from the right.

Given the unacceptable partisanship creating gridlocks and a colossal failure to balance the budget, it is appropriate for the State of California to end the term of the administration and those responsible in leading the state from prosperity to an economic ruin.

Effective immediately, the countdown begins for Sacramento to follow the guidelines by sparing the education, health care, energy, environment and all the essential programs and services benefiting the people and enacting the relevant tax increases with the elimination of redundant spending in other areas.

It’s incumbent on Sacramento to finalize on the meaningful state budget in order to settle the debts to different creditors and restore the pre-recession California image and credit ratings.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Economy 

Comments

Got something to say?

You must be logged in to post a comment.