As each day goes by, the efforts by the “Governator”, Arnold Schwarzengger to avoid the bankruptcy of California appear ever more to be ½ wishful-thinking, and ½ fraudulent accounting.
Let's start with the basic reality: there is zero possibility of California surviving this bankruptcy crisis (by itself) without raising taxes to bring in more revenue. However, Schwarzenegger has already stated there is zero possibility of him signing any budget which contains tax increases.
Yet, while Schwarzenegger will do nothing to increase state revenues, he has had the audacity to announce he will attempt to sell a $6 BILLION “revenue anticipation warrant”. In other words, with a current budget shortfall of over $15 BILLION, after doing as much cost-cutting as possible, he is committing his future replacement as governor to come up with an extra $6 billion (plus interest) to fund California's current bankrupt operations.
This comes with the state economy, and state revenues still hurtling downward – as befits the “Greater Depression” which the U.S. is currently experiencing.
Another one of Schwarzenegger's brilliant “solutions” is to sell off aging, obsolete state facilities, with the two examples (mentioned in a Reuters article) being the Los Angeles Coliseum and San Quentin prison.
Why would any sane investor with enough capital to purchase a stadium wish to do so in a bankrupt state, where the population has been impoverished to such a degree that even sporting events will not be spared huge drop-offs in attendance?
Perhaps the San Quentin sale makes a lot more sense. With massive over-crowding in California prisons, that treat the inmates worse than most livestock, and currently violate laws on the minimum standards of care for prisoners, unloading this “asset” would be a wise move.
Once San Quentin becomes a “private prison”, then the government can simply ignore the sub-human treatment provided to inmates in private prisons across the U.S. (one of the only “growth industries” in America). The sadists who assume control of San Quentin can then just stop feeding the prisoners, eliminating “budget problems” and over-crowding – simultaneously.
For those who think my pronouncement on California's “economic health” (or more properly its “lack of health”) is overly harsh, here are a couple of quotes.
Larry Gerston, political scientist, San Jose State university:
[Schwarzenegger's policies amount to a choice between] Armageddon and Armageddon-lite. At this point, if we're not talking about a doomsday scenario, we're getting pretty close.
Tom Tarabicos, financial advisor, Covenant Wealth Group:
I have sold all of my clients' municipal bonds related to the state of California and any of its municipalities...A real disaster is developing in California...We're putting California on the same level as Detroit. [It doesn't get any worse than that!]
Regular readers will recall that I have been predicting exactly such an economic meltdown (see Feb.17: “California government lays-off 20,000 as FIRST step in crisis”). The combination of a relentless collapse in revenues, along with the repeated lies of Ben Bernanke that a “recovery is on the way” has caused states and municipalities across the U.S. to begin preparing for this “Greater Depression” much too LATE.
Robbing over $6 billion from future state revenues to temporarily prop-up California's financial 'house of cards' solves nothing – it only guarantees an even greater fiscal crisis (i.e. bankruptcy) months down the road.
Ultimately, as I have repeated over and over, the only way to avoid a domino-like chain of bankruptcies in cities, towns and states across the U.S. is for the U.S. government to come up with yet more trillions to plug the gaping chasms in these budgets.
It is now past the point where U.S. politicians can continue to “deal with” this crisis by simply using lies (and more reckless borrowing) to stall for time.
The Soviet Union never believed it could ever go bankrupt, either.