Tuesday, June 16, 2009

Obama to California: Take A Hike

White House to California: You're On Your Own (6/16/09 CNBC):

"The White House Tuesday dashed hopes that the federal government would help California overcome a mammoth budget crisis that has brought the state dangerously close to an economic meltdown, saying California will have to solve the problem on its own."

The message was delivered by Mr. Press Secretary Robert Gibbs.

""It's obviously not an easy time for the state of California," White House spokesman Robert Gibbs told a briefing when asked if the administration would provide emergency financing for the state.

"We'll continue to monitor the challenges that they have, but this budgetary problem unfortunately is one that they're going to have to solve," Gibbs said."

The governor and his delegation, as well as California's Senators and Represenatives, must have thought they would be eventually bailed out. Aren't they too big to fail, with 13% of GDP? Also, didn't they vote (60%) for the current president in 2008 election?
After all, AIG got $180 billion, GM will get $50 billion, and they are just private companies. Right?

"It will run out of cash within weeks if it does not balance its books, according to State Controller John Chiang, who estimated last week California was "less than 50 days away from a meltdown of state government.

"Standard & Poor's ratings agency on Monday put $67.1 billion worth of California's debt on alert for a possible ratings cut because the state may run out of cash by the end of July."

California's budget deficit is about $21 billion, with the total budget at $131 billion. Only 8 years ago the budget was below $100 billion. When the current governor took over, the state budget was $104 billion.

Now that California has been officially told to take a hike, it can seriously start cutting the excesses for a change, and that is a good thing in the long run.

The one trick I think California may still have up the sleeve is a threat to cut social welfare programs for the minorities / the poor / (legal and illegal) immigrants / socially disadvantaged (whatever). The administration may respond to that line of pleading.

(What happens if China, Japan, Russia, Brazil start to tell the administration the same thing? "It is obviously not an easy time for the U.S. We will continue to monitor the challenges that the U.S. has, but this budgetary problem unfortunately is one that the U.S. is going to have to solve.")


Post a Comment