CG: Good. Obama is doing the right thing here. The states need to solve their own budgets.
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WASHINGTON (Reuters) – The White House on 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 the state will have to solve the problem on its own.
"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.
California's revenues are plunging amid recession, rising unemployment and the prolonged housing crisis, and the state is unable to borrow its way out of its immediate financial trouble by issuing debt because of its budget gap.
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."
One potential rescuer has been the federal government, and for nearly a year California Treasurer Bill Lockyer has pressured the U.S. Congress and the president to help the state with debt markets.
While U.S. Treasury Secretary Timothy Geithner said this spring the administration was looking into assisting California and other states, it has yet to offer any help beyond that included for all states in the $787 billion economic stimulus plan passed in February.
"Obviously many states throughout the country because of the slowdown in our economy find themselves with severe budgetary constraints," Gibbs said. "The president believed and addressed part of this in the recovery and reinvestment plan by ensuring the largest amount of fiscal relief that we've seen move to states in the history of our country."
Gibbs said he didn't "know the degree to which we've analyzed each of California's individual (budget) cuts."
This is not the first time a U.S. president has closed the federal wallet to a struggling state or city.
In 1975 the New York Daily News ran the headline "Ford to city: drop dead," when then President Gerald Ford denied assistance to New York City that would have allowed the U.S. financial capital to sidestep filing for bankruptcy.
WASHINGTON'S REBUFF ADDS TO DEBT MARKET WOES
Standard & Poor's ratings agency on Monday put $67.1 billion of California's debt on alert for a possible ratings cut because the state may run out of cash by the end of July.
Larkin, director of credit analysis at Herbert J. Sims & Co Inc in Iselin, New Jersey, predicted a downgrade.
"To say they've got big problems is an understatement. The budget problems are too large for the rating agencies to be comfortable with single-A ratings on the state."
Washington's view toward California is one more reason to not hold the state's debt, said Tom Tarabicos, a financial adviser at Wells Fargo Financial Advisors Network in Roswell, Georgia.
"We're selling every California bond we can," Tarabicos said. "We don't like them."
Instead, Tarabicos said he may buy into California's general obligation debt next year should its yields rise to reflect inflation and continued risk to the state's finances from ongoing economic weakness.
"Sometime next year you'll be able to buy California GOs somewhere around 7 percent or 8 percent," Tarabicos said, referring to general obligation bonds, adding:
"Nothing is going to change in that state, fiscally, over the next two or three years. I just don't see anything positive coming out of there. It's going to be dead for quite a while."
(Reporting by David Alexander and Lisa Lambert in Washington, Jim Christie in San Francisco and Karen Pierog in Chicago; Editing by James Dalgleish)
http://news.yahoo.com/s/nm/20090616/...a_whitehouse_5
But... But.. But.
California's too big to fail...
Seriously now, the California legislature has not done anything substantial in the last several years to bring things into control. The people ed themselves with who they elected. I say let then crash.
good. for once I agree with an obama administration decision.
I remember a long time ago, when new york was in bad financial straits, whoever the president was at the time told them "too bad". don't remember the pres though.
edit: oops, just noticed in the article that it was Ford who told NY to drop dead.
Last edited by Bender; 06-16-2009 at 10:49 PM.
'em. The people in CA have had multiple chances to fix the problem and they keep trying to take the easy way out.
Shouldn't this be on the Obama's positive accomplishments thread?
If they go bankrupt and liquidate... I wonder how much Scarlett Johansen is gonna go for?
I have a feeling that California going bust won't be tallied as an achievement.
I'd say so, but then I do have a hard time trying to balance Obama not wanting to bail out California while simultaneously wanting to turn the rest of the US into California.
I remember a couple years ago, or less, Calif. attempted to save some money by changing some welfare laws or something... but the fed gov't overruled what CA wanted to do and told them they had to pay full welfare benefits...
don't remember the exact details of the problem. I think it was something about new CA residents who just moved from another state.
How can it be a positive. Actually, he's in a tight spot on this one, and loses either way. It's the no win scenario, most likely.
That may be true, and if so, just a drop in the bucket. There are several problems. No one single issue would be the fix.
California can fix its own . They just have to make the tough choices. Arnie's plan is going to be modified and implemented. There really isn't much else to do.
yeah I know. I was just mentioning something that CA tried to do not too long ago, but the gov't said too bad. Back during the time, when I knew the facts, I thought CA was in the right.That may be true, and if so, just a drop in the bucket. There are several problems. No one single issue would be the fix.
Fiscally irresponsible states make their bed, they should lay in it.
No kidding. We're getting overrun.
What a pack of hypocrites in D.C.
When Cali tried to fix it last month by renegotiating labor contracts, the White House said no (and threatened to withhold stimulus money) because it involved union trash taking a pay cut.
What a ing joke.
yeah, that would be the only reason why I want to give aid to California.
California needs to get a part time job.....maybe go mow some other states lawns for money.
Good for Obama. California is one ed up state. These nutjobs have been moving down to Big D for years. The taxes are crazy high on businesses plus the overall cost of living has pushed alot of folks out. California is the capital of bull . Tabloids, s,Arnold,Pelosi,3 strike law (a dude is in prison for life for stealing a bike) crazy over the top environmentalist. If you run into one of these nutjobs set them straight.
My God. I tell you, that's what I hate most.
Oregon used to be so awesome. Portland used to be rated the best city in America. Then that's what happened to us. Californians moved in with their ideas, and we were Californicated.
From the thread Gay boy wins Prom Queen:
http://www.naomiklein.org/articles/2...-pay-sins-rich
This is pretty edifying on what the real situation is in CA - how they got there, and why the Governator is proposing the things he is proposing, and what the real impact would be.
Can you put it in a capsule for us? Please? I'm not about to watch 23 minutes of video, and the intro is strikingly uninformative.
Seriously? you can't watch a video for 23 minutes? Take some Ritalin, dude. LOL
Uh, my unofficial summary: Arnie came into power with sweeping tax cuts, handed down more tax cuts, and surprise surprise, now all the services and schools in CA can't be paid for. But a little problematic fact about the CA legislature is that it was changed so that a 2/3 majority had to approve any tax HIKE - and currently it is not looking likely to put the money back that was there before Arnie went into office. So now thousands of schoolteachers have been fired - mostly from poor, Latino/Black neighborhoods - and millions of people are likely to lose their health care, their jobs, transitional assistance, etc. The radio shock jocks are demonizing poor Mexicans and blaming it all on them. Meanwhile, Obama is refusing to pay the 26 billion dollar deficit even though he handed out 10 times that much to AIG.
It's pretty much a playbook of Milton Friedman's Chicago-style economic shock therapy.
Don't want to, don't have the time, don't do Ritalin. Thanks for the capsule, though.
...is official once you post it here.Uh, my unofficial summary...
Looking at this the other way around, California hasn't been living within it's means. Blaming tax cuts isn't the whole story, and Arnie didn't enact them by himself. He had a little help.
Also, Arnie had little to do with rising health care and pension costs.
Proposition 13 ( and the legislative supermajorities it requires for state tax increases) was passed in 1978.
Prop 13 left cities dependent on block grants from the state for education and a whole array of services. It's not worked out well. Califonia's schools pre-Prop 13 were among the nation's best. Now they are among the worst. It's too bad such a liberal state is letting its neediest schools go to .
A lot of states aren't so generous. If California can't afford the services it provides anymore, something's gotta give. Unfortunately this means the little guy will take it on the chin. Economic adjustment is painful, and it isn't fair either.
Why should Obama pay for California's deficit? We're talking about state obligations here, not federal ones.
Also, if Obama pulls California's bacon out of the fire, all the other states will get in line for a federal handout, rather than getting their own financial houses in order. It would create a perverse incentive -- like the AIG bailout!
You say that like it's a bad thing. Why shouldn't we take the same advice we gave to South America, east Asia, etc., etc. when they defaulted?
Tighten the belt, pay down debts, eliminate waste and corruption. What's so wrong with that?
.... Hmmm.
I PICK NUMBAH THREE.
seriously, lets just close the borders to people from there.
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