New Budget Hole Presents an Opportunity
The Legislative Analyst’s announcement that the state budget may be $8 billion out of balance despite the recent budget deal has focused attention on the May 19 ballot measures designed to fix the budget problems. Critics and commentators argue that this announcement puts the budget reform package in danger of being defeated. The Los Angeles Times carried a sub-headline that said the shortfall “could make May ballot items a tougher sell.”
How’s that? Defeating the ballot measures won’t close the budget hole. In fact, it will do the opposite; it will make the budget hole larger in the out years as predicted by the LAO.
But, the announcement is both a warning and an opportunity for the legislature to start working on long term solutions to California’s budget and government structural problems.
The first thing the legislators should recognize is that, with the economy down, the expected revenue boost from the new taxes will not be as high as projected. For one thing, this means that if Proposition 1A on the May ballot passes, the new spending cap based on revenues will be that much tighter.
Another Instance of Greed: The Bonus Round
AIG rumbled back into the news last weekend again when it announced plans to bonus its people to the tune of some $165 Million, despite being on life-support after inhaling some $170-plus Billion of your and my tax dollar BailOut bucks. These guys just don’t stop!
Their justification, per the Sunday AM Cable Talking Heads, is that they are obligated under existing contracts to bonus their key producers; they call it ‘retention pay’ – that’s what Larry Summers told George Stephanopoulos Sunday morning. Give me a break.
Rewarding failure is maddeningly counter-productive and is not exactly a morale booster to a nation staggering under the load of unrelenting bad economic news. AIG has been the poster-boy for rewarding failure, having drunk deeply of Federal largesse to keep its heart beating, and whenever anybody lifts a finger or raises a voice of complaint, they remind us that AIG is simply Too Big to Fail and that, if we let it go down the Lehman road to oblivion, we will so upset the economic world and so de-stabilize AIG’s trading partners that chaos will reign and life as we know it will end. While some of that parade of horribles may actually, and regrettably, be true, it does not justify AIG’s actions and somebody needs to put a halt to paying bonuses to people who ran their company into the ground.
California’s lost leadership in foreign trade is a symptom of larger economic problems
A consequence of California’s changing industry mix – the decades-long shift from manufacturing and production to service jobs – is in our international trade profile. Traded goods bring the most value to an economy – and usually create the best jobs. According to the latest figures from the International Trade Administration , California used to be the leading state in foreign goods trade – but no longer.
Until the collapse of the technology bubble in 2001, California was the nation’s leading merchandise exporter. Since then, Texas has claimed bragging rights – and not just in the petrochemical industries. California still leads the country in computer exports, but Texas is now the leading exporter of machinery, electrical equipment, plastics and fabricated metals. And it is gaining fast in high tech exports.