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It's the ECONOMY, Stupid!

Considering California political history, a big payday is in store for political campaign consultants and funding from political action committees to protect the special interests at stake.

Overall, it will cost more to buy things (sales tax increase) and general income tax increase.  The devil is in the details and there are few details available.

As posted on my BLOG on Mar 17, 2009:

Without much of an intermission, the California budget fiasco roared to life with revelation that spending is exceeding revenue and an additional $8 billion shortfall is expected.

There is a profound observation by John Adams - “In my many years I have come to a conclusion that one useless man is a shame, two is a law firm and three or more is a congress.”

Or, in the case of California, change “congress” to “legislature”.....

According to news reports, there is a flurry of activity to figure out how to raise taxes even more.

Seems the “budget cuts” from Round 1 were only reductions on amounts proposed to be spent.  That is still an INCREASE from previous spending levels.

And, the shortfall continues, the spending continues, and no one wants to propose real solutions......

The first step in triage is stop the bleeding.  In the case of government, stop spending more than you have....

The “Ugly Budget” - Round 3 is coming....

The infamous ‘special election’.  Can’t wait for the puffing and posturing.

As posted in my BLOG on May 4, 2009:

Okay, the California legislators managed to pass a state budget that depends on getting the voters to approve certain steps.

Within days of passing the budget and declaring the state in in financial harmony, word came out that the state budget is another $8 billion plus in the deficit column.  So much for financial harmony.

That brings us to Round 3 of the “Ugly Budget”.  A special election (at significant cost to the state - increasing the deficit) is scheduled for May 19.  On that day, voters will accept or reject some combination of five ballot propositions.

Prop A ensures that selected residents will pay higher state income tax and EVERY person that buys something in the state will pay an increased sales tax.  In addition, funds will be set aside in a “rainy day” account.

Funny thing about the “rainy day” account.  Funds are only applied if certain conditions are met.  And, due to a companion proposition (Prop B), there is little chance of those conditions being met.

You see, Prop B “restores” funding for schools.  But, the “restored” funds is funds that were never taken away, because they were not in the budget to begin with.  The “cuts” to the education budget reflect a reduction in that amount that was REQUESTED, which was a significant increase (greater than inflation) over the past year.

The “doom and gloom” pundits are now tugging at the heart strings predicting dire cuts in fire fighters and police officers if Props A and B don’t pass.

Seems as education has taken a back seat as recent frivolities within the state system have shown significant waste within the education system.  

Voter polls have four of the five propositions sitting with about a 40% approval rating.  

So, the special election is coming.  The “elected” representatives have failed to do due diligence and exercise fiduciary responsibility.  They bounced that hot potato back to the voters.

Will the voters exercise fiduciary responsibility and bounce the hot potato back to the legislature?

Exciting times await.  May 19 will be an interesting day.  And, the days leading up will be spin to make your head spin....

As posted in my BLOG on May 20, 2009:

Tuesday, May 19, 2009 was a special election day where angry California voters sent a clear message to the state legislature for them to live within their means.

Five of six ballot propositions touted to “balance” the state budget deficit were voted down in a convincing margin.  However, the anti-tax, anti-spending message appears to have been lost on the “leadership” of the state.

Instead of sitting down and trimming the budget in a thoughtful and rational manner, the elite have step out boldly suggesting the voters demand cuts in service such as schools, police, firefighters, and health care.

Rational and intelligent people when faced with a shortage of funds would step back and say “Perhaps we don’t need the brand new sports car today.”  They still NEED that car, just, not the new sports car.

Perhaps California, like AIG, is “too big to let fail”.  There is a limit to “Tax and Spend”....

So, here we are, July 1, 2009 and California has come to an apparent stalemate.  It appears the proposals forwarded include hefty new taxes and fees along with increased spending.  Budget "cuts" are a simple movement of spending from one month to another.

And, the real key is how the deficit will be addressed.

For a little history lesson...

California has not always been budget dysfunctional. There have been points in time where certain special interest groups have worked with the legislature to establish a state program that is supported by user participation, NOT TAX DOLLARS.  The Off Highway Motor Vehicle Trust Fund is one such program.  It is one of the few state programs that runs a surplus and it is self-sufficient in that is takes in more from user supported activities than it spends.

Sounds like an oxymoron -- a government program that takes in more than it spends.  Well, there is about $90 million sitting in the fund that is targeted to land acquisitions in support of OHV recreation activities.  However, forces in the state bureaucracy have prevented that money from being spent in support of motorized recreation.  Now, the battle cry is that is money that must be diverted to support other state programs that feed at the tax dollar trough to support self absorbed constituents that believe government owes them a living at someone else's expense.

The federal Pittman-Robertson Act of 1937 established a precedence where the special interest recreation community (hunters and fishermen) supported a self-imposed tax on themselves to support wildlife habitat restoration.  The same principle applies to the California OMHVR Trust Fund.  It is a fund that is a"self-imposed" tax on OHV recreation in order to support their recreation interest.

That is the fund that is being targeted to support other ineffective and inefficient state programs.  That is the fund that is being targeted to support self-absorbed interests that believe government should provide all for everyone and someone else pays for it.

Just "WHO" is that someone?  Well, it is the minority segment that believes they know what is best for you and if you submit to their will, the world will be a better place.

Today, the California budget is dysfunctional to the point that is is broken.  Depending on the economic report, California is the world's sixth largest economy.  And, it is on verge of imploding.  

Will self-sufficient state programs be tapped to prolong the day of reconciling?

Or, will history repeat --- cut the meat to save the fat..... 

Its the ECONOMY, stupid.  Why depend on a self-sufficient program to bailout inefficiency and ineptness?

Economic 101 teaches the "acceleration value of a dollar".  Any student of economics learns that spending is related to productivity.  Perhaps the "leader" need to return to school for an education.  But, that opens another oxymoron discussion....

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