The expected happened:
California voters soundly rejected a package of ballot measures Tuesday that would have reduced the state’s projected budget deficit of $21.3 billion to something slightly less overwhelming: $15.4 billion.
The defeat of the measures means that Gov. Arnold Schwarzenegger and the state Legislature will have to consider deeper cuts to education, public safety, and health and human services, officials have said.
Propositions 1A through 1E – which would have changed the state’s budgeting system, ensured money to schools in future years and generated billions of dollars of revenue for the state’s general fund – fell well behind in early returns and never recovered.
The only measure that voters approved was Proposition 1F, which will freeze salaries of top state officials, including lawmakers and the governor, during tough budget years.
Schwarzenegger, however, still doesn’t get it:
In a written statement Tuesday night, Schwarzenegger said that he believes Californians are simply frustrated with the state’s dysfunctional budget system.
“Now we must move forward from this point to begin to address our fiscal crisis with constructive solutions,” the governor said.
In reality it has nothing especially to do with the state’s “dysfunctional budget system”, but instead with the state’s profligate spending which has landed it in overwhelming debt. And the most “constructive solutions” would be to – wait for it – cut spending.
Why is it I have a feeling that such a solution will be mostly absent from whatever CA legislators come up with?
Because the fact you’ve been a responsible adult and paid your credit cards on time and have immaculate credit simply doesn’t matter once Congress gets involved in saving yet another victim class from itself:
Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.
Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”
You begin to wonder, “why bother”? You pay your mortgage on time and end up subsidizing those who don’t. You manage your household finances well and end up paying to bail out institutions which didn’t. You stay on top of your credit cards and pay them off regularly and now you’ll be subsidizing those who don’t.
Responsible conduct is punished and irresponsible conduct is subsidized.
And, of course, when you create a new victim class, it is important to vilify the evil oppressor:
Austan Goolsbee, an economic adviser to President Obama, said that while the credit card industry had the right to make a reasonable profit as long as its contracts were in plain language and rule-breakers were held accountable, its current practices were akin to “a series of carjackings.”
“The card industry is giving the argument that if you didn’t want to be carjacked, why weren’t you locking your doors or taking a different road?” Mr. Goolsbee said.
Amazing. Just simply and utterly amazing.
Although Herbert Hoover is rarely cited when one thinks of “immortal words”, these few paragraphs from Hoover (from James T. Flynn’s “The Roosevelt Myth”, HT: the Heritage Foundation) should certainly give you pause:
In every single case before the rise of totalitarian governments there had been a period dominated by economic planners. Each of these nations had an era under starry-eyed men who believed that they could plan and force the economic life of the people. They believed that was the way to correct abuse or to meet emergencies in systems of free enterprise. They exalted the state as the solver of all economic problems.
These men thought they were liberals. But they also thought they could have economic dictatorship by bureaucracy and at the same time preserve free speech, orderly justice, and free government.
These men are not Communists or Fascists. But they mixed these ideas into free systems. It is true that Communists and Fascists were round about. They formed popular fronts and gave the applause. These men shifted the relation of government to free enterprise from that of umpire to controller.
Consider the “car czar”. Look at the Chrysler board. Imagine government run health care. Cap-and-trade. Etc.
After that bit of reality from today, read Hoover’s further observations:
Directly or indirectly they politically controlled credit, prices, production or industry, farmer and laborer. They devalued, pump-primed and deflated. They controlled private business by government competition, by regulation and by taxes. They met every failure with demands for more and more power and control … When it was too late they discovered that every time they stretched the arm of government into private enterprise, except to correct abuse, then somehow, somewhere, men’s minds became confused. At once men became fearful and hesitant. Initiative slackened, industry slowed down production.
Look around you and tell me what you see. The future? It’s to be found in Hoover’s words from 1940.
Bruce Bartlett gives you a different way of looking at the mess your political leaders, over a number of generations, have gotten us into and what it will cost, at a minimum, to fulfill the promises they’ve made over the decades.
To summarize, we see that taxpayers are on the hook for Social Security and Medicare by these amounts: Social Security, 1.3% of GDP; Medicare part A, 2.8% of GDP; Medicare part B, 2.8% of GDP; and Medicare part D, 1.2% of GDP. This adds up to 8.1% of GDP. Thus federal income taxes for every taxpayer would have to rise by roughly 81% to pay all of the benefits promised by these programs under current law over and above the payroll tax.
Since many taxpayers have just paid their income taxes for 2008 they may have their federal returns close at hand. They all should look up the total amount they paid and multiply that figure by 1.81 to find out what they should be paying right now to finance Social Security and Medicare.
To put it another way, the total unfunded indebtedness of Social Security and Medicare comes to $106.4 trillion. That is how much larger the nation’s capital stock would have to be today, all of it owned by the Social Security and Medicare trust funds, to generate enough income to pay all the benefits that have been promised over and above future payroll taxes. But the nation’s total private net worth is only $51.5 trillion, according to the Federal Reserve. In effect, we have promised the elderly benefits equal to more than twice the nation’s total wealth on top of the payroll tax.
We again have a new crop of political leaders making similar promises about a range of things, from energy to the environment to health care. Look at what they’ve done with the portion of health care they were given previously?
Someone – anyone – tell me how, given the performance of government to this point with Medicare and Medicaid, it is going to provide lower cost health care when it is obvious that it has been instrumental in doing just the opposite?
For some reason, I just can’t get past that negative and inconvenient truth enough to suspend disbelief and decide that once government is running the whole show, everything will fall in line and we’ll have world-class health care at a much lower price – all managed by government.
And one other point Bartlett makes – this mess was made by politicians and, as our laws are written, can only be fixed by politicians. But politicians rarely, if ever like to make decisions which will be unpopular and cause them to have to find new employment. No one likes to be the bad guy. So don’t expect much in the way of “fixing” this mess. You’re more likely to see the whole house of cards collapse because it is unsustainable and the administration in charge at the time blame the previous one (kind of like what you’re seeing now on just about everything else) than to see any political leader actually make the hard decisions necessary (and then win over the Congress) to actually take care of these looming problems.
Enjoy your Sunday.
It would appear the first shots in what could develop into a global trade war have been fired:
Ordered by Congress to “buy American” when spending money from the $787 billion stimulus package, the town of Peru, Ind., stunned its Canadian supplier by rejecting sewage pumps made outside of Toronto. After a Navy official spotted Canadian pipe fittings in a construction project at Camp Pendleton, Calif., they were hauled out of the ground and replaced with American versions. In recent weeks, other Canadian manufacturers doing business with U.S. state and local governments say they have been besieged with requests to sign affidavits pledging that they will only supply materials made in the USA.
Outrage spread in Canada, with the Toronto Star last week bemoaning “a plague of protectionist measures in the U.S.” and Canadian companies openly fretting about having to shift jobs to the United States to meet made-in-the-USA requirements. This week, the Canadians fired back. A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts — the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.
Reports are Canadian McDonalds are only using Canadian potatoes and calling them “freedom fries” – okay, I’m kidding. But this isn’t a kidding matter. You remember how, when caught with the “buy American” clause in the stimulus package, Obama tried to wave it away by saying it didn’t mean what it said and Congress promising to water it down?
Yeah, like many political promises made by Congress and the President, this one has now proven to be false.
The buy American provisions in the stimulus package, signed into law in February, were just the beginning. Last week, Obama unveiled a series of proposals aimed at increasing taxes by nearly $200 billion over the next decade on U.S. companies doing business abroad. At a White House event, Obama said the measures were designed to “close corporate loopholes” that permit companies to “pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, N.Y.”
Those sorts of measures are sure to speed the recovery. [/sarc]
Who is Obama lecturing here?
President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”
Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”
In the same article:
Earlier this week, the Obama administration revised its own budget estimates and raised the projected deficit for this year to a record $1.84 trillion, up 5 percent from the February estimate. The revision for the 2010 fiscal year estimated the deficit at $1.26 trillion, up 7.4 percent from the February figure. The White House Office of Management and Budget also projected next year’s budget will end up at $3.59 trillion, compared with the $3.55 trillion it estimated previously.
Oh, and I loved this:
“Most of what is driving us into debt is health care, so we have to drive down costs,” he said.
Private health care isn’t borrowing from China is it? It is the government run side of things which is doing that. So after admitting government can’t manage cost effective health care the message is to hand them the rest of it as well?
Physician, heal thyself.
We have a special election here in California on Tuesday the 19th. We all have to go to our polling places, and decide whether Propositions 1A-1F–which were put on the ballot by the legislature–will be accepted. Of those propositions, 1F, which denies pay increases for elected officials if the state’s budget is all higgeldy-piggeldy–is the only one worth passing.
The rest of them amount to nothing more than allowing the legislature to loot the revenues from things like the lottery or child health programs, that the current law prevents them from touching. But the legislature wants to loot those programs, so that it can use the money in the general fund, instead. And, the general fund certainly needs something. At this rate, there is an excellent chance that California will be out of money by July. That means no money for teachers. No money for the DMV. Or the CHP, or CDF. The state will be, well, broke.
So, who do we blame for this, California?
Some people, Like Tom McClintock, the former Republican state senator and now Congressman, blame Arnold Schwarzenegger. Indeed, McClintock says that Schwarzenegger lied to the people of California when he ran against Gray Davis in the now-famous recall election. “He promised to stop the crazy deficit spending, cut up the credit cards, live within our means. And he did exactly the opposite. Schwarzenegger increased spending faster than we saw under Gray Davis.” McClintock, of course, was one of the people who ran against Schwarzenegger during that election.
(By the way, a side note to Rep. McClintock: Barring an act of divine providence, the sun will set in a blazing red sky to the east of Casablanca before you ever become governor. You may be a great guy, for all I know, and truly committed to reducing the size and scope of government. You may be popular in little the red-state enclave that makes up your Congressional district. But the electorate at large is not going to send someone with your crazy, helter-skelter eyes to the governor’s mansion.)
But should we blame Arnold for this mess? After all, he promised to reform the budget process, and ensure that California would never, ever be in the position that Gray Davis left us in, with a massive budget shortfall. And yet, he did. In fact, the animating issue of that recall election was Davis’ proposed increase to the car registration fee, which would make the annual regiatration fee average something like $600. Now, Schwarzenegger is supporting pretty much the same thing. So, it’s certain that the Governator has been a failure.
But, you know what? I don’t blame him, California. I blame you. Not every individual one of you, of course. By “you”, I mean the electorate as a whole. We aren’t in this position because Arnold changed his mind about reforming the budget process. He did, in fact, put sweeping changes to the process before you for approval in a series of ballot propositions in a special election.
And you told him to go f*ck himself.
Not only did you kill his reform plans by sizeable majorities, you then proceed to approve nearly every state bond issue that reared its ugly head. More money for schools? No problem. More money for the CDF? Let’s borrow it. More money for a shelter for developmentally challenged kittens? Might as well slap that on the card, too.
You listened when the Service Employees Union, the California Teachers Association, and the AFSCME union for government workers told you that if we attempted to reform the budget, disaster would ensue. We’d have to slash thousands of jobs for teachers, firemen and cops. Those of us who weren’t lucky enough to be murdered in our beds or die shrieking in horrific pain as our bodies were engulfed by flame would be able to look forward only to a life shameful unemployment due to our abject ignorance, cowering under the heel of our new Chinese overlords. You believed them they told you, “education spending is being cut, and our children are suffering,” despite the fact that, while the school age population has been declining, education spending since 2003 has risen from $45 billion to $54 billion. That’s a 20% increase, at a time when school enrollment was falling.
So, when the special interests or politicians asked to spend or borrow more money via ballot propositions, you told them to go right ahead. “Spend away, Sunshine! Let the good times roll!” And that’s exactly what we did. It seems never to have occured to you that the only way the government can spend money is to take it from the economy–that is to say, you.
So, now, the state’s got nothing left to spend. But, by your votes to increase spending, and to reject any reform of the budget process, that’s apparently what you wanted to happen.And since the state has no other way to get money, Sacramento is reaching onto your pocket yet again. So, when you get that $600 bill for vehicle registration renewal, see the prices of goods get higher as the sales tax goes up, and watch your state income tax bill rise, you need to just smile, suck it up, and be a man. After all, that’s exactly what you asked for.
Now you’re getting it.
Why not just wrap us all up in bubble wrap and bottle feed us?
“We like credit cards — they are valuable vehicles for many people,” said Senator Christopher J. Dodd, Democrat of Connecticut, the chairman of the Senate banking committee and author of the measure now being considered by the Senate. “It’s when these vehicles are being abused by the card issuers at the expense of the consumers that we must step in and change the rules.”
Doug Bandow provides the proper pithy reply to Sen. Dodd:
“Abused by the card issuers.” Of course. The very same card issuers who kidnapped people, forced consumers to apply for cards at gunpoint, and convinced merchants to refuse to accept checks or cash in order to force everyone to pull out “plastic.” The poor helpless consumers who had nothing to do with the fact that they wandered amidst America’s cathedrals of consumption buying wiz-bang electronic goods, furniture, CDs, clothes, and more. The stuff just magically showed up in their homes, with a charge being entered against them against their will. It’s all the card issuers’ fault!
Certainly card issuers are raising their rates arbitrarily to very high rates. And, as I did recently, card holders are calling them up and very politely saying “stuff it – and while you’re at it do it with my canceled card”.
Credit cards aren’t a ‘right’, and the fact that someone gets themselves into trouble with them doesn’t make them a ‘victim’ deserving of special legislation to “right a wrong”.
What in the world ever happened to individual responsibility and accepting the consequences for your actions?
My latest Examiner column about the usual – the law of unintended consequences.
These don’t really need much explanation. But they also should come as news to anyone who has paid even passing attention to the entitlement bomb over the years. From the Heritage Foundation:
More here if you can stomach them.