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California Dreamin' (On Such a Winter's Day)
The Los Angeles Times reports that the Governator is expected to appeal to Washington for some $8 billion in bailout funds, and is holding hostage CalWORKS, the mainstay of California's welfare program (and a long standing and favored catamite to the country's progressives) in the unlikely event he doesn't get it. Arnie also seems poised to select this as an opportune time to re-open the question of drilling for oil off the Santa Barbara coast.
Of course, a number of other things are weighing on California's debt addled mind. For instance, the impact of shiny new health care cost reductions on the states massive debt load. Readers will be well aware of our view of the cost shell game being played with this legislation, but, we ask you, what is the point of hoisting $4 billion or so in expenses on California if the Federal government is going to have to send $8 billion right back into the state as a result? Optics, of course. Still we are fairly sure this will be an isolated incident as we cannot imagine that any other states are facing fiscal issues that would prevent them from easily paying for the cost savings the new health legislation will bless them with.
Of course, California doesn't seem to have expected federal legislation that would result in such a severe fiscal emasculation as is performed in the present bill and, given that Arnie was one of the few Republicans of any stripe to support the legislation, you can almost taste the sour sting of betrayal in the letter he wrote Nancy Pelosi yesterday:
Dear Madam Speaker,
As one of the few governors in the nation who attempted to pass comprehensive health care reform at the state level, I have great appreciation for the historic effort you are leading in Congress. In fact, I am one of the only Republican elected officials in the country to publicly support the President’s health care reform efforts.
When asked for my support, I was assured that federal legislation would not increase costs to California or include new unfunded mandates. Unfortunately, under nearly every scenario we can predict, the federal health care reform legislation being debated would cost California’s General Fund an additional $3 billion to $4 billion annually. This crushing new burden will be added to a safety net that is already shredding under billions of dollars in unfunded federal mandates that we are struggling to meet. Medicaid is a partnership program between the federal government and the states. As the partner responsible for implementing this program, I am telling you that our Medicaid program is already at the breaking point, and if federal health care reform is passed without addressing the underlying faults in the system, health care reform will fail.
Sucker.
While we explore the fate of California, it is illuminating to notice the tired pattern of sovereign extortion in the form of the threat of imminent fiscal violence to favored (or even critical) government services. Why is it that municipalities (or the Federal government for that matter) seem to uniformly respond to looming fiscal crises by announcing potential cuts in, for example, "...the In-Home Health Care Services program for the disabled and elderly poor," or police, emergency services, fire, and the department of motor vehicles? Of course, we know the answer.
And so, California will, in all likelihood, get a large, steaming hunk of Federal extortion payments, making even more explicit the Federal Government's role as the lender of last resort for the abysmal failure of progressive (and expensive) municipal experiments in everything from welfare to green energy to hopelessly mathematically challenged defined benefit programs. Given the total surrender of federalism and the wholesale abandonment of the republic, the clever Zero Hedge reader may consider adding to their municipal credit default swap pricing model a variable that captures expected gubernatorial expertise in fiscal extortion and lobbying. We highly suspect that the last states to fail will be those who exhibit the highest levels of operational excellence in extracting liquidity from an increasingly sore Federal teat. California seems to be off to a good start, but then their thirst for mother's milk is awfully daunting.
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Arnie will first have to don a bandana and some combat greens and go take out the Alien/Predator combination of Boxer and Feinstein, then behead Pelosi and throw that rotten cantaloupe down the steps of the snake temple in order to get anything done here.
Get to the choppa!
I am Chumbawamba.
lol. the treasury ain't got time to bleed!
"if it bleeds, i will kill it"
Come on! I'm hear! Tax me now! Come on....Do it! TAX ME!!!
-California Resident
Sucker.
This may be the most telling word when we review the history of 2008-2011.
Thank you for the article Marla. The details in the so called "jobs bill" working through D.C. certainly appears to have lots of state, local aid.
New York is broke as most of you know and they have already sent out reduced checks (10% haircut is what has been reported) to school districts and localities.
I still worry that Barney et. al. are going to come up with a federally insured muni program. I believe that could signal the conclusive and definitive moment when the Federal gov't goes in to the shitter. I can just see all these states and municalities floating zillions (get used to it, trillions soon to be passe) in muni bonds with the attitude of "hey, we don't have to pay them off because they are insured by Washington D.C."
That has been the phrase I use instead of goodbye as often as possible - "See you later, Sucker"
It has never been more appropriate, especially after meetings.
For anyone participating in a higher stakes game than mere financial markets, this is a tell that many astute watchers have been waiting.
Those who wish to see leviathan take its final curtain call should welcome, no, encourage the wholesale support of states, cities and other municipalities via direct federal assistance & guarantees.
For it is only then that we shall see the beginning of the end. Once made dependent, the respective states will have no alternative but to explore other means of issuing their own scrip as financing becomes increasingly difficult at the federal level.
Thus, devolution of the existing federation will begin in earnest as regions discover that terminating negative value-added consumption provides a tremendous boost to their own bottom-lines.
It is always about money - not just markets - but politics and life itself.
""I still worry that Barney et. al. are going to come up with a federally insured muni program.""
Barney is pushing for this hard--he may get it too--
This applies to all of the organizations that Pres Obama had over to the WH and demanded that they come out aand support medical reform without ever saying not until you reveal your plan.
Later after the collaspe, they should all be frog-marched to trial and they can claim - he was so nice in demanding this of me because his Chicago thugs would wreck havoc on his organization with so many investigations they would be convicted. I say - you go hang.
Will be interesting to see how Obama screws this one up. He's stated before, in no uncertain terms, that states/cities looking for federal bailout dollars should go looking elsewhere. If he holds to his word, expect a showdown between Ahnold and Washington. If not, expect a que to begin to form, alphabetically of course, starting with Arizona and ending with Wisconsin - with fun, progressive states like New Jersey in the middle.
Game on, I say! Green shoots!
It ends w/ Zimbabwe...
+0.99999999999999...
I am Chumbawamba.
+1x10^(E+27)^i
Or I'll just give you ONE TRILLION (zim) DOLLARS!
Arnold is right about the misplaced priority on universal health care, when the effort should have been a referendum on Medicare and Medicaid. The only way to reduce spending is to reign in costs. This means addressing fraud, negotiating a fixed price for drugs from all manufacturers around the world, and setting the price for premiums. If the health care bill increases costs to the states, in addition to the Medicare and Medicaid burdens, and does not set fixed prices, the states will quickly be unable to pay. It just a matter of time that the demographics will over burden the states in the next 5 years.
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Medicare in its pure form is paid for by the tax payers through FICA. Medicaid is a shared program between the Federal Government and the States, and there is an overlap area between the two known as dual eligibles. Also, the states must pay Medicare premiums for the elderly poor (QMB and SLMB) in their respective states, and by extension, pay premiums for any sub eligibility like for Part D and Part C.
I think what Arnold was looking for was the repeal of the states requirement for covering health care for the elderly poor in its current form.
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The states have already received a federal bailout, it was called the American Recovery and Reinvestment Act 2009 (ARRA2009). States have used the majority of the 2009 funds to offset state budget deficits (medicaid and medicare). $144B to the states mostly to offset Medicaid, which by extension lumps into medicare for the elderly poor under the state funded program. Essentially a direct infusion of cash into the states general fund.
Some ARRA2009 links.
http://www.irs.gov/newsroom/article/0,,id=204335,00.html
http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009
Now, obviously to this point, there was no direct bailout of a single state government unable to balance its budget. To show favoritism to any particular state is unworkable in passing legislation, and the president said he would not sign such a bill.
The only way to help the states with their budget shortfalls, is to provide a nation wide program to give all states some type of relieve for the most expensive government mandated programs; medicare and medicaid, and as noted above, already occurred with ARRA2009. So the only real solution to funnel more money to the states, California included, is Stimulus ARRA2010.
Most ZH readers will note that there has been some plan for state aid part 2, over at least the past 4 months, and could take the guise of a jobs package, or some other lofty proclamation, but essentially a state aid bill.
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It is interesting to me that the misguided policies of our Federal Government, and uncontrolled size and waste, would manifest the fundamental "economic" weakness first at the state level. The states cannot engage in printing money like the FED. So our political system, to a certain extent, is being played out at the state level first. That is, what is the political will to create a viable plan (budget). So in a sense, we can look at the failures at the state level to get some understanding of the capacity of political will on the national level.
Mark Beck
"The states cannot engage in printing money like the FED. So our political system, to a certain extent, is being played out at the state level first. That is, what is the political will to create a viable plan (budget). So in a sense, we can look at the failures at the state level to get some understanding of the capacity of political will on the national level."
Bingo Mr. Beck. It is impossible to overstate this point in my opinion.
Surely the timing of Arnie's puckering interview on CNN (Sunday) had nothing to do with his imminent appeal for a bailout...
Obama gets an 'A' for effort from Schwarzenegger
http://politicalticker.blogs.cnn.com/2009/12/21/obama-gets-an-a-for-effort-from-schwarzenegger-2/
Only 8 billion? He'll be back...
He's baaaack.
lol
LOL that made me hurt.
Never let a (manufactured) crisis go to waste.
California Medical MariJane cards are going to be expanded to include purchases of:
Obama Blotter Acid
http://www.boingboing.net/2009/12/02/obama-acid.html
Obama Ecstasy
http://www.boingboing.net/2009/12/03/obama-ecstasy-tablet.html
Shit, where can I score me some of that acid? Been too long.
I am Chumbawamba.
It's probably DOBama
Get your ass to Mars.
Get to da Chopper! It's not a tumor! It's a crises in Kalifornia!
It's Kullyfawnia.
I am Chumbawamba.
Dear Madam Speaker,
Who is your daddy and what does he do?
-Arnold
Congratulations to the Gov of Cali, the Federal Gov, and all public sector employees for your consistent performance in avoiding responsibility, and creative methods of enabling self-enriching behavior.
Many of us didn't think you could extend and pretend this long, but you continue to set new performance standards that are far outside of our (myopic) rational view of the world.
Since money can be created and distributed at no contemporaneous cost, feel free to do whatever you like. Good luck to all of you. Just remember that opting out of your liabilities sets a course of behavior for tax payers, or former tax payers as the case may be.
DEBTOR'S REVOLT!
I am Chumbawamba.
+BITCHES!
Pull all your money out of TBTF (espicially the prime choice of Russian hackers: Citi)
Don't pay any debt payments to TBTF starting 01 01 2010
Let chaos reign.
Merry Christmas
Something very fishy is going on with the CRE REITs today. After some brief weakness post-new home number, they are shooting up while the market stays flat.
MAC +7%
California is the sixth largest economy in the world. The Federals get alot of money through extortion... it's payback time.
I wish the states would start passing secession ordinances.
Marla your fingers play on the keyboard remind me of Grigory Sokolov playing the ivory keys in a combination of Sergeï Prokofiev mixed with Chopin Mazurka OP 68 no 2 in A --most enjoyable.
You my dear are a Falcon-Gentle and may your wings always be full.
Merry Christmas to all and to all A GOOD FLIGHT
Very consistent with the views below...
http://www.leap2020.eu/GEAB-N-40-is-available!-Spring-2010-A-new-tipping-point-of-the-global-systemic-crisis-When-the-slip-knot-around-public_a4093.html
This is in response to the CRE REIT comment. Take a look at the ETF "NSL" (Nuveen Senior Income Fund" Some bizarre change occured in the last two days, look at the chart. Are theses two items related??
I cannot find any relation with NSL.
I guess people are betting (w/ CRE REITs) that the Cali garbage will reap the benefits of a state bailout... If so, I'm 100% certain a secondary will follow the next day - at least for MAC.
I can think of no better recipe to break up the United States than to demand that people from places like Texas and Nebraska pay for California's malfeasance. Keep it up boys, and we'll all get what we want.
The taxpayers in California have been paying for Nebraska since the mid-1980s. It's about time we got some ROI.
http://www.taxfoundation.org/research/show/22685.html
...uhhh, if california has been paying for nebraska since the 1980s, then what kind of gaap tricks are you using to explain california's $20b debt situation? i would second you if california was currently running a surplus...
Seems to me the two issues could be perfectly complementary.
Knew Arnold the false would punt and try
to stick it to washington. Arnold you should
have caved earlier and gone to Bush 43
instead of Bush 44. Now you look lower
than a girlie man.
Epic!
"This isn't the state of California, this is the state of insanity"
- Steven Speilberg's 1941
California will not get a bailout because a bailout is not needed. Everything is getting better all the time. Unemployment is turning around, and housing is turning around. Everything is soon be as it is supposed to be.
... yeah, right. I think I am going to hell for that comment.
Timmy? Is that you?
Eet's not a Duma! Eet's a Russian Pahlamentary Gahvernment!
1. .gov takes back 90% of what it gives out. Taxation knocks off 40%, hidden taxation knocks off another 20 - 30% and then any corporate profits, banking or economic growth leads to revenue for .gov as well.
2. .gov has figured out the sheeple would rather live under Stalin with DJIA 10K+ than have any free markets or rights and have DJIA at 6K. Sheeple want $$$ same as their represen, ahem, leaders.
Great stuff!
dammit Marla, my OCD kicked in and I been singin' that song for twenty minutes.
http://www.youtube.com/watch?v=RtVIhDgo_uU
and I came across the Benny Benassi remix which is pumpin'
http://www.youtube.com/watch?v=sTbd2e2EyTk&feature=related
Reason why I keep at least one computer on west coast time...
That remix rocks.
California Bonds Fail on Advice Bill Lockyer Couldn’t Refuse
For California Treasurer Bill Lockyer, the offer fromGoldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. was too good to refuse.
If California was willing to forgo competitive bidding for a $4.5 billion bond offering, the banks promised more orders from individuals and a lower bill to the taxpayers. The firms insisted that by negotiating with them, the state would benefit from its special relationship with the Wall Street troika and wind up with what two underwriters called a salutary “buzz” to boost demand for the debt.
http://bloomberg.com/apps/news?pid=20601109&sid=aWuY7slLZtoI&pos=10
Sounds so Mafia like....
Arnie is a total poseur!!
I have lost respect for the individual.
Federalism as encapsulated by the utilization of the commerce clause to emasculate state & local governments is fast reaching the reality of a total breakdown. I suspect that if the rule of law is to have any hope of a Phoenix like rebirth then the juxtaposition of this collapse in federal/state/local government funding combined with the recognition that international markets cannot absorb all of the bank/fed/state/local/corporate/individual gravy may well provide the best vehicle for a comparatively rapid resolution. The thing is that some folks will have to make a decision regarding the continued validity of incrementalism and the failure of capture since it is reliant on disloyalty.
One thing is certain. All branches of the government of the United States at all of its levels almost without exception are totally insolvent either financially, intellectually or ethically and are standing out on the street corner panhandling, pawning or prostituting. Brings the concept of leadership via commanding or demanding respect into sharper focus.
Nice work Mr. Kendig.
10th Amendment nullification!
It is a race to the bottom. Which state's going to declare bankruptcy first? After the last 8 years of giving California the bone, it's looking like we'll win. It'll be just ahead of NY is my guess. Love you too.
I though Pelosi was supposed to get a bailout for California for sucking... delivering on the Health Care bill.
Which begs the question, "Why is she in office if she can't do anything for her state?"
Like most of them, she's in office purely for her own benefit. Anything else is kindergarten level PR tripe.
California's dreamin', alright! Our 10% sales tax, high property/income taxes, fee's, surcharges, car registration---etc. What do you did you do with all the revenue?
We've had $21-30+ Billion dollar budget deficits every year since he has been elected. Talk about kicking the can.
Sorry, Ahhhnold. You have no leverage! Even Obama cant help you now. Guess leaving your 'real' job to try your hand at governing the sixth largest economy in da world has'nt worked out too well for either of us.
Arnold is a sucker for believing anything Obama has ever said, and so were all of the other suckers (AMA, AARP,etc) that believed they need to support Obama and his medical reform without ever reading it. They pulled the old bait and switch. Remember, Obama promised all negioiations out in the open. When several reporters would ask a question, Obama would always say that is not my bill, but never produced one.
Arnold is a sucker for believing anything Obama has ever said, and so were all of the other suckers (AMA, AARP,etc) that believed they need to support Obama and his medical reform without ever reading it. They pulled the old bait and switch. Remember, Obama promised all negioiations out in the open. When several reporters would ask a question, Obama would always say that is not my bill, but never produced one.
"I think we have taken a turn for the surreal."
Get ready for a big surprise
Congress, at the behest of Obama, Rahm et al will stall until after the 2010 gubernatorial election in Calif. Then send the check promptly in Jan. 2011... seconds after a Democrat is sworn into Broke Ass Arnold's old job.
If the Democrats in Congress are shellacked in the 2010 midterms... they will pass it lame duck and still hand it to Arnold's replacement. If it were George "The Dunce" Bush... he would do the same thing.
For political effect mind you...
George... hand the new guy your Dunce Cap.
Ellen Brown's commentary on California and the implementation of a State Bank of North Dakota model seems to make sense. Perhaps, the political climate is ill-suited for sanity.
Doesn't the new 'healthcare bill' chop about a half a tril off the Medicare funding? Guess AARP (along with most state governors) will be standing with limp dick in hand after this sinks in?
Because they can't be fired by the people?