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Friday, June 12, 2009 11:30 AM


Showdown in California: Schwarzenegger vs. Democrats


The showdown is on in California between the Democrat controlled legislature and governor Schwarzenegger. The battle shapes up like this: Democrats do not understand basic math and Schwarzenegger is not giving in. The end result is California seen missing budget deadline again.

Barring a miracle, California lawmakers will miss their June 15 deadline for passing a balanced budget -- a staggering challenge with the state facing a $24.3 billion shortfall amid the worst drop in state revenues since the Great Depression.

Observers of the most populous U.S. state's political scene laugh at the idea of a budget deal by Monday.

"It's about as likely as me being named MVP of the Stanley Cup final," said Dan Schnur, director of the Unruh Institute of Politics at the University of Southern California.

Citing the state's weak economy and double-digit unemployment rate, the movie star-turned politician has ruled out new taxes, which has raised his standing with the legislature's unruly and anti-tax Republican minority.

Schwarzenegger also urged Democrats to ignore lobbying by their union allies against sharply lower spending levels to help balance the state's books.

"Do they want to protect the workers that provide the services, or do they want to protect the people that get those services? The choice is up to them," he said.

His blunt talk came as the Service Employees International Union launched an advertising campaign against his budget plan, a threat to many of its 700,000 members in the state.

State Senate President Pro Tem Darrell Steinberg has said spending cuts are inevitable, but he opposes Schwarzenegger's plan for scrapping state programs. Instead, he wants to tap reserves in the governor's plan to maintain the programs.
Understanding Negative Numbers

Tapping "reserves" is idiotic because California has negative reserves of $24 billion. Do the Democrats or the unions understand the concept of negative numbers?

Unfortunately the answer is a resounding "No". Some might think this is a reason to keep the education budget intact. However, the odds that the legislature or unions sign up for much needed remedial math education classes is zero. Therefore, saving taxpayer money must take precedence over spending that will not go to where it is most needed.

Schwarzenegger Threatens To Shut Down Government

If a deal is not reached Schwarzenegger threatens to shut down state government.
Gov. Arnold Schwarzenegger vowed Wednesday to let California government come to a "grinding halt" rather than agree to a high-interest loan to keep the state afloat if he and the Legislature do not close the yawning budget gap in coming weeks.

Schwarzenegger said that emergency borrowing would be too expensive and that his threat to block it was necessary to prod lawmakers into swift action.

A loan would only "give them another reason why we don't have to do it now," the governor said. "What we need to do is just to basically cut off all the funding and just let them have a taste of what it is like when the state comes to a shutdown -- grinding halt."

The comments, made in an interview with The Times' editorial board, represent the governor's latest salvo in the battle over California's budget. An emergency loan -- not routine short-term borrowing but a longer-term, higher-interest loan -- would require the governor's approval but not that of the Legislature, unlike his proposed budget solutions. He approved the initial step for such borrowing last year and can revoke it at any time.

Clearly alluding to labor unions that oppose the cuts, the governor said: "Do they want to protect the workers that provide the services, or do they want to protect the people that get those services? The choice is up to them."

"We will meet the July 1 deadline," Senate leader Darrell Steinberg (D-Sacramento) said in an e-mail to The Times.

If lawmakers fall short of that goal, as they have many years, Schwarzenegger's refusal to borrow would leave the nation's most populous state with no way to pay its bills.

In the Senate, Democrats have sketched a counter-proposal that would drain the state's reserves and rely on hopes for a rosier economic future to hold off the deepest of the cuts. Their plan would resolve up to $20 billion of the projected $24-billion deficit.

The governor called that approach "hallucinatory" on Tuesday and "irresponsible" on Wednesday. "We have not hit the bottom" of the economic crisis, he told The Times.

Eliseo Medina, SEIU's national executive vice president, said the governor "ought to be worrying about trying to maintain services instead of trying to kill the messenger."
Eliseo Medina and the SEIU are two of the many reasons California is bankrupt.

California Math

1) California is broke
2) Taxpayers are fed up
3) Union pension plans are bloated to the gills
4) Union workers are overpaid
5) No one can afford to pay for the services the SEIU wants to deliver at the price the SEIU wants everyone to pay

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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