Is California Korea?

Certainly, Larry Summers, Timothy Geithner, and Christina Romer, plus all of their aids, have done the math, and $79 billion to states was all that states could possibly absorb without wasting money. Hence the corporate tax cuts.

I'm *sure* they are correct, but let's do some quick math to double-check...

California's budget deficit for the next 18 months is $42 billion. (Of course, this is on top of a bunch of cuts... California's state gov't and the UC's have not yet gotten the memo that loads of money is on the way, they are still in cutting mode.)

Texas's budget shortfall the next two years is estimated somewhere between $6 and $24 billion...

The city of Philadelphia has an estimated budget shortfall of $1 billion over the next five years...

New York City -- $1.2 billion budget gap (I see $1.5 elsewhere); raising tolls for transit and is cutting services...

Many states have no deficit, of course, because they've got balanced budget amendments! They're just cutting spending!

The state of Florida just cut spending for the upcoming year by $1.2 billion -- with massive cuts in environmental programs, and is increasing taxes on retirement homes. This is in the face of an estimated $3.5 billion deficit for one year. (Given that Florida is ground zero for the housing bust, one wonders if this forecast isn't optimistic...)

Of course, the plan also includes money for medicaid and local school districts, and this will help states, but it seems to me to be way short. It's also not clear to me that there is any moral hazard here -- states which are cutting their budgets in the middle of a recession deserve to be punished for stupid behavior. States running large deficits should be rewarded.

OK, let's see what four minutes of research did: 56 + 24 + 1 + 2.4 + 7 = $90.4 billion (numbers extrapolated for two year deficit)

Not to mention, what about smaller states? Let's start adding in smaller states here too...
Indiana -- $800 million, this year alone (though a purdue university economist denounced this as unduly optimistic)
Illinois -- $800 million, this year alone
Kentucky -- $400 million shortfall, thru next June... f
South Carolina -- Already! cut budget by $720 million, more to come...

According to this (http://www.cbpp.org/9-8-08sfp.htm), over half of states "have already cut spending", and it estimates state budget shortfalls of $145 billion, althought this doesn't count city shortfalls, so it's a rather lowball estimate...

They write: "For example, at least 22 states have implemented or are considering cuts that will affect low-income children’s or families’ eligibility for health insurance or reduce their access to health care services. Programs for the elderly and disabled are also being cut. At least 21 states are cutting medical, rehabilitative, home care, or other services needed by low-income people who are elderly or have disabilities, or significantly increasing the cost of these services."

But don't worry, Larry Summers is on the case. He knows all this stuff. And he's gonna fix it... He & Geithner know California is not Korea, and hence, we don't need a fiscal austerity program. We don't need Summers & Geithner to force a balanced budget amendment down our throats.

Obama says he's up for suggestions. Here's one: Up the aid to states by $300 billion to help cover the estimated budget shortfall thru 2011 of $355 billion. Let them do what they want with it...

Barack Obama, it's time to fire Larry Summers. Fire him now...