Thursday, February 12, 2009

Fire Larry Summers Now!

Here's the latest on the state of California's budget:
The plan relies almost equally on spending cuts and tax increases to close the deficit — $15.1 billion in cuts and $14.3 billion in new revenue — as well as $10.9 billion in borrowing. Funding for schools and community colleges would drop by $8.6 billion, by far the largest single spending reduction. Cost-of-living increases would be denied for welfare recipients and for the aged, blind and disabled; those savings, along with other cuts, would be more than $1 billion. And spending on state universities would be pared by $890 million.

The proposal would require state employees to continue to take off two Fridays a month without pay through summer 2010, and it would eliminate two of 14 paid state holidays. But the mass layoffs Schwarzenegger threatened this week would be avoided.

Voters also will be asked to approve borrowing $5 billion against future lottery revenue — an unpopular idea, polling shows. The state intends as well to take out a $5.5 billion loan, an uncertain prospect given the state of the credit markets.

If California receives enough money from the federal stimulus package approved Wednesday, the state would forgo the $5.5 billion loan. Officials also expect the federal money to alleviate the need for roughly $1 billion in proposed spending cuts and $1.8 billion in tax increases.

This really makes it sound like the Obama stimulus is chickenfeed. At a bare minimum, the Obama Stimulus should reverse all state spending cuts and tax increases. This effectively shrinks the size of Obama's stimulus over the next 18 months by nearly 5%. And California is not alone.

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