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Forum Post: Shortfall in California’s Budget Swells to $16 Billion

Posted 1 year ago on May 13, 2012, 12:41 p.m. EST by occuman (-21)
This content is user submitted and not an official statement

Highest taxes in the country - and it is still not enough for the govt

http://www.nytimes.com/2012/05/13/us/huge-new-shortfall-predicted-in-california-budget.html?_r=1&hp

23 Comments

23 Comments


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[-] 4 points by looselyhuman (3117) 1 year ago

Highest taxes in the country.

Bullshit. See property taxes: http://www.nytimes.com/2007/04/10/business/11leonhardt-avgproptaxrates.html

It's all about the Reagan-era tax revolt mindset that led to Prop 13 which has been a budget nightmare ever since.

[-] 0 points by occuman (-21) 1 year ago

that's only property taxes. how about including all taxes

[-] 2 points by looselyhuman (3117) 1 year ago

Oh I thought we were being lazy and sloppy - felt I had exceeded the low bar you set, simply by providing accurate information. Oh well.

  • 15th in income tax
  • 9th in total tax burden
  • 21st in spending as a burden on income

Towards the top in services provided (5th in spending); taxation doesn't balance that, hence the deficit. Without Prop 13 Cal would be in good shape. Time had it right back in 2009: http://www.time.com/time/magazine/article/0,9171,1910985,00.html

Statistics source: http://www.jsonline.com/news/wisconsin/89702927.html

[-] 1 points by PublicCurrency (1387) 1 year ago

Without the repeal of the Glass-Steagall Act, California would be in good shape.

"Predatory lenders are keeping us in debt peonage through misguided economics and bank-captured legislators. We have people who desperately want to work, to the point of going back to school to try to improve their chances; and we have mountains of work that needs to be done. The only thing keeping them apart is that artificial constraint called “money”, which we have allowed to be created by banks and let out at interest when it could have been created by public institutions for public purposes, either by direct issuance or through publicly owned banks. We just need to recognize our oppressors and throw off their yoke, and the good times can roll again."

http://www.informationclearinghouse.info/article31309.htm

http://www.WebOfDebt.com

http://www.TheMoneyMasters.com

http://www.Monetary.org

[-] -1 points by Shutoffthelights (-13) 1 year ago

Without being flooded with illegal aliens and under the the control of its government employee unions, California would be a better shape.

[-] 0 points by Slabbers (10) 1 year ago

Are you kidding? Without Prop 13 we would be in good shape? Nope, try again.

[-] 0 points by occuman (-21) 1 year ago

I stand corrected - sounds like you can justify raising the taxes in Cali. Maybe fewer wealthy people will leave.

[-] 1 points by PublicCurrency (1387) 1 year ago

Currently, only one state in our nation is operating with a surplus budget. That state is North Dakota and the surplus is greater than $1,5 billion ! ! !

Only one state—North Dakota—owns its own bank. North Dakota is also the only state to escape the credit crisis of 2008, sporting a budget surplus every year since; but skeptics write this off to coincidence or other factors. The common perception is that government bureaucrats are bad businessmen. To determine whether government-owned banks are assets or liabilities, then, we need to look farther afield.

When we remove our myopic U.S. blinders, it turns out that globally, not only are publicly-owned banks quite common but that countries with strong public banking sectors generally have strong, stable economies. According to an Inter-American Development Bank paper presented in 2005, the percentage of state ownership in the banking industry globally by the mid-nineties was over 40 percent.1 The BRIC countries—Brazil, Russia, India, and China—contain nearly three billion of the world’s seven billion people, or 40% of the global population. The BRICs all make heavy use of public sector banks, which compose about 75% of the banks in India, 69% or more in China, 45% in Brazil, and 60% in Russia.

The BRICs have been the main locus of world economic growth in the last decade. China Daily reports, “Between 2000 and 2010, BRIC's GDP grew by an incredible 92.7 percent, compared to a global GDP growth of just 32 percent, with industrialized economies having a very modest 15.5 percent.”

http://www.WebOfDebt.com

[-] 1 points by Spade2 (478) 1 year ago

Some would also say it's because of North Dakota's booming oil production, is that a major factor?

[-] 1 points by PublicCurrency (1387) 1 year ago

The federal government aggressively drove down interest rates to save the big banks. This created opportunity for banks – whose variable payments on the derivative deals were tied to interest rates set largely by the Federal Reserve and Government – to profit excessively at the expense of state and local governments. While banks are still collecting fixed rates of from 4 percent to 6 percent, they are now regularly paying state and local governments as little as a tenth of one percent on the outstanding bonds – with no end to the low rates in sight.

. . . With the fed lowering interest rates, now states and local governments are paying about 50 times what the banks are paying. Talk about a windfall profit the banks are making off of the suffering of local economies.

To make matters worse, these state and local governments have no way of getting out of these deals. Banks are demanding that state and local governments pay tens or hundreds of millions of dollars in fees to exit these deals. In some cases, banks are forcing termination of the deals against the will of state and local governments, using obscure contract provisions written in the fine print.

By the end of 2010, borrowers had paid over $4 billion just to get out of the swap deals.

California’s water resources department . . . spent $305 million unwinding interest-rate bets that backfired, handing over the money to banks led by New York-based Morgan Stanley. North Carolina paid $59.8 million in August, enough to cover the annual salaries of about 1,400 full-time state employees. Reading, Pennsylvania, which sought protection in the state’s fiscally distressed communities program, got caught on the wrong end of the deals, costing it $21 million, equal to more than a year’s worth of real-estate taxes.

In a March 15th article on Counterpunch titled “An Inside Glimpse Into the Nefarious Operations of Goldman Sachs: A Toxic System,” Darwin Bond-Graham adds these cases from California:

The most obvious example is the city of Oakland where a chronic budget crisis has led to the shuttering of schools and cuts to elder services, housing, and public safety. Oakland signed an interest rate swap with Goldman in 1997. . . .

Across the Bay, Goldman Sachs signed an interest rate swap agreement with the San Francisco International Airport in 2007 to hedge $143 million in debt. Today this agreement has a negative value to the Airport of about $22 million, even though its terms were much better than those Oakland agreed to.

Greg Smith wrote that at Goldman Sachs, the gullible bureaucrats on the other side of these deals were called “muppets.” But even sophisticated players could have found themselves on the wrong side of this sort of manipulated bet. Satyajit Das gives the example of Harvard University’s bad swap deals under the presidency of Larry Summers, who had fought against derivatives regulation as Treasury Secretary in 1999. There could hardly be more sophisticated players than Summers and Harvard University. But then who could have anticipated, when the Fed funds rate was at 5%, that the Fed would push it nearly to zero? When the game is rigged, even the most experienced gamblers can lose their shirts.

Courts have dismissed complaints from aggrieved borrowers alleging securities fraud, ruling that interest-rate swaps are privately negotiated contracts, not securities; and “a deal is a deal.” So says contract law, strictly construed; but municipal governments and the taxpayers supporting them clearly have a claim in equity. The banks have made outrageous profits by capitalizing on their own misdeeds. They have already been paid several times over: first with taxpayer bailout money; then with nearly free loans from the Fed; then with fees, penalties and exaggerated losses imposed on municipalities and other counterparties under the interest rate swaps themselves.

The windfall of revenue accruing to JP Morgan, Goldman Sachs, and their peers from interest rate swap derivatives is due to nothing other than political decisions that have been made at the federal level to allow these deals to run their course, even while benchmark interest rates, influenced by the Federal Reserve’s rate setting, and determined by many of these same banks (the London Interbank Offered Rate, LIBOR) linger close to zero. These political decisions have determined that virtually all interest rate swaps between local and state governments and the largest banks have turned into perverse contracts whereby cities, counties, school districts, water agencies, airports, transit authorities, and hospitals pay millions yearly to the few elite banks that run the global financial system, for nothing meaningful in return.

Ellen Brown March 20, 2012

http://www.webofdebt.com/articles/interestrateswap.php

[-] 0 points by occuman (-21) 1 year ago

what does this have to do with California's Budget?

[-] 1 points by MattLHolck (16833) from San Diego, CA 1 year ago

it's complex so the people can't understand ?

[-] 0 points by occuman (-21) 1 year ago

It's not complex - you commies like to make it seem so so people give up & just take your word for it. are you kidding? Long winded NYT style garbage. You wasted a lot of time saying nothing. The bottom like is people with money & businesses are leaving the State for more Capital friendly ground.

[-] 1 points by BetsyRoss (-744) 1 year ago

In a recent report, the US Census Bureau reveals that Californians are leaving California at a faster rate than residents leaving any other state.

http://www.huffingtonpost.com/2011/11/28/californians-moving-census-survey_n_1117049.html

[-] 0 points by occuman (-21) 1 year ago

yea - I wonder why?

[-] 0 points by occupybrains (30) 1 year ago

There is no getting out of this mess.

The leaders are horribly corrupted. The military is bombing anyone who blinks at them. The people are more concerned with materialistic stuff than anything meaningful or the future.

This thing is going to fall apart regardless of what Democrats, Republicans are other groups do. No empire lasts forever. This one is going out with a bang.

[-] 0 points by occuman (-21) 1 year ago

as long as we continue to reward pols who give us free stuff we will continue to perish.

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[-] -3 points by ItNeverBegan (1) 1 year ago

It's all just so very confusing. LOL. Load a state with uneducated and impoverished Mexicans, turn governance over to the unions and, go figure, problems developed. Must be those evil rich people that simply aren't paying enough in taxes. LOL.

[-] -2 points by occuman (-21) 1 year ago

yea - clueless . It's not rocket science

[-] 0 points by ItNeverBegan (1) 1 year ago

It's just getting worse. The cycle of government expansion, taxation, and immigration of those that can't provide a tax base continues unabated. If you're in the paying class and don't work for government, all you can do at least point is leave. California, like Greece, needs an utter restructuring.

[-] 1 points by Builder (4202) 1 year ago

Surely the Governator can fix it?

Oh, that's right, he likes to have "relations" with his Mexican staffers.

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[-] 1 points by MattLHolck (16833) from San Diego, CA 1 year ago

a lot to military spending happens in California

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[-] 0 points by occuman (-21) 1 year ago

I concur my friend