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Thread: Der Governator needs to raise another $500 BILLION dollars ...

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    Banned Melonie's Avatar
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    Default Der Governator needs to raise another $500 BILLION dollars ...

    Schwarzenegger wants $500 billion to rebuild California
    Reuters is reporting California needs billions in bonds.

    "I was at a meeting this morning where someone said, 'Look, we need $150 billion just for infrastructure and transportation.' It's true," Schwarzenegger told Reuters in an interview in a state office in San Francisco.

    "We need $500 billion to rebuild California the way it ought to be," he added. "But this is of course too big for people to digest, so you don't talk about that."

    Speaking about the total of $42.7 billion in general obligation bonds authorized by voters last year for public works spending, Schwarzenegger said: "This was only the foot in the door, to whet the appetite."

    In the short term, Schwarzenegger acknowledged California could face lower tax revenues than projected in his January budget plan, but said he opposed new taxes.

    "We have done tremendously with the revenue increases, but we do not want to do a tax increase."

    He said he does not expect California to issue less debt if the economy slows. "I don't think we have to do that," he said.

    This is so staggering that all I can do is repeat the sound bytes.

    Sound Bytes

    * $42.7 billion in general obligation bonds issued last year is "only the foot in the door, to whet the appetite."
    * It will take $500 billion to "rebuild California the way it ought to be".
    * $500 billion is "too big for people to digest, so you don't talk about that" even though he is talking about it.
    * California needs $500 billion even though it has "done tremendously with the revenue increases".
    * California will not issue less debt even if the economy slows.
    * California "could face lower tax revenues" but he opposes tax hikes.

    The US Census Bureau QuickFacts estimates the 2005 California population at 36,132,147 . Let's do the math. $500,000,000,000 / 36,132,147 is $13,838 dollars for every man woman and child in the state. That might not sound so bad but I do not think many 5 year olds have that much cash lying around. Let's try the numbers again with the working age population (18-64). The working age population is 22,546,460 (calculated manually). That translates to a staggering $22,176 liability for every working age person. Married couples would need to pony up a mere $44,352 per couple to do it "the way it ought to be done", and remember those are after tax dollars.

    But there are some other figures to look at, such as 13.8% of the California population is below the poverty level, and the median household income clocks in at $48,440. (QuickFacts shows those numbers are as of 2003).

    This looks like fiscal insanity no matter how many years he wants to stretch this out over. The kicker is that Schwarzenegger thinks this can be paid for without increasing taxes, in the face of falling revenues, even if the economy heads into a recession. Mark my words California, your taxes are going to skyrocket if anything remotely close to this proposal passes.

    Mike Shedlock / Mish

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    Banned Eric Stoner's Avatar
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    Default Re: Der Governator needs to raise another $500 BILLION dollars ...

    MELONIE- $500 billion over how many years ? Just because he's asking for or talking about $500 billion does not mean that Cali voters will approve the bond issues.
    The biggest reason California has such serious fiscal problems is Medi-Cal. They are stuck paying BILLIONS for medical care for ILLEGAL immigrants. Pregnant Mexican women are still trying to waddle over the border to have their children in the U.S. Not as successfully as in past years but it's still happening. State aid to education ( localities are limited by Prop 13 in raising property taxes) and a growing prison population and a brain/wealth drain from California as those who can afford to move to Idaho and Nevada and Cali's problems are almost insoluble.

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    Banned Melonie's Avatar
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    Default Re: Der Governator needs to raise another $500 BILLION dollars ...

    Just because he's asking for or talking about $500 billion does not mean that Cali voters will approve the bond issues.
    Don't be so sure. Every Californian middle class private sector taxpayer who joins the 'brain/wealth drain' is one less vote opposing such bond measures.

    On the other hand, you've got at least 1/3rd of Californians who are in 'low income brackets' such that they don't actually pay much in the way of state income tax. Thus they stand to gain far more from the new bond money expenditures than they will be 'charged' in increased taxes to pay for those bonds in the future.

    On the third hand, you've got some 5% of Californians who are clearly in the 'rich' category. Thus they have the resources and the professional help to insulate much of their 'income' from actually being taxed at the published California rates. Thus the 'rich' stand to gain from the bond money as well since, in many cases, they will be the ones who are purchasing the new tax free California bonds and receiving a very nice tax free return on their investment !

    On the fourth hand, you've got an unknown number of construction workers, project managers etc. who are about to lose their jobs in the California housing industry. A big bond issue calling for the construction of new schools / prisons / roads etc. would offer a 'life preserver' to these workers of union construction work at prevailing wage rates versus structural unemployment. Throw in the additional teachers / prison guards / transportation workers who will benefit from the new union civil service jobs created as a direct result of constructing new schools / prisons / roads. Thus the bond issue would be in their (short term) interest as well.

    Add up the fractions, and you've almost certainly got a 51% majority to pass a bond issue vote !

    There are some pundits who would point out that this 'triangle of economic socialism' i.e. the 'rich' who are actually financing the gov't spending but making money off the tax free gov't bonds in the process, the union workers whose weekly paychecks are ultimately paid for by the gov't, and the 'poor' voters who don't actually have to pay much of anything in the way of income taxes and whose benefits are provided by the gov't, is the future economic model of 'blue' states.

    But as you point out, somebody has to actually pay the bond interest with money that originates outside of the 'triangle of economic socialism's' dollar recycling. This essentially only leaves three sources for revenues from which the gov't can pay the bond interest to the 'rich' bond owners. The first is higher income taxes on both public and private sector workers. The second is higher corporate taxes on private sector businesses. The third is higher sales taxes that grab a bigger piece of every dollar spent by everyone in California - rich, worker, and poor alike.

    ~
    Last edited by Melonie; 03-03-2007 at 06:00 AM.

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