It has been all in the news lately about California’s huge budget problems.  It boggles the mind that any state can get billions of dollars in debt, though California isn’t the only state with this problem.  To solve this problem, the legislation of the state has decided that increasing taxes and laying off workers is the only way.  Now, I agree that you will probably have to raise taxes (though I would have thought California would have other means of revenue available), but laying off state workers (on top of the ones already furloughed and laid off) is more of a shoot yourself in the foot move. Point in fact…

• State workers in general tend to be the smallest part of the budget, most (the ones most likely to be let go) are low income.  Yes, you save some money instantly, but not a great deal, unless you lay off the big paycheck people (not likely).
• Some of these people have skill sets that are essential and will be hard to replace once the budget crisis is over.  Government services that are still left will suffer.
• These laid off workers will be joining the other laid off workers on unemployment and on state welfare.  You will have even more children on the state insurance.  All of this will increase the money needed from the government.
• All those with homes and outstanding debts will be defaulting on their loans added to the problems of the economic crisis.

I don’t have any answers, but it seems that no or little thought has been put into solving the budget crisis in California.

UPDATE: Bizarre ideas seems to be rampant these days.  Georgia has been having budget problems as well (a shortfall and not an actual debt since by the state constitution the budget has to be balanced with projected revenue) with cuts across the board with some lay offs by a few universities.  Now that the legislature has just recently manage to keep the budget in range of the law, some Republicans are now advancing their own “economic stimulus” package of their own with tax cuts for businesses and corporations.  How are they going to pay for the tax cuts?  Lay off state workers.  I know for a fact that state workers in Georgia (teachers included) are severely underpaid.  And what is one of the main tax breaks?  A tax break for hiring people who have been unemployed for at least 60 days.

I see where this is heading, you hire someone (maybe a laid off state worker) who has been out of work for sixty days, employ the person for the minimum time, and then lay them off getting the tax break in the process.  One hell of a scam in the making if you are not careful with the wording on the legislation.

Email this post

There has been a lot of news about the President’s economic stimulus plan and the problems of getting the Republicans to come on board. One of the biggest sticking points is the ration of government spending to tax cuts.  Let us just take a look at what tax cuts and spending as referenced in the proposal changes…

• First of all, government spending actually gives a better return on the dollar.
• Every dollar spent by the government translates to $1.02 to $1.38 of economic benefits.  That dollar spent by the government pays for resources and labor used in the U.S. In other words, the money stays in the U.S., goes into U.S. tax payer pockets as income, and actually does something for the people.
• Every dollar in tax cuts translates into about 30¢ into the economy – the tax refunds and breaks to people end up in savings accounts, paying bills, or paying down debts.  Hardly does that money actually go to new spending.
• Spending by government means the dollar stays in the U.S., spending by people sends dollars overseas, thus weakening the dollar.
• Tax breaks for small businesses, though noble, is not much help in the economy.  Again, small businesses will use the tax breaks not to spend on new equipment, upgrades, and new jobs, but on paying down debt.  Yes, it is good to pay down debt, but it does nothing to stimulate the economy.
• Tax breaks for big business (does Trickle Down Theory ring a bell) has the same problem as small business breaks added that any extra money will be given to stockholders.  Big business is notorious for not using money to upgrade, improve, and create jobs.
• Tax breaks will not stimulate investment.  In the past, it has been Wall Street that has drained the economy and money by companies buying back stock and paying dividends.  And who has all that stock… it is not you and me, skippy, who are buying the goods and struggling to put food on the table.
• Business growth comes by sales, not investment capital.  A company is not going to dive into risky investment just because there is more cash lying around.  Sales stimulates growth because then companies have solid evidence that there will be more money on the heels of the current sales.  Money the government spends on projects employ people who then will be more willing to spend knowing that they will still have a job.
• Government spending creates jobs, particularly the plan as put forth by the President.  Those who have been laid-off will be more able to find jobs.  Pay attention because this can get complicated…
• Jim works for a software company and was laid-off.  Government starts building roads.  Though Jim does not have a clue on how to build roads, someone else does named Carl.  So Carl gets hired along with other people.  Maybe this company suddenly needs more IT people to handle the increase in data.  Maybe Jim can doe that job and because the company has more money coming in it will hire Jim.  Or that company sees a chance with the new money and employees to upgrade its systems, Jim gets rehired to his old job.  Now we have a lot less people using unemployment benefits.  Hey, the government just saved some money.
• Bill is a teacher about to lose his job because of state budget crisis.  State gets more education funds.  Bill keeps his job, can continue to give that kid having problem in math the extra help.  That kid grows up, goes to college, and finds a job at Jim’s software company that didn’t go bust because of the stimulated economy making much more money that working at a fast food chain so in turn he has more taxable income.
• Yes, that little bit of spending on that road made an enormous impact.
• The other scenario, tax break instead went to a company that used the money to pay more dividends to a stockholder Sam that put it away in savings.  Jim didn’t get his job back, Carl stayed on unemployment, Bill lost his job, and the kid wasn’t able to get the extra help he needed because there was not enough teachers. Yes, Sam has more money from his reduction in capital gains, lower taxes, and higher dividends. of course Sam could be altruistic, but history proves otherwise (see what got us into this mess in the first place).

That is just my opinion, but it is backed by this guy and this guy as well as in this interview.

Of course, that federal wage tax holiday would work for me as I’d would by more groceries and some clothes.

Email this post

It happened. An African-American man has won a presidential election. In a feat that hasn’t been seen for many elections, the electoral vote winner is also the popular vote winner. At the time of this posting Obama had 52% of the vote and 332 electoral votes with three states, Indiana, Missouri, and North Carolina, still processing votes and too close to call for those states. With 330 electoral votes, Obama clearly surpassed the require 270 electoral votes needed to win. What surprised me is that Obama took both Pennsylvania and Florida, two states that were until last night leaning in McCain’s favor. Seven states, Colorado, Florida, Iowa, Nevada, New Mexico, Ohio, and Virginia, changed party selection from the last two elections.

I was also surprised that the race was closer in Georgia. My state has a history of overwhelmingly supporting the Republican candidate (except for Abraham Lincoln and the support for Democrat Jimmy Carter in his two presidential elections).

The new President is going to have a difficult job ahead of him with the failing economy, stock market volatility, strained foreign relations, job loses, lowering take-home income, and troop withdrawals. I certainly don’t envy him the job which may take two terms just to fix.

Now if we can just get a woman elected president.

Email this post

Warning! Politics Ahead!

From time to time (and I’m talking long stretches of time in between) I talk about politics… or rather that thing they call politics in relation to elections, it looks more like shouting matches and prissy fits to me. Well, get ready, I’m about to go into politic talk mode.

I don’t normally watch Presidential or VP debates as they are loaded with more rhetoric than actual information. I’m not even sure they qualify as real debates and I used to be on the debate team (state 1st runner up and top five) in high school. I’m gonna break with my usual disinterest of the political hog calling and watch the VP debate on Thursday from Washington U. in ole St. Louis. So far from what I’ve seen and heard from Palin herself, I’m expecting a laugh riot to rival a Monty Python sketch. You want a preview? Just check out when Palin answers a bailout question from Katie Couric. WTF? I mean I though Yogi Berra was a bit out there in some of the quotes accredited to him.

I guess I’ll have to miss Supernatural tomorrow night.

Listening to Bioshock Soundtrack by Garry Schyman.

Email this post