7 ms·

The housing & job reports feel right and are welcome news. But did the NYTimes just point to California's current budget as a sign of our State's "economic sta

by aresant 14y ago

The housing & job reports feel right and are welcome news. But did the NYTimes just point to California's current budget as a sign of our State's "economic stability"? They quote that the "California Legislative Analyst’s Office projecting . . . . [that] California might post a $1 billion surplus in 2014" That is such an irresponsible thing to publish - a "surplus" makes it sound like the government is totally on top of the situation here and a model for success. The reality is that CA would be going off the @!@W$! rails right now in 2012 if voters hadn't just passed Prop 30. Prop 30 was an EMERGENCY, retroactive (from Jan 1 2012), and "short-term" (7 year) tax on high income earners + a moderate increase in sales tax which is going to raise $6B a YEAR to pull CA's ass out of the fire. So while the gloom may be lifting, I remain pessimistic that our state gov't has any long-term solutions to their continued budgetary missteps.

dreamdu5t 14y ago
A surplus of $1 billion means nothing for California's $100+ billion in debt and unfunded liabilities. We would need a billion surplus every year for hundreds of years. http://www.nytimes.com/2012/09/21/us/california-debt-higher-than-earlier-estimates.html http://www.nytimes.com/2012/09/21/us/california-debt-higher-... http://www.usgovernmentspending.com/california_state_spending.html http://www.usgovernmentspending.com/california_state_spendin...
- jfoutz 14y ago
  Well, I don't know California's interest rate on those loans, but if it's lower than inflation, you'll inevitably win. Also, if the economy keeps growing, 100 billion in a hundred years will be a lot easier to come up with than it is today. Think of Dr Evil asking for 1 million dollars. edit Just looked it up. Just shy of a 2 trillion dollar Gross State Product? 100 billion is a big number, but 5% debt is not that bad. (the state) Going into debt during the good times is stupid, going into debt in recession is probably smart.
  - ekianjo 14y ago
    The Gross State Product does NOT belong to the State, though.
  - adventured 14y ago
    Not to mention that debt interest is taking up twice as much of the general fund as a decade ago. "California's current debt burden is 7.8 percent of the state's general fund budget of $88.5 billion for the current fiscal year that ends in June 2012. That 7.8 percent is more than double the 3.4 percent of fiscal 2003-04." http://www.ocregister.com/articles/debt-320389-interest-state.html http://www.ocregister.com/articles/debt-320389-interest-stat...
    - muzz 14y ago
      Yes indeed California racked up a lot of debt from 2003 to 2012. However, with the decreasing shortfalls and expected balanced budgets that debt is no longer increasing and with the projected surpluses it can be paid down. The debt is a legacy of the past. Great strides have been made in the past few years to get the state's fiscal situation in order.
  - NoPiece 14y ago
    It isn't the debt by itself that is the problem, it is the debt plus the unfunded liabilities. The pension liability alone is estimated at an additional $500 billion. Plus there is the debt and financial problems of the various cities and counties.
    - rprasad 14y ago
      The unfunded liability will last out most another 50 years (when the last of the employees covered by these generous pensions dies). New employees receive far less favorable pensions: either significant reduced defined-benefit pensions, or a switch to defined-contribution pensions. New employees are also subject to higher retirement eligiblity raises and cannot apply as much (if any) vacation time or unused sick days toward increasing their pension-base salary.
- anigbrowl 14y ago
  That's a surplus after all the debt service payments (ie bond interest), and unfunded liabilities aren't all due immediately. Some are unfunded because they're pay-as-you-go, and so they don't need to be fully funded in the present. Suppose you have an income, a year's worth of savings in the bank, and a mortgage with 20 years left on the term. You don't lie awake at night worrying about 19 years' worth of unfunded liability, even though you don't currently have the money to pay it off. In fact, right now is a good time to have debt or even issue more because interest rates are at historic lows.
guelo 14y ago
The California budget crises were created by the rule that required a 2/3 supermajority vote in both legislative houses to pass a budget that raised taxes. That rule was used by the minority Republicans during the recession to hold the state hostage to slash and burn government programs across the state. The rule was rescinded by voters in 2010 after they got sick of the insanity. Voters also just gave the Democrats a supermajority in the legislature. We will now have unimpeded Democratic rule.
- NoPiece 14y ago
  You can't create a crisis simply by refusing to raise taxes (which were already near the highest in the nation). There was obviously massive spending going on without the revenue to pay for it. How about blaming the spenders?
  - rprasad 14y ago
    You can't create a crisis simply by refusing to raise taxes (which were already near the highest in the nation). Sure you can. Spending increases are very predicable, and generally increase with the size of the governed populace. There is a limit to how much efficiency you can extract from technology and procedural changes when there are legal (and especially constitutional) restrictions on what you can do and how you can do it. The Republican minority repeatedly attempted not only to prevent spending increases, but to reduce budget revenue to 1960s levels, i.e., to the level of spending when the state's population was roughly half its current size. The only success they had was in reducing budgets for (very successful) social programs and drug rehabilitation.
    - NoPiece 14y ago
      Just as spending rises predictably, so does revenue along with GDP. Taxe rates haven't gone down, so all you need to do is grow spending at a reasonable rate. California didn't grow spending reasonably or responsibly. As tax revenue spiked during the dot com and real estate boom, spending went up commensurately, and beyond.
Bullshituserid 14y ago
What housing report? Is this another one that heralds increasing prices as GOOD? Yeah, let's bring back the bubble that everyone was talking about. Oh yeah, and we all knew a CORRECTION was due, and yet when it happened it was a "crisis." Bullshit. Also, fuck California for ripping off small businesses and essentially calling them stupid for incorporating in California. If you start a business in California and LOSE MONEY, the state will still charge you $800 a year in "tax." California is a huge rip-off, fraud, and disgrace. The proposition "system" shifts the burden of legislating to the citizens, many of which don't have the judgment to say NO. And thus the state is saddled with unfundable bullshit year after year. There's nothing good going on in California. The entire state needs an enema.
adventured 14y ago
Few seem to want to hear it, but the housing 'recovery' is based strictly on a Fed that provides perpetual QE to hold down interest rates forever. Not to mention they've removed trillions in junk mortgages from the market, leaving them one of the world's largest land owners. That has also made it easier for the banks to go back to bad real estate policies, since those toxic mortgages have been effectively bailed off their balance sheets. It is currently the Fed's stated intention to create another housing bubble (in their terms they want to inflate asset values, har har), and they're working very hard at it. A large portion of California's supposed improvement is based on rising property values, making home owners feel better off again. It's all fantasy land economically. Mortgage rates at 3.4% is obscene based on any historical norm. When those rates revert to an average (or worse) as they must, the housing market will tank. The opposite reaction that the Fed's extreme intervention will invite, is going to cause massive destruction just like the last housing bubble they brewed. They learned nothing from their past mistakes.
- aptwebapps 14y ago
  "perpetual QE" It's hard to cast 2007 to date as perpetual and the end goal is not to keep interest rates down, but inflation.
  - 001sky 14y ago
    fed has said this will policy position will go forward for the 'forseable future' or some-such In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015. http://www.federalreserve.gov/newsevents/press/monetary/20120913a.htm http://www.federalreserve.gov/newsevents/press/monetary/2012...
    - aptwebapps 14y ago
      Yes, by which point they hope that they won't need to keep interest rates down. In fact, this statement and others made at the time are an attempt to get additional traction with expectations about future interest rates.
temphn 14y ago
Regarding the housing numbers, Bernanke is printing $85B per month to buy mortgage-backed securities as part of Operation Twist/QE3. He's pumping the bubble back up; feels good now but the final pop is going to really hurt. http://qz.com/14060/qe3-is-forcing-banks-to-lend-and-its-working It’s never been so profitable for US banks to give mortgages. Yet they’ve almost never been so reluctant to do it. So now, the Fed is forcing them. Much has been written about the Fed’s announcement of its latest effort to support the US economy with a new round of money creation and mortgage-bond buying—QE3—on Sep. 13. But few have recognized that it amounted to a shot across the bow of some of the biggest financial institutions in the country. Here’s why. The Fed is aiming its unlimited buying power (since it can literally create money) at the market for mortgage-backed securities (MBS), the pools of mortgages where nearly all American home loans eventually end up. And the one of the largest holders of these MBS are the banks. Speaking of rails, California is still building a $68 billion train to nowhere. The state will still declare bankruptcy within years, Prop. 30 or no Prop 30. Most of the people entering CA are not YC founders, but rather high school dropouts, and most of the people and companies leaving are net taxpayers. Further taxes will only increase this exodus. All of Prop 30's projected revenue is based on the fallacious idea that smart, high-earning people are stationary targets. They will leave, just as many companies have left. http://money.cnn.com/2011/06/28/news/economy/California_companies/index.htm http://money.cnn.com/2011/06/28/news/economy/California_comp...
- melling 14y ago
  I thought the train was going between LA and SF? Seems like an ideal distance (350miles/550km) to build a bullet train, right? It's a lot of money and it'll be completed about the time Japan finishes it's 300mph (500kph) maglev, but considering how long it takes to get things done in the US, I guess people should be happy for now. Someday, SF to LA will be about 1hr. http://www.bbc.co.uk/newsround/20512131 http://www.bbc.co.uk/newsround/20512131
  - temphn 14y ago
    The train will never connect LA and SF. http://www.nytimes.com/2011/11/27/us/california-rail-project-advances-amid-cries-of-boondoggle.html?pagewanted=all The first phase would be a 130-mile stretch from Bakersfield to just south of Chowchilla in central California, at a cost of just over $6 billion; of that, $2.6 billion would come from a $9 billion high-speed rail bond passed by California voters in 2008, and $3.5 billion from federal stimulus money. ... The authority said it chose the relatively remote section in the Central Valley as the first leg to be built, even though few people there are looking to use a railroad, so that construction could begin next year and meet deadlines for using federal money. But critics suggest that the real motivation was to get the spur in place, calculating that future legislatures would not be able to abandon the project before it reached major population centers. “What they are hoping is that this will be to high-speed rail what Vietnam was to foreign policy: that once you’re in there, you have to get in deeper,” said Richard White, a professor of history at Stanford University. “The most logical outcome to me is we are going to have a white elephant in the San Joaquin Valley.” There is no plan on how to finance the project once the bond and federal money is exhausted, beyond a hope of private investment and public money during flusher times. ... Beyond that, several experts suggested that the train would never attract the promised ridership, in no small part because unlike, say, the Amtrak Northeast Corridor, the bullet train would go into cities that do not have particularly extensive public transit networks, forcing people to rent cars once they arrived. Low ridership would undercut the economic and environmental benefits that are part of the argument for the project.

by aresant 14y ago

dreamdu5t 14y ago

A surplus of $1 billion means nothing for California's $100+ billion in debt and unfunded liabilities. We would need a billion surplus every year for hundreds of years. http://www.nytimes.com/2012/09/21/us/california-debt-higher-than-earlier-estimates.html http://www.nytimes.com/2012/09/21/us/california-debt-higher-... http://www.usgovernmentspending.com/california_state_spending.html http://www.usgovernmentspending.com/california_state_spendin...

jfoutz 14y ago
Well, I don't know California's interest rate on those loans, but if it's lower than inflation, you'll inevitably win. Also, if the economy keeps growing, 100 billion in a hundred years will be a lot easier to come up with than it is today. Think of Dr Evil asking for 1 million dollars. edit Just looked it up. Just shy of a 2 trillion dollar Gross State Product? 100 billion is a big number, but 5% debt is not that bad. (the state) Going into debt during the good times is stupid, going into debt in recession is probably smart.
- ekianjo 14y ago
  The Gross State Product does NOT belong to the State, though.
- adventured 14y ago
  Not to mention that debt interest is taking up twice as much of the general fund as a decade ago. "California's current debt burden is 7.8 percent of the state's general fund budget of $88.5 billion for the current fiscal year that ends in June 2012. That 7.8 percent is more than double the 3.4 percent of fiscal 2003-04." http://www.ocregister.com/articles/debt-320389-interest-state.html http://www.ocregister.com/articles/debt-320389-interest-stat...
  - muzz 14y ago
    Yes indeed California racked up a lot of debt from 2003 to 2012. However, with the decreasing shortfalls and expected balanced budgets that debt is no longer increasing and with the projected surpluses it can be paid down. The debt is a legacy of the past. Great strides have been made in the past few years to get the state's fiscal situation in order.
- NoPiece 14y ago
  It isn't the debt by itself that is the problem, it is the debt plus the unfunded liabilities. The pension liability alone is estimated at an additional $500 billion. Plus there is the debt and financial problems of the various cities and counties.
  - rprasad 14y ago
    The unfunded liability will last out most another 50 years (when the last of the employees covered by these generous pensions dies). New employees receive far less favorable pensions: either significant reduced defined-benefit pensions, or a switch to defined-contribution pensions. New employees are also subject to higher retirement eligiblity raises and cannot apply as much (if any) vacation time or unused sick days toward increasing their pension-base salary.
anigbrowl 14y ago
That's a surplus after all the debt service payments (ie bond interest), and unfunded liabilities aren't all due immediately. Some are unfunded because they're pay-as-you-go, and so they don't need to be fully funded in the present. Suppose you have an income, a year's worth of savings in the bank, and a mortgage with 20 years left on the term. You don't lie awake at night worrying about 19 years' worth of unfunded liability, even though you don't currently have the money to pay it off. In fact, right now is a good time to have debt or even issue more because interest rates are at historic lows.

guelo 14y ago

The California budget crises were created by the rule that required a 2/3 supermajority vote in both legislative houses to pass a budget that raised taxes. That rule was used by the minority Republicans during the recession to hold the state hostage to slash and burn government programs across the state. The rule was rescinded by voters in 2010 after they got sick of the insanity. Voters also just gave the Democrats a supermajority in the legislature. We will now have unimpeded Democratic rule.

NoPiece 14y ago
You can't create a crisis simply by refusing to raise taxes (which were already near the highest in the nation). There was obviously massive spending going on without the revenue to pay for it. How about blaming the spenders?
- rprasad 14y ago
  You can't create a crisis simply by refusing to raise taxes (which were already near the highest in the nation). Sure you can. Spending increases are very predicable, and generally increase with the size of the governed populace. There is a limit to how much efficiency you can extract from technology and procedural changes when there are legal (and especially constitutional) restrictions on what you can do and how you can do it. The Republican minority repeatedly attempted not only to prevent spending increases, but to reduce budget revenue to 1960s levels, i.e., to the level of spending when the state's population was roughly half its current size. The only success they had was in reducing budgets for (very successful) social programs and drug rehabilitation.
  - NoPiece 14y ago
    Just as spending rises predictably, so does revenue along with GDP. Taxe rates haven't gone down, so all you need to do is grow spending at a reasonable rate. California didn't grow spending reasonably or responsibly. As tax revenue spiked during the dot com and real estate boom, spending went up commensurately, and beyond.

Bullshituserid 14y ago

What housing report? Is this another one that heralds increasing prices as GOOD? Yeah, let's bring back the bubble that everyone was talking about. Oh yeah, and we all knew a CORRECTION was due, and yet when it happened it was a "crisis." Bullshit. Also, fuck California for ripping off small businesses and essentially calling them stupid for incorporating in California. If you start a business in California and LOSE MONEY, the state will still charge you $800 a year in "tax." California is a huge rip-off, fraud, and disgrace. The proposition "system" shifts the burden of legislating to the citizens, many of which don't have the judgment to say NO. And thus the state is saddled with unfundable bullshit year after year. There's nothing good going on in California. The entire state needs an enema.

adventured 14y ago

Few seem to want to hear it, but the housing 'recovery' is based strictly on a Fed that provides perpetual QE to hold down interest rates forever. Not to mention they've removed trillions in junk mortgages from the market, leaving them one of the world's largest land owners. That has also made it easier for the banks to go back to bad real estate policies, since those toxic mortgages have been effectively bailed off their balance sheets. It is currently the Fed's stated intention to create another housing bubble (in their terms they want to inflate asset values, har har), and they're working very hard at it. A large portion of California's supposed improvement is based on rising property values, making home owners feel better off again. It's all fantasy land economically. Mortgage rates at 3.4% is obscene based on any historical norm. When those rates revert to an average (or worse) as they must, the housing market will tank. The opposite reaction that the Fed's extreme intervention will invite, is going to cause massive destruction just like the last housing bubble they brewed. They learned nothing from their past mistakes.

aptwebapps 14y ago
"perpetual QE" It's hard to cast 2007 to date as perpetual and the end goal is not to keep interest rates down, but inflation.
- 001sky 14y ago
  fed has said this will policy position will go forward for the 'forseable future' or some-such In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015. http://www.federalreserve.gov/newsevents/press/monetary/20120913a.htm http://www.federalreserve.gov/newsevents/press/monetary/2012...
  - aptwebapps 14y ago
    Yes, by which point they hope that they won't need to keep interest rates down. In fact, this statement and others made at the time are an attempt to get additional traction with expectations about future interest rates.

temphn 14y ago

Regarding the housing numbers, Bernanke is printing $85B per month to buy mortgage-backed securities as part of Operation Twist/QE3. He's pumping the bubble back up; feels good now but the final pop is going to really hurt. http://qz.com/14060/qe3-is-forcing-banks-to-lend-and-its-working It’s never been so profitable for US banks to give mortgages. Yet they’ve almost never been so reluctant to do it. So now, the Fed is forcing them. Much has been written about the Fed’s announcement of its latest effort to support the US economy with a new round of money creation and mortgage-bond buying—QE3—on Sep. 13. But few have recognized that it amounted to a shot across the bow of some of the biggest financial institutions in the country. Here’s why. The Fed is aiming its unlimited buying power (since it can literally create money) at the market for mortgage-backed securities (MBS), the pools of mortgages where nearly all American home loans eventually end up. And the one of the largest holders of these MBS are the banks. Speaking of rails, California is still building a $68 billion train to nowhere. The state will still declare bankruptcy within years, Prop. 30 or no Prop 30. Most of the people entering CA are not YC founders, but rather high school dropouts, and most of the people and companies leaving are net taxpayers. Further taxes will only increase this exodus. All of Prop 30's projected revenue is based on the fallacious idea that smart, high-earning people are stationary targets. They will leave, just as many companies have left. http://money.cnn.com/2011/06/28/news/economy/California_companies/index.htm http://money.cnn.com/2011/06/28/news/economy/California_comp...

melling 14y ago
I thought the train was going between LA and SF? Seems like an ideal distance (350miles/550km) to build a bullet train, right? It's a lot of money and it'll be completed about the time Japan finishes it's 300mph (500kph) maglev, but considering how long it takes to get things done in the US, I guess people should be happy for now. Someday, SF to LA will be about 1hr. http://www.bbc.co.uk/newsround/20512131 http://www.bbc.co.uk/newsround/20512131
- temphn 14y ago
  The train will never connect LA and SF. http://www.nytimes.com/2011/11/27/us/california-rail-project-advances-amid-cries-of-boondoggle.html?pagewanted=all The first phase would be a 130-mile stretch from Bakersfield to just south of Chowchilla in central California, at a cost of just over $6 billion; of that, $2.6 billion would come from a $9 billion high-speed rail bond passed by California voters in 2008, and $3.5 billion from federal stimulus money. ... The authority said it chose the relatively remote section in the Central Valley as the first leg to be built, even though few people there are looking to use a railroad, so that construction could begin next year and meet deadlines for using federal money. But critics suggest that the real motivation was to get the spur in place, calculating that future legislatures would not be able to abandon the project before it reached major population centers. “What they are hoping is that this will be to high-speed rail what Vietnam was to foreign policy: that once you’re in there, you have to get in deeper,” said Richard White, a professor of history at Stanford University. “The most logical outcome to me is we are going to have a white elephant in the San Joaquin Valley.” There is no plan on how to finance the project once the bond and federal money is exhausted, beyond a hope of private investment and public money during flusher times. ... Beyond that, several experts suggested that the train would never attract the promised ridership, in no small part because unlike, say, the Amtrak Northeast Corridor, the bullet train would go into cities that do not have particularly extensive public transit networks, forcing people to rent cars once they arrived. Low ridership would undercut the economic and environmental benefits that are part of the argument for the project.