Birds of a Feather

What does the Gubenator and Gentleman Jerry have in common? Both are on the losing end of fiscal policy. What neither the politicians in Sacramento or San Diego were willing to accept was that the last two years were the good years in the tax revenue cycle and that the housing bubble bursting in 2007-2008, just like the bubble burst in 1999-2000, is going to take down their fiscal house of cards like Hurricane Katrina versus a Gulf Coast trailer park. It’s time we get use to the “R” word — recession — and with it renewed fiscal crisis. That’s my second “told you so” of the day.

3 Responses to “Birds of a Feather”

  1. Vladimir M. Says:

    First of all, we’ve missed you in sixth period Dr. Luna…

    Now, I’ve been wanting to ask you about this for a couple days: the Governor says that in order to balance the budget he can only raise taxes or cut funding but I was wondering if some sort of monetary policy could be implemented? Instead of taking money away from the people, is there any way in which he could promote greater spending which would flood more money into the system (much like the Federal Reserve and the control of interest rates)?

  2. Carl Luna Says:

    V —

    That’s the drawback with being part of a monetary union — you lose monetary autonomy. U.S. states have no independent powers like the Fed to influence the money supply. Instead, they are subject to whatever interest rate regime the national Fed implements. States are also limited in fiscal policy as they can not run the sorts of massive deficits the Feds can. California macroeconomic policy is, therefore, as influenced by Washington as Sacramento. This is a similar problem experienced by EU members of the EURO zone — they’ve had to sacrifice monetary autonomy in exchange for the benefits of an integrated economy. Good question, however.

  3. mlaiuppa Says:

    I’ll insert an “I told you so” of my own here too.

    I said way back when Jerry was running that you can’t just cut spending. That’s good but not solution. You also have to raise revenue in some way. I said the same thing when Arnold was running.

    Anyone who runs a household knows these basic facts. When monthly bills total more than monthly income you have to either cut spending or raise income. If the gap is enough you have to do both.

    San Diego and California have to do both.

    To think either the city or the state can solve it’s fiscal woes by ONLY cutting back on spending is fiscally irresponsible. But it’s a fantasy the voters keep buying in to. And look where it’s got us.

    Both the City and the State also need to take a page out of the Household Handbook and start saving for a rainy day. That kick back of tax money that Pete Wilson inacted was the dumbest thing I every heard. It is totally stupid. Save the money for a future emergency. Gee… that Enron scam or the pension debacle.

    Anyone with any sense knows you don’t spend your entire paycheck down to zero every month. If you can you save something for a rainy day.

    And it’s been pouring for quite some time now.

    Voters: bite the bullet. You think inflation only hits you? Taxes are going to *have* to go up. And…..big business is going to have to start paying it’s fair share. Get over it.

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