Thursday, February 19, 2009

No celebration for Sactown

Everyone please put away your Congrats posters and stop patting yourselves on the back. The budget California just passed after more than 5 days of being locked inside a room is mediocre at best, and pointless at worst. No one has faced the fact that California’s budgeting system is terribly flawed, and will continue to be so for the following reasons:

1. The majority of Californians don’t care. Yes, it’s a pain when the DMV is not open on Saturday or if I won’t get my $32 tax refund, but for the most part the budget not being passed had little effect on most state residents. The people that do care: counties, cities, state workers, and state politicians’ families don’t make up a large enough percentage of the population to really make this a priority.

2. The right and left in California never have to agree on anything except for taxes and the budget. I’ve written about this before, but this is the one time when Reps can really stick it to the Dems for rolling over them the rest of the year with a simple majority. What generally happens, is a refusal to compromise at any cost, and the few that do cross the party line cut themselves a nice deal in exchange for alienation from their party. There needs to be a change in the 2/3 majority vote for the budget and tax increases.

3. Californians want everything for nothing. No one wants to give up any of their current funding, but no one wants to increase taxes. And this happens every year, not just when the economy is in recession. For 16 of the past 18 years, California has run a structural deficit, which means even when the economy is good we’ve spent more than we’ve taken in and covered that gap with moving money around on the books and/or borrowing. Except this year, with a $41 billion gap and the lowest bond rating in the nation, the politicians were forced to come up with a solution.

4. Even the politicians have little incentive to make it work. The voters want term limits to prevent lazy voters from sending the same inefficient officials back to Sacramento year after year. As a result, we have politicians who need to find their next gig after their term is up and spend the majority of their time in office raising funds for their next election, fixing long-term problems with short-term solutions and burning bridges at every turn, because they won’t be in office long enough to care. I know expecting the voter to care about who they choose to represent them is asking a lot, but this automatic system of accountability has not improved the quality of public policy or reduce the amount of corruption.

Read the following 3 opinions by some very smart individuals about other reasons why we’re in a budgetary mess. They include the hyper-partisan nature of our State officials, and the ballot initiative process, which allows the same voter who is too lazy to vote out ineffective politicians to make changes to our State Constitution and determine where to spend money with only a 50% majority. Today is the type of day I wish I could avoid reading the news and spend my time blissfully enjoying TMZ and other gossipy websites. Who is Jennifer Aniston dating these days?

Wednesday, February 4, 2009

The Government: Spender of Last Resort

The past week's news about the economic stimulus plan has really started to irk me to a level I have not seen since a certain VP candidate was on all the talk shows remarking on our proximity to Russia. It seems that Congress is involved in a big game of chicken, and the only ones who are going to get hurt are the "everyday Americans" (note: I don't even know what that phrase means, but everyone uses it so I thought why not?). Why do I think we're headed to an even bigger disaster? Read this article from to get a taste as to why if the economic stimulus doesn't actually spend money and instead just cuts taxes we'll be an even bigger lurch. Actually, you don't even have to do that just think about what you did last year, when the feds gave you $300 to stimulate the economy. What did most of us do? Well those of us who needed the money used it to pay off some debt or put it into savings. Nowadays, $300 isn't a lot towards big ticket items such as big screen TVs or cars, the two industries really hurting these days.

Tax cuts don't work to stimulate the economy. Should we have tax cuts if the government isn't using the money or doesn't need it? Yes of course. Especially when we've balanced the budget. But in times of extreme deficit, how are tax cuts going to help? Another suggestion was there needs to be tax incentives for small businesses to hire people. Hmm...if businesses need to hire someone to be more productive they will. How will hiring a person they don't need to receive a tax break help their overall bottom line? If there is no demand for the service/product you sell why would you expand capacity?!

I'm sorry I'm in such a rant right now, but it would behoove the majority of politicians and pundits to sit down and read an Economics 101 book, particularly focusing on macroeconomics. Once you realize the magic equation of GDP=C+I+G+(X-M) it becomes painfully obvious that if C (consumption) is non-existent and I (investment) is in the toilet, and you're in a huge trade deficit (X-M). The only variable that can be changed is G (government spending)! Any 1st year Econ student can tell you that government investment in the economy has A LOT more bang for its buck than redistribution of wealth via tax cuts. And when no one is buying, the spender of last resort is guess who...Uncle Sam.

Tuesday, February 3, 2009

Buck up Gen Y, it's not over yet.

A while ago I commented on an article regarding the need for interview-ready clothing especially in the state of the economy. It seems that the outlook is even grimmer in this New York Times' blog entry about what to wear on the day you think you're going to get the axe.

I haven't really heard personally of anyone getting the axe at their job, but I've definitely heard a lot about layoffs and closures in the news. Macy's, Home Depot, Target...the list just keeps growing longer and longer. I am lucky to be employed, as is my bearded friend, in industries that are continuing to survive (even if on a day-to-day basis.) Politics and education do not rely on the fickle consumer to keep them afloat, but foundations/corporations and the taxpayers may not be able to maintain their support in the coming years. All the pundits and economists are saying if you think 2009 is bad, wait until 2010.

And yet this happens for my generation at a unique period in our adult lives. As we barrel towards thirty, we're saving up for down payments on starter houses, paying off student loans and embarking on our "real" careers. Where does this leave us? Our generation has already sent thousands to Iraq and Afghanistan to fight a war that started at the beginning of our 20s. We elected the first Black President at the end of our 20s. Now it seems that the course of history has a few more curveballs it wants to throw before we see 35. I've yet to lose my sense of optimism, but all the doom and gloom makes it difficult to have much faith in being able to achieve our personal version of the American Dream.