The $1.1 trillion budget bill also adds about $5.4 billion for new labor, education and health spending in addition to billions more to meet a shortfall in Pell grants for low-income college students; $1.25 billion in spending related to health care reform; including 6,600 legislative earmark provisions where $8 billion within the bill should be spent.

Unfortunately this congressional mad hatter spending will not help get the country back on track with jobs or create an opportunity for business growth.  What it will do is create further drag on the economy as greater revenue is required to pay down the interest on the debt to finance these spending programs bought on Chinese credit.

We can hope the new congress will begin to rein in spending which will still require the president’s signature for passage.

There is no stimulus to come from a one year 2% payroll tax rate cut; There is no stimulus in raising the estate tax from zero to 50%; tax credits for ethanol help an industry already on federal life support, to mention a few.   However, what has in effect happened is that America will soon get a second $858 billion Stimulus over two years, lets not forget the first Obama $814 billion 2009 stimulus package.  This time Obama got the Republicans to offer to increase spending by $858 but $630 billion of the tax bill is earmark spending above and beyond extension of the Bush tax cuts.

This is not good economic news for a future forecast that the recovery is taking hold.  Just when we thought the reckless spending was over its damn the deficit, full speed ahead with spending more borrowed Chinese dollars.

While oil prices would have to go back to their 2008 highs to slow the economy the recent run-up towards $90/bbl is already doing its damage. Gasoline prices at the pump are now over $3/gallon in 20 states and the surge has effectively drained $40 billion out of household cash flow. So, a good part of that Bush tax cut extension is going to be siphoned into the gas tank.

Those now receiving unemployment soared 523,000 to 4.2 million the latest week and they will receive continuing payments of unemployment checks instead of standing in soup lines.

Imagine embarking on more fiscal expansion at a time when structurally the budgetary gap has breached 7% of GDP and the Fed going along the road of even more radical expansion of its balance sheet with quantitative easing II, and a congress that was just spanked for creating fiscal excesses is now tapping into the Social Security fund so as to stimulate consumer expenditures.

Now Democrats opt for the tax cuts they reviled in 2008 and the lame duck congressional leadership appears in line to run up the fiscal tab even more with a trillion dollar continuing resolution/omnibus spending bill to fund the federal government through next year; remember they did not pass a federal budget yet, and this resolution contains even more democratic pork barrel spending.

WHATS HAPPENING IN THE REAL ESTATE MARKET?

It’s perplexing that the latest down-leg in U.S. home prices has gone virtually unnoticed by the media and the markets. The Case-Shiller index is down in each of the past three months and there is still roughly two years’ of unsold inventory overhanging the market once the “shadow” foreclosure backlog is included.

Housing demand is dormant as home buying intentions slipped in December to a level that can only be described as anemic. Mortgage applications remain near decade-low levels and part of this reflects lingering caution among private lenders who are still maintaining fairly stringent credit guidelines.

A FEW OF THE LATEST HEADLINES FOR DECEMBER

Housing Wire – “Robo-signing hangover slows foreclosures in Western states” (12-14-10)

“Foreclosure sales in Arizona, California, Nevada, Oregon and Washington fell 38.7% in October and November, according to ForeclosureRadar.”

CNN - “Obama’s mortgage mod plan is still lacking” (12-14-10)

“Last April, the Congressional Oversight Panel found the program to be struggling to get off the ground despite having been in action for a year and a half. The latest evaluation of the Home Affordable Modification Program (HAMP) came out Tuesday and the result was — same deal.”

San Francisco Chronicle - “Loss of estate tax leaves hole in state budget” (12-14-10)

“The proposed tax deal in Congress would fail to deliver about $2.7 billion in estate tax revenues California was counting on receiving this fiscal year and next, but some say the state should never have expected those revenues in the first place.”

Housing Wire – “LendingTree survey shows 40% of homeowners took first loan offer” (12-14-10)

“Roughly 40% of current homeowners surveyed by the online lender exchange LendingTree obtained just one mortgage loan quote before purchasing their home. LendingTree and the Harris Interactive surveyed 1,317 homeowners online, and of those 96% said they compare prices when shopping for anything – except mortgages. This, according to LendingTree, explains why only 28% surveyed feel confident they got the best possible deal on their loan.”

Associated Press – “Fewer homeowners underwater in the third quarter” (12-13-10)

“About 10.8 million households, or 22.5 percent of all mortgaged homes, were underwater in the July-September quarter, housing data firm CoreLogic said Monday. That’s down from 23 percent, or 11 million households, in the second quarter.”

Housing Wire – “Zillow: Home values crater by $1.7 trillion in 2010″ (12-9-10)

“U.S. homes are expected to lose more than $1.7 trillion in value this year, 63% more than the estimated $1 trillion lost in 2009, according to Zillow.”

Housing Wire – “Double dip in some markets drag home prices down 5.8%: Clear Capital” (12-9-10)

“Home prices in November dropped 5.8% over the previous three months and are down 2.7% from a year ago, according to real estate analytics firm Clear Capital.”

Housing Wire – “Fannie Mae survey finds traditional homeownership changing” (12-9-10)

“51% of survey respondents said the housing crisis has not affected their overall willingness to buy a home, 33% said they would be more likely to rent their next home than buy. In January, 30% of Americans surveyed said they would rent a home the next time around.”

Housing Wire – “Fitch sees 10% drop in home prices in 2011, negative outlook for MBS” (12-9-10)

“Fitch Ratings expects another 10% decline in home prices in 2011, as the supply of distressed properties continues to weigh down the housing market. Accordingly, analysts maintained the agency’s negative outlook for the residential mortgage-backed securities space and said 53% of all investment-grade RMBS rated by Fitch have a negative outlook.”

HOW ABOUT THAT GOLDEN STATE CALIFORNIA!

Governor Re-elect Jerry Brown says California’s budget deficit may hit $28 billion, and last year it was a meager 19 billion that was apparently closed by Governor Schwarzenegger this past budget year, with gimmicks to reach the balanced budget requirement like trying to borrow $3 trillion in bonds all at once.

California’s Politicians are solely responsible for this fiscal mess from spending on programs when revenues were dropping and for not having any fiscal restraint.  They are also responsible for using borrowed money to pay for current expenses until they had borrowed more than they now seem able to pay back.

REVIEW OF CURRENT GROWTH, EMPLOYMENT STATISTICS AND AFFORDABILITY

Growth is down, unemployment is up and home prices are in the tank.  These are good times for purchasing homes and reselling them, and holding on to assets that will take off when the economy turns and inflation takes off.  Home mortgage rates are now trending upward and the bond market is following suit.  California will need funding from the federal government to stay afloat, raise taxes, cut spending and pay higher rates for borrowed money due to its terrible credit standing.  Raising taxes will not help the numbers on the chart above.

The definition of insanity doing the same thing over and over again expecting different results………Einstein



California has 38 million people, a GDP of $1.8 trillion, and economy larger that India, Canada, Russia or Brazil and its economy is collapsing.  The California unemployment rate has surged to 11.5 percent, the worst since World War II.

Lawmakers are scrambling to close the $24 billion gap after voters rejected ballot measures last month that would have increased taxes, borrowed money and reapportioned state funds.

But Governor Schwarzenegger has vowed to veto any budget that includes new taxes, setting the stage for an ugly battle as the clock ticks toward the deadline.Now  after voters rejected ballot measures last month that would have increased taxes, borrowed money and reapportioned state funds, legislators are still trying to increase taxes and borrow money.

Governor Schwarzenegger has vowed to veto any budget that includes new taxes, setting the stage for an ugly battle as the clock ticks toward the budget deadline.

Last month, California lost 68,900 jobs, a total of approximately 740,000 in the past 12 months, and even with national job losses slowing layoffs will continue through 2010 and average unemployment is predicted to reach 12.1 percent some predict the jobless rate to reach 15 percent.  Those part time workers who have given up looking could reach 25 percent reaching levels not seen since the Great Depression.

Due to California’s immense debt, its bond rating is likely to fall below the minimal level legally required for most money market funds, forcing financial institutions to dump California paper and as the States cash situation deteriorates to the point where the controller will have to delay payments, the State could face a double down grade, so said Moody’s rating service.

State legislators still haven’t gotten the message.  The liberal’s in control of the assembly and senate are still talking borrowing and tax increases and can’t bear to see their sacred financial cows lose funding.  Even as the school systems in some areas have to drop teachers while students who can’t speak english will not have special assistance, education seems to be hardest hit, most significantly from the illegal immigrant population that sends money to mother Mexico, while California taxpayers pay for their health care and unemployment benefits.

The obvious question is will the arrogance to State officials, similar to GM’s executives think that they are too big to fail?

The probability is very high that California will default on its bond obligations, which is why Governor Schwarzenegger was recently in Washington with his tin cup asking to have the Federal Government guarantee its bonds.  The Fed’s have their own financial problems and bond rating to worry about so the answer from Washington was “NO!.”

Moody’s is set for a double downgrade of California bonds.  California State legislators are not getting real on the budget making a default inevitable, which will set off a chain reaction of defaults throughout the bond market.  This will cause the rest of the US economy to slowly implode. California’s economy will be first depression domino to fall followed by twelve other liberal states in dire financial straits that have allowed their social spending to get out of hand over the years as has the Golden State.

The real question is can the bond market in process of recovery handle this shock nationwide.  Considering the massive borrowing by the Obama Administration on absurd billion dollar pork barrel projects such as wind energy, green automobiles, and 9000 earmarks to name a few, ever come back to earth when nationalizing health care in the name of saving money for Americans is the next financial straw to throw upon the camels (taxpayers) back.

Will other nations continue to buy American debt as its states begin to default on their debt?  As unemployment continues to slowly rise will the federal government past the first national sales tax to keep foreign investors interested in purchasing US debt as it’s bond rating begins to falter?

What has the federal government ever run efficiently? What federal jobs are being furloughed?   How can the federal government continue to acquire private businesses and then operate them at a loss?

The Obama administration’s reckless handling of the downward economic spiral blaming Bush is losing its appeal.  The liberal answer of government spending its way to recovery is beginning to be recognized by the American people as a Marxist-fascist fantasy.  Accordingly, Comrade President Obama’s approval rating drops below 60 percent for the first time as Americans begin to wake up to their fate, just ten months before the April tax bills hit.

Five years ago California’s Governator had a balanced budget amendment passed to solve the States wild spending programs.  In fact Schwarzenegger was elected because of the over spending poiicies of former Governor Grey Davis who was effectively impeached by public referendum.  However, it is clear that state legislature under Schwarzenegger’s guidance has continued to create more spending than the state could afford due to the fact the Governor signed on to the excessive spending with his executive pen.

Now Schwarzenegger wants California voters to sanction further debt by the passage of life saver legislation to infuse more money into the already broken political system of entitlement programs.

A product of the budget deal earlier this year Proposition 1A would boost the state’s rainy day fund, and invoke a spending cap and trigger the extension of recent tax hikes for up to two years. Proposition 1B would begin to restore cuts to schools if 1A is also approved.  Proposition 1C would allow officials to borrow $5 billion in state lottery money for general purposes. Propositions 1D and 1E would transfer money for budget use that currently is set aside for children’s and mental health services. Proposition F, the only one that polls show voters leaning toward approving, would ban raises for legislators and state officeholders in years when California runs a deficit.

Judith Younger, 49, a Santa Monica resident who works at LAX, said she had been leaning toward supporting at least Propositions 1A and 1B but changed her mind after reading “the fine print.” “I was discouraged and felt betrayed,” she said between spoonfuls of yogurt on the church’s front steps. “I don’t think it’s going to help.”

Schwarzenegger and other officials were trying to tamp down those sentiments. “We understand that anger,” the governor said. “We understand that frustration.”

If Schwarzenegger “understands” why did he go along with the lies and disinformation  in a continuation of spending policies of his impeached predecessor? Let us hope he “understands” why this bastardized legislative system needs its butt kicked.  Only then will all politicians BEGIN TO GET THE MESSAGE it is the people’s money and the train of debt has got to stop somewhere.  Why not in California!  Let California’s propositions fail!   Make the elected officials learn how to cut costs and run government more efficently! Let’s hope Californians are the first Americans to send a message to Washington, “We are mad as hell and we just won’t take it any more!”

But California has a contingency plan when these initiatives fail!  The State’s elected officials will give up more state sovereignty to the Federal Government to receive loan guarantees and other bail out dollars with all sorts of strings attached.  By fiat the federal government will ensure that liberal policies benefiting labor unions, special interest groups and others with Washington influence have their policies instituted at the revocation of laws already passed by the California legislature as a condition of financial assistance is a major string actually a hangman’s noose for the State and its population!

Michelle Malkin reports May 14, 2009, “that Barney Frank wants to Bailout California. Although Frank is in the process of drafting legislation that could create a long-term federal reinsurance program for municipal bonds, it isn’t clear what can get through Congress, or how quickly. Frank told Bloomberg News on Tuesday that he was “working with the administration now . . . to do something short-term” for California.

In a letter to U.S. Treasury Secretary Timothy F. Geithner, Lockyer asked the government to in effect guarantee the state’s debt against default, so that investors would be willing to provide the financing at reasonable interest rates…

“The enormous size of the required funding together with the state’s current credit condition and the continued weakness of the municipal finance market . . . make it highly unlikely that the state can access the short-term market for its borrowing based on its own credit,” Lockyer told Geithner.

As the state’s cash shortage has worsened in the recession, Lockyer has for months been lobbying for some kind of federal backstop on new debt issuance, which he has said should be extended to all state and local governments to help pare their borrowing costs.

Although critics say U.S. help for California would discourage the state from solving its structural budget problems, Lockyer has insisted that his plan wouldn’t be a federal handout. The state would pay a fee to the Treasury for the temporary backstop, he said.

Riiiiight. And next they’ll tell us that taxpayers will actually make money off this “investment.”

Message from taxpayers to Washington: Let California fail.

Sacramento California is a microcosm of what is happening throughout America.  Some think because the DOW industrial are in an apparent rebound and unemployment figures have slowed a bit even though they have not dropped below 600,000 per month that this recession is over or that a bottom has been reached.

But this is not the case, the inventory of homes across America will increase through the summer as government programs and bank hoping for an increase in sales are holding off on selling their inventory in hopes of receiving better prices for the toxic assets they hold on their books. But as the business cycle worsens bank balance sheets will need to rid themselves of this bad debt and face the fact that they need cash to keep their doors open.

Because of the increase in taxes in California the State is reporting $13 billion less in April tax receipts, leaving them $700 million behind the revenue forecasts incorporated into the budget deal reached in February. This is a problem happening all across America, where higher taxes do not result in more State revenue.  This recession cycle is still spiraling lower and when decreasing tax revenues indicate an inability to support massive government spending on bureaucratic jobs there will only be two choices, increases taxes or cut spending.

Here is a review of the current situation in Sacramento the capitol of the Great State of California as reported in the Sacramento Bee, May 5, 2009 by Phillip Reese and Jim Wasserman:

24,000 homes and apartments are vacant in the Sacramento area and nearly a third or 7,200 of the six-county region’s vacant homes have been empty longer than a year. In other sections of the city more than one in 10 homes is vacant, and one in 20 homes are in areas of southern Sacramento.

Real estate agents in the area claim recent foreclosure moratoriums in legislation recently signed by Governor Schwarzenegger  extending the time to six month before foreclosures can be resolved is one of the causes that banks are sitting on an inventory of homes.  Unemployment is forcing apartment communities to report a 11.3 percent rise in vacancy as unemployment forces family members to double up.

Banks are also trying to keep their excessive inventory from coming to the market as this would cause prices to drop further as supply outstrips demand.

Yuba County leads California in the percentage of residences, homes, apartments condominiums, vacant for at last 90 days and half have been empty for over a year:

Among the 10 largest counties in the State, only Riverside held a higher vacancy rate 4.1 % than Sacramento County’s 2.8 %.

Nothing is moving reported one local real estate agent.  Yuba, a rural county that has seen 1,200 foreclosures in the past 15 months, according to a reacher at DataQuick.

Thousands of vacant properties have driven down the value of empty homes and apartments across the region.

Feinstein’s self interest in lining the pockets of her husband by inadvertently funding a contract his company received to do foreclosure work is just another case of the corruption of power and we should expect no less from government officials.  The biggest crime is that people keep electing thieves into office because they themselves are thieves and want their fair share of the welfare bailouts from a liberal government tax and spend machine.

Claiming plausable denyability while at the same time lining your pockets with cash from direct decisions of an elected official is called conflict of interest.  Ethical people who take it upon themsleves to represent the people must be beyond reproach in their dealings with the publics money.

But hey we didn’t even know this would happen, it does help with the house payment, the new yacht, vacation money and my reelection campain war chest, thanks America, oh and thank you Dianne great job and good example!:))

Feinstein Accused of Self-Dealing in $25 Billion Legislation for FDIC

Sen. Diane Feinstein (D., Ca.) as reported by the Washington Times, April 21st,  is embroiled in an expanding controversy over her introduction of legislation to give $25 billion to the Federal Deposit Insurance Corp that awarded a highly generous contract to her husband. Feinstein is notably not on any committee with jurisdiction in this area and this legislation was unusual for her. The scandal, once again, shows the calculated decision of Senators to preserve loopholes that allow them to invest or have interests in areas where they legislate and vote.

I have written repeatedly about how members of Congress have made themselves rich by investing in areas where they vote or legislate, click here. In this case, Feinstein suddenly decided to send $25 billion to the FDIC after her husband’s real estate firm was given a lucrative contract to sell foreclosed properties. She offered the measure on Oct. 30th only days after the agency gave the CB Richard Ellis Group (CBRE) – the firm headed by her husband Richard Blum.

For civil libertarians, the week has been something of a windfall. Jane Harman and Feinstein are blamed for blocking efforts to investigate unlawful surveillance and torture -programs that they reportedly knew about for years before made public. Now, Harman is facing a potential criminal allegation and Feinstein is tied up in a financial scandal.

Feinstein has a legitimate argument under the ethics rules in the Senate which were written to clear Senators rather than deter Senators from conflicts of interests. While there is an obvious appearance of a conflict of interest, the toothless standard could not gum a Senator engaged in the both flagrant acts of self-dealing.
For the full story,

On the day the new Congress convened this year, Sen. Dianne Feinstein introduced legislation to route $25 billion in taxpayer money to a government agency that had just awarded her husband’s real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms.

Mrs. Feinstein’s intervention on behalf of the Federal Deposit Insurance Corp. was unusual: the California Democrat isn’t a member of the Senate Committee on Banking, Housing and Urban Affairs with jurisdiction over FDIC; and the agency is supposed to operate from money it raises from bank-paid insurance payments – not direct federal dollars.

Documents reviewed by The Washington Times show Mrs. Feinstein first offered Oct. 30 to help the FDIC secure money for its effort to stem the rise of home foreclosures. Her letter was sent just days before the agency determined that CB Richard Ellis Group (CBRE) – the commercial real estate firm that her husband Richard Blum heads as board chairman – had won the competitive bidding for a contract to sell foreclosed properties that FDIC had inherited from failed banks.

About the same time of the contract award, Mr. Blum’s private investment firm reported to the Securities and Exchange Commission that it and related affiliates had purchased more than 10 million new shares in CBRE. The shares were purchased for the going price of $3.77; CBRE’s stock closed Monday at $5.14.

Spokesmen for the FDIC, Mrs. Feinstein and Mr. Blum’s firm told The Times that there was no connection between the legislation and the contract signed Nov. 13, and that the couple didn’t even know about CBRE’s business with FDIC until after it was awarded.

What happens when Americans elect politicians who put their promise to the people who elected them below their allegiance to the State?  Let us hope that men like Mr. Schroeder, an Orange County lawyer, who is directing the drive against Mr. Adams one of six republicans who broke with their promise to the people of California and voted with the State succeeds with his effort to teach to honor their word.  When a politician runs on promises to the people that then elect him and he in turn votes for the State instead of the people who put him in office, there is only one place he belongs, behind the wood shed.

“I put my oath of office above any pledge,” Mr. Adams said. “It was a budget that required a whole lot of compromise.” Mr. Maldonado, who received particular scorn by casting the sixth and decisive Republican vote, said he regretted signing the pledge. “I wish there were another word or two there that said, ‘except in cases of emergency.’”Antitax advocates have launched bids to sack two of the so-called Sacramento Six for supporting a budget that raises taxes.

The cowards who allowed the impasse to be broken should be known for what they are, socialists!  Anthony Adams, Roger Niello and Mike Villines of the Assembly, and Roy Ashburn, Dave Cogdill and Abel Maldonado of the Senate —  are not conservatives but weak (RINO) republicans in name only.  So far only Messrs. Adams and Ashburn have been served with recall papers.

All six lawmakers say the State’s largest-ever deficit and a looming cash shortfall necessitated approving a budget with new taxes. “I had a decision to make based on the reality of California’s financial [situation], and you couldn’t balance this budget without raising taxes,” Mr. Ashburn said.

Whatever happened to cutting spending programs, standing on conservative principals and promises to your constituents gentlemen?  Men who have no courage, who do not love their country, who do not understand that liberty is a precious commodity that is based on personal freedom are not republicans.  Freedom of and for men to make up their own minds that their inner ethical voice is all that is needed to provide opportunity for men to find their own moral compass in society is a conservative principal of true republicans.  Men who stand for government stealing property in the name of social virtue to set up future theft in the name of the State are men who will lose their liberty.  Republicans who are elected on their word but break public confidence should be tarred and feathered and rode out of town on a rail like the good ole days.

Thank God for men like Mike Schroeder, a former State GOP chairman who indicated that all except Mr. Niello – who broke a pledge they signed in 2008 vowing never to support tax increases. “The whole point is to send a message that if you get elected under false pretenses and you lie to voters, then you won’t be allowed to finish your terms,”  Mr. Schroeder said.  He is also confident his petition to recall Mr. Adams will qualify for the ballot.

Let us support Mr. Schroeder who is a true American in the spirit of our forefathers of the American Revolution holding representatives to the task of keeping their word.  What if the men who signed the Declaration of Independence decided to support England during the war for American freedom instead of their countrymen because it was easier than keeping their word?  This is the problem with most politicians today, they cannot keep their word, and they do not understand what it takes to protect freedom and liberty.

Most American politicians have lost their moral compass that was handed down through generations to protect freedom and liberty from the tyranny of government intervention in our lives.

If men like the Benedict Arnold six were original signors to the Declaration of Independence we would not have liberty to protect, but would be speaking German in a global fascist State like weak men are allowing to happen today.  Watch the President of the United States cowering among dictators seeking acceptance turning his back on America in favor of global social justice contrary to the constitution of the United States.

If the elected politicians will not keep their word and turn their backs on American values then the consequence of impeachment is the only alternative.  Let us hold President Obama to the same standard as the Benedict Arnold Six.

RINO Governor Schwarzenegger has had an epiphany, immediately after meeting with President Obama’s Secretary of Labor Hilda Solis in Sacramento.   ”President Obama and I share similar priorities right now when it comes to helping the economy rebound and creating a greener California and America,” he reported to the capitol crowd after his meeting. “In California we will utilize federal economic stimulus funds and public-private partnerships to help stimulate our economy while initiating actions to improve our environment. Green jobs are exactly what our economy and environment need right now”

How can Americans and Californians possibly hope to recover from this deep recession and future Great Depression II with policies that do not address the real problem.  A government that spends more money than it takes in!?  What is really frightening is that Schwarzenegger and Obama see eye to eye on the fixing the economy!

Green Jobs? What’s next there are talks in the State Capitol of  legalizing marihuana, real green revenue, in the State that would bring in an estimated $1 billion in annual revenues.  Desperate times call for desperate measures but green jobs funded by the Obama stimulus so the state can turnaround and tax those who receive these short term government jobs is more of the same stupidity.  What happens when the Federal dollars dry up, Governator?

Last Thursday Schwarzenegger was more real in his annual State of the State address The budget deficit that’s ballooned to $40 billion through mid-2010.

Here is a glimpse of the Propositions which come before voters May 19, 2009:

Proposition 1A

State Budget. Changes California Budget Process. Limits State Spending. Increases “Rainy Day” Budget Stabilization Fund.

Proposition 1B

• Education Funding. Payment Plan.

Proposition 1C

• Lottery Modernization Act.

Proposition 1D

• Protects Children’s Services Funding. Helps Balance State Budget.

Proposition 1E

• Mental Health Services Funding. Temporary Reallocation. Helps Balance State Budget.

Proposition 1F

• Elected Officials’ Salaries. Prevents Pay Increases During Budget Deficit Years.

A revision in this fiscal years and next fiscal year’s budget produced the single largest tax increase at the state level every passed in our nation’s history.

Every family in California will see their tax burden raise well over $1000 a year. This tax increase, which was voted against by 39 of the 45 Republicans in the legislature,  with over 40% growth in state spending over just the last four years alone the States elected officials are after the taxpayer to bail them out of their inability to balance the budget.  Fortunately, a budget cannot pass without 65% of the legislatures approval otherwise California would have the same insanity in spending as is now being performed by the Federal Government. Any State budget package must include going to the voters with ballot measures to bail out California’s elected officials monstrous spending habits.

The deceitful Governor and his legislative cronies aren’t telling the truth in their ballot measure – Proposition 1A. it sounds good until you get into the fine print.  It speaks of imposing a new “spending limit” that would force the state to put away money into reserves in bad times, allowing the state to draw upon those funds in future downturns.  Sounds pretty good but there is a “hidden tax” they don’t tell you about.  Because, if it is passed, it will automatically trigger an extension of the tax increase for two more years to pay for it.

These Obamaesque, tax lies where elected officials don’t tell the whole truth in order to get the American people to bite the hook then so politicians can pull them aboard and gut their pocket books do not create a confidence necessary to get the economy moving in the right direction again.  The politicians and big labor will not cut spending and it is up to citizens of the state to force them to make the necessary cuts!

Executive Director Kris Vosburgh  of the Howard Jarvis Taxpayers Association, a California-based taxpayers’ rights group. says the organization is taking a position against only one of the measures, Proposition 1A, because it extends a tax increase from two years to four. He says, “Prop. 1A dwarfs all the others in importance,” Mr. Vosburgh says. “The rest are merely rearranging deck chairs on the Titanic.”

Tony Quinn, a Sacramento-based political analyst and coauthor of the so-called California Target Book, a nonpartisan guide that tracks state political races says, “if Schwarzenegger is  I am absolutely convinced that the state will go into bankruptcy.”

On May 9, 2009 Californians will have their first chance to tell their elected officials, “I’m mad as hell and I just won’t take it any more!” by voting down the Govenors measures, bankrupting the state and making the elected officials make cuts in the bloated government spending priorities that they have allowed to expand out of control.

How about taxing offshore oil drilling?  Good idea but California’s RINO Governor and President want a green state.  When the elected officials proclaim “let them eat cake” its time to chop off their heads as the French did to Marie Antoinette!

California Lawmakers Reconvene, Remain Apart on Solving Budget

California’s Legislature reconvened today, after a marathon budget session ended last night with a $40 billion package of tax increases, spending cuts and borrowing falling one vote short amid a record deficit.

Bleary-eyed lawmakers were sent home at 9 p.m. Sacramento time after spending 28 hours in a session that ended with the proposal’s prospects in doubt. Republican Governor Arnold Schwarzenegger and legislative leaders worked through the day and night without success to secure an additional Republican vote in the Senate. Democrats control the Assembly and Senate, with a two-thirds supermajority needed for passage of tax increases and budgets.

“We are just searching for that one more vote that we need in order to get that budget done,” Schwarzenegger told reporters last night after he made surprise appearances at closed-door party caucuses to encourage lawmakers to keep working. “What is most important is that they hang in there. They should not leave. They should continue with the fight.”

Failure of the package would prolong a four-month stalemate over how to counter a record $42 billion deficit that drained California of cash, left it with the lowest credit rating among U.S. states, forced officials to delay paying bills totaling $3.7 billion and halted $3.8 billion of bond-financed construction on schools, roads and other public works.

The draft bills include plans to raise the state sales-tax rate to 8.25 percent from 7.25 percent; boost vehicle license fees to 1.15 percent from 0.65 percent of the value of an automobile; add 12 cents to the per-gallon gasoline tax; reduce the dependant-care tax credit to $100 from $300 and impose a surcharge on income taxes of up to 5 percent.

Voting Impasse

To gain the two-thirds margin, three Republican votes are required in the 80-member Assembly and another three in the 40- seat Senate. Lawmakers have said there are enough Republicans in Assembly for the package of 27 bills to get the 54 votes required for passage. In the Senate, 27 in favor are needed for approval. Republicans have blocked previous attempts to raise taxes to close the deficit.

Senate President Pro-Tem Darrell Steinberg of Sacramento said Republican holdouts are causing the impasse.

“The majority of the group of senators are stuck with an ideology that says that under no circumstances, no matter how bad the national and international economic crisis is, they will never increase revenue, and that’s untenable,” Steinberg said.

Combined, the measures would raise taxes and fees by $14 billion, cut spending $16 billion and add $10 billion to the state’s debt. Another $2 billion in reserves would be created from funds moved on balance sheets.

‘Counter-Intuitive’

“It’s counter-intuitive to think that you can solve this budget problem in this economy with tax increases,” said Senator Dave Cox, a Sacramento-area Republican who Democrats had counted on to vote for the package. Democrats control both legislative chambers.

Standard & Poor’s cut $46 billion of California’s full- faith-and-credit debt to A from A+ on Feb. 2, making the U.S.’s largest tax-exempt borrower the lowest-rated state. California’s 10-year general-obligation bonds already pay a record 1.23 percentage points in yield above benchmark municipal debt, according to Bloomberg indexes.

Failure of the package would mean the state can’t sell any municipal bonds. State Treasurer Bill Lockyer has halted state debt offerings, saying investors won’t lend California money at affordable rates until the deficit and cash crisis are resolved. The state hasn’t issued general obligation bonds since June and has depleted most funds in its construction account.

The state controller has said more payments to vendors and to counties for health and human services will be delayed and he may begin paying bills with IOUs in April if the impasse isn’t quickly resolved.

California Budget Crisis Spurs Trading in Credit-Default Swaps

Banks, hedge funds and other investors seeking to protect themselves from losses tied to California’s budget crisis are driving an increase in trading in credit- default swaps linked to the state.

Credit-default swaps protecting against a default by California, the nation’s most populous state, have more than tripled since Sept. 5, according to CMA DataVision in London. Last week, the contracts for the first time showed up on a list of the 1,000 most actively traded in the Depository Trust & Clearing Corp.’s trade warehouse.

Banks and investors are using the derivatives to hedge against losses on interest-rate swaps, commodities contracts and other assets that face losses if the state can’t make good on its obligations, said Fabrice Pilato, head of muni derivative trading at Morgan Stanley in New York.

“Because California is the largest U.S. state and is currently facing a well-publicized cash shortfall, many parties that have exposure to munis in general and to California in particular” are using the contracts as a hedge, Pilato said in a telephone interview.

Plunging housing prices and financial markets and rising unemployment have siphoned tax revenue from the state, which is set to face $42 billion less than it will need to pay for schools, police and other services through June 2010.

Moody’s Investors Service last month placed $67 billion of the state’s debt on review for a possible downgrade, citing a “lack of legislative solutions” for closing the budget gap. Moody’s rates California’s long-term debt A1, tied with Louisiana as the lowest among U.S. states. Standard & Poor’s, which has an equivalent rating of A+ on California’s general obligation bonds, said in December it was considering a downgrade.

Budget Shortfall

Governor Arnold Schwarzenegger said Jan. 26 that legislative leaders were closing in on an agreement to eliminate the budget shortfall.

Despite the increase in trading of California credit-default swaps, the market remains relatively illiquid compared with that for contracts linked to companies. The rush to hedge and speculation there will be more negative headlines in coming months are distorting the actual default risks for the state, said Matt Fabian, managing director at Municipal Market Advisors.

Traditional tax-exempt municipal bond investors haven’t been using the credit-default swaps market, he said.

‘More Bad News’

“I think what the market is saying is there’s a high likelihood of more bad news,” Fabian said. “The risk of California defaulting hasn’t changed very much. It would have to stop paying on tens of billions of dollars of regular expenses before its constitution would let it default on its debt.”

Credit-default swaps protecting against losses on the state’s debt for 10 years have jumped 257 basis points to 350 basis points since Sept. 5 and reached as high as 507 basis points in December, according to CMA DataVision.

A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Five-year contracts on the Markit MCDX index, tied to 50 municipal issuers including California, have risen 59 basis points since the end of October to 210 basis points, CMA data show. It reached 350 basis points last month.

Credit-default swaps, used to hedge against losses or to speculate on the ability of borrowers to repay their debt, rise as investor confidence deteriorates. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent if borrowers fail to meet their debt obligations.

As of Jan. 23, there were outstanding credit-default swaps on California covering a net $375 million of debt, according to data from the Depository Trust’s registry. That compares with an average of about $1.2 billion for the 1,000 most actively traded names, the data show.

The capitalists (private enterprise) vs socialists (unions) both contending for the good of their own selfish supporters, but which is posed to do the right thing for the people who ultimately pay the tab.  Will the employed public servants take a cut in pay while unemployment rises, or will they remember where the cash comes from that pays their salaries?  Lets take a look with the Governator’s plan.

Schwarzenegger Plan for Furloughs Upheld by Judge

Jan. 29 (Bloomberg) — California Governor Arnold Schwarzenegger can order thousands of state workers to take two unpaid days off a month to cut $1.4 billion from the budget, a judge ruled.

Superior Court Judge Patrick Marlette in Sacramento, California, today ruled in favor of Schwarzenegger in a lawsuit brought by employee unions seeking to block the furloughs. Schwarzenegger said yesterday that he would lay off workers to achieve the savings if he lost in court.

“I cannot help but recognize the huge impact this will have on state workers,” Marlette said at a hearing today in Sacramento. “My job is not to rule if this is the right solution but whether his action is authorized by law.”

The unpaid days off, scheduled to begin Feb. 6 for 238,0000 workers, amount to a 10 percent pay cut, according to labor unions that oppose them. Schwarzenegger, a Republican, ordered the furloughs to help conserve cash.

California, the most-populous U.S. state, is anticipated to have $42 billion less than it will need to pay for schools, police and other services through June 2010 because the recession and stock market have lowered tax revenue.

“The governor’s furloughs will save over a billion dollars and avoid laying off thousands of state workers,” said Matt David, Schwarzenegger’s spokesman, in a statement after the ruling. “As businesses and families across the state are cutting back to make ends meet, so must government.”

Appeal Possible

Jim Zamora, a spokesman for Service Employees International Union, Local 1000, a plaintiff in the case, said the group may appeal. SEIU filed an unfair practice complaint today with the state’s Public Employment Relations Board alleging the furloughs violate collective bargaining agreements.

“We feel we have strong grounds for an appeal. But we will not make a final decision until our attorneys have discussed all our options with our union leadership,” said Zamora in an e- mail.

Earlier this month, state Controller John Chiang said he would delay $3.7 billion in payments, including income-tax refunds, if the budget isn’t redrawn to ensure there is enough money for schools and to meet interest payments on debt, which are priorities mandated by law.

The deficit and cash shortage developed rapidly after Schwarzenegger signed this year’s budget in September. Since then, the governor called lawmakers into three special sessions and twice declared fiscal emergencies. On Jan. 7, he vetoed the only budget plan that reached his desk.

Schwarzenegger said yesterday that he anticipates they will strike a deal within the next few days on the deficit.

The case is Professional Engineers in California Government v Schwarzenegger, 2008-80000126, Sacramento Superior Court.