Business Insider: California was America’s Greece in 2009. It had excellent wine and olive oil. But tax revenues were collapsing. The deficit ballooned. Its credit rating was cut to the lowest of any state in the US. It couldn’t borrow at reasonable rates. And when, under Gov. Arnold Schwarzenegger, it couldn’t pay its bills with real money, it sent fancy-looking IOUs to its suppliers.
Today, California is flush with money. The economy in the coastal areas has bounced back. Unemployment, while still high in some areas, continues to drop. The budget is on its second annual “surplus” in a row. Capital gains taxes from the booming tech sector, the soaring stock market, the white-hot property sector, and all kinds of other investment activities, on top of some “temporary” tax increases, triggered a flood of revenues – $6.7 billion more than Brown’s office had estimated just in January.
OK, no one can figure out how to deal with the unfunded pension and healthcare liabilities. But what the heck, lawmakers at the Democratic stronghold are now fighting over how to spend the “surplus.” They’ve got till June 15 to figure it out and pass a budget or their pay will be docked.
Gov. Jerry Brown, sworn in for his fourth and final term in January – he’d served two terms in the 1970s – is putting his stamp of frugality on the budget, trying to stem the flood of spending proposals. But lawmakers need to be reelected, votes need to be bought, special interests need to be satisfied, and so the money needs to flow.
Brown’s budget – up 6% from the current year – directs most of the “surplus,” as required by law, toward schools and a newfangled rainy-day fund. It’s also used to pay down the “wall of debt,” as he’d called it, that governments have built up over the years with deficit spending. Standard & Poor’s is watching. It currently rates California’s general obligation bonds A+. If the lawmakers don’t go overboard, it might upgrade the state back to where it was 14 years ago.
Home prices are soaring and in a number of cities have gone far beyond the peak of the prior housing bubble. Stocks are soaring. The tech boom is in full swing. Startups with multi-billion-dollar valuations and vertigo-inducing cash-burn rates are proliferating. Silicon Valley is once again changing the world for the better.
“And by the way, we don’t really compete with Texas and New York,” Gov. Brown said in a speech at the CalChamber on May 29, in reference to California’s status as the seventh largest economy in the world. “No, we’re competing with the UK and Germany. And we are ahead of India, Russia, Italy, and Brazil.” Exuberance is back.
Thursday, June 11, 2015
Jerry Brown ultimately is an honest man
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