The Billion-Dollar Backstop

You can browse the Calitics live feed of the Governor's May "this is not a revise" Revise, if you're a glutton for punishment. Basically, Arnold used a taxpayer-funded press conference to scare the public into voting for his ballot measures, vowing to fill a $21 billion dollar budget gap with a mess of cuts, some borrowing, and no new revenues, in taxes or fees, suggesting that the majority-vote fee increase idea would get a veto. He's including cuts that would spur the loss of stimulus funds, with the caveat that he would sweet-talk the Obama Administration to allow the funds to go through despite the cuts. He's floating a raid of state and local governments. Essentially he's lined up fully with the right wing of the Yacht Party to drown the state and make it impossible to climb out of this recession.

So, with that, a bit of more promising news. The state's Congressional delegation will fight for a federal backstop for California's bonds. Well, at least the Democrats in the delegation.

"California faces a tremendous budget deficit and cash flow crisis, which requires immediate attention," said Democratic Rep. Doris Matsui of Sacramento. "There is no panacea for addressing California's budget issues at the federal level. However, it's time for the federal government to step in and temporarily guarantee bonds until the economy improves."

Matsui is working on a bill with Democratic Rep. Barney Frank of Massachusetts, the chairman of the House Financial Services Committee.

Proponents say they're not asking Washington for a bailout, merely trying to lower the state's borrowing costs by having the federal government back its loans.

Critics say it would be a drastic mistake that would jeopardize the federal government's AAA credit rating, noting that California ranks as the worst credit risk among the 50 states.

"That's never been dhttp://www.blogger.com/img/blank.gifone, and I think it's never been done for good reason," said Republican Rep. Dan Lungren of Gold River.

He said the federal government can't afford to back bonds for every state, adding: "If California does it, other states are going to be standing in line, with New York right behind them."

Does Dan Lungren have a functioning brain? A federal backstop would cost the government $0.00 dollars. The guarantee would lower borrowing rates. The chances of the state defaulting on these loans is about 0.000001%. California has never done so in its history, as much as the Yacht Party would like it to happen (then they'd get the REAL reform, is I believe how it goes). Ultimately this would save the state $1 billion dollars in interest on these loans. The federal government has spent $700 billion on the same financial firms trying to gouge the state on these bonds. I think it's a fair trade.

Not that $1 billion is more than a drop in the bucket in the overall picture of things, but I figure you need a little sugar with your rainstorm...