Governor Veto Pen

Brian and Robert have the rundown of what line-item veto cuts the Governor made today when signing the budget. The budget solution presented to him was about $1 billion short of the goal, so the Governor used his blue pencil to make unilateral cuts. I think I've said before that the good rule of thumb for these cuts, from the Governor's perspective, is to ask "Who doesn't vote?" and cut there. And for the most part, he did that. I guess he hopes that the AIDS patients who will no longer receive treatment due to cuts in the Office of AIDS Prevention and Treatment will succumb to the disease and therefore not vote. Cuts to child welfare and health care services fall on children who cannot vote. But since Schwarzenegger will never face voters again, he decided to even wield the blue pencil on actual voters. $6 million more got slashed from state parks, used by virtually everyone, and this could see as many as 100 state parks forced to close. All community health clinics get cut of their state funding, which may disproportionately affect rural areas, as will the elimination of funding for the Williamson Act, which gives farmers a subsidy to keep their parcels from falling into the hands of developers. In this budget, Schwarzenegger has assembled something for everyone to hate.

As Robert says, there's a way around this that the legislature probably won't take:

The state legislature could try and override these vetoes. But as we've seen time and again, this legislature appears to have forgotten that the override power actually exists. It would be a very good chance for Democrats to force Republicans to take a stand on these programs. Either they vote to restore the funding, or they vote to kick kids off of health care and close beaches and parks, giving Dems a set of issues to run on in 2010.

It seems doubtful that such an override will even be attempted. And so California slides deeper into ruin.

I'd have to look at the rules, and see if they've closed the extraordinary session and thus cannot override the blue-pencil vetoes. But basically this is correct. And some of those line-items, like the Williamson Act funding, would get a good deal of Republican support.

Needless to say, I agree that the line item veto, and the aggrandizement of executive power generally, should get ditched in a Constitutional convention. At the least, we could set up a mechanism where line items must be upheld by the Legislature.

...AP has a story up. Darrell Steinberg comes out with fighting words:

Senate President Pro Tem Darrell Steinberg, a Democrat who negotiated the original budget compromise with Schwarzenegger, immediately questioned the legality of many of the governor's line-item vetoes.

"We will fight to restore every dollar of additional cuts to health and human services," Steinberg said in a statement. "This is not the last word."

The last word, Senator, is override.

...also, fun fact: the budget is already around $8 billion short for 2010-2011. Surprise!

The Post-IOU World

Today is the first day that most large banks stop taking IOUs from individuals and small businesses. For those left holding them, the options are limited. Citibank agreed to a one-week extension, and Bank of the West will accept them - but only for existing customers. Other big banks may offer lines of credit or other short-term bridges for customers, but on a case-by-case basis. IOU holders needing cash might be able to try credit unions, or inevitably, check-cashing stores. And this all appears to suit Arnold Antionette just fine:

State Treasurer Bill Lockyer tried to persuade the big banks to change their minds about the IOUs. "We're just trying to convince them that it would be in the best interest of their customers and the best interest of taxpayers to give it more time," said his spokesman Tom Dresslar.

Gov. Arnold Schwarzenegger made no such attempt at persuasion. "His focus is to get a solution to our budget so we don't have to deal with IOUs," said his spokesman Aaron McLear. "I don't think it was anyone's expectation that they would honor them forever."

Emerging from a meeting with legislative leaders Friday, the governor would say only that "IOUs are one more reason to get the budget done as quickly as possible."

In 1992, the last time the state issued IOUs, the major banks accepted them for about a month. Their refusal to go any further was widely seen as a move to pressure officials to pass a budget.

Yes, of course, this is why he vetoed solutions that would have stopped the issuance of IOUs in the first place.

Meanwhile, John Chiang's latest release of the state economic picture shows a $10 billion dollar shortfall in Fiscal Year 2009, and a still-contracting revenue picture that has led to a $4 billion dollar delay in payments to local school districts. They has planned on sending out the money Friday; now they will hold off until July 30.

And the Big Five have returned to the negotiating table today, where they claim "constructive" negotiations, which we've heard plenty of times before. No word on whether the Governor continues to hinge a budget deal on uncorroborated fictions about fraud in social services or fiscally unwise cuts to programs like welfare.

California Plays "Block That Recovery"

The real tragedy of the proposed cuts in the state budget comes when you recognize that some of them would cancel out federal stimulus dollars. A perfect example would be the elimination of the welfare-to-work program Cal Works. In Los Angeles County, the stimulus funds a program through Cal Works that provides jobs. Without Cal Works, the program gets eliminated, and $200 million in federal dollars cease to flow to the state. And that's really just one example.

We see the same cross purposes when assessing social services programs for the elderly.

"Advocates for the elderly in California say recent budget cuts are dramatically affecting the ability of social service programs to keep up with demand" at a time when "the state's elderly population — and the incidents of elder abuse — are exploding," NPR reports. One example is Contra Costa County, where the Aging and Adult Services Program laid off two-thirds of the staff who "investigate abuse complaints of elderly and dependent adults." The county is now "turning over virtually all of its self-neglect cases to some other agency — often, the police." The Contra Costa situation is "so severe that the county grand jury recently concluded that Adult Protective Services no longer has the resources to carry out its legal mandate to investigate physical and financial abuse complaints." This comes at a time when complaints of elder abuse are on the rise. According to "national studies," only "1 in 5 elder abuse cases is reported" (Siler, 6/3).

Needless to say, this threatens the ability for Contra Costa county to qualify for stimulus funds to backfill those cuts, thanks to "maintenance of effort" rules. The Feds giveth, the state taketh away and taketh away what the Feds giveth. And that undermines the goals of the stimulus and damages economic recovery, given that we are the nation's largest state.

Some would say that the state's "runaway spending" brought this on, but Sen. Mark Leno argues persuasively against this, detailing the nature of the spending over the past decade and where that money has actually gone - tax cuts (the vehicle license fee), prisons, debt service, and the rapid cost growth in health care and fire protection. This is familiar to most of us but ought to be shared with those friends who don't know the facts. Same with this.

What truly brought this on is a dysfunctional process that requires serious structural reform.

Man Of Steele

Michael Steele, who is cooperating with federal investigators (something you don't want in an RNC Chair) over post-election payments from his failed Senate run for work that was never completed to his sister, who happens to be Mike Tyson's ex-wife (something you REALLY don't want in an RNC Chair), is going on TV a lot to be the chief messenger for Republicans on the economy. This is a problem because he doesn't know what he is talking about.

Yesterday, Steele spoke to ABC's George Stephanopoulos about the Republican position on the economy, and inexplicably, stuck to the same position, arguing, "What this administration is talking about is making work. It is creating work."

When Stephanopoulos responded, "But that's a job," Steele added, "No, it's not a job. A job is something that -- that a business owner creates."

Stephanopoulos, looking confused, asked, "So a job doesn't count if it's a government job?" Steele stuck to his guns, insisting that hiring someone to perform a service isn't an actual job because government contracts "have an end point." Apparently, a job is only a job if it's indefinite.

Stephanopoulos, still confused, said, "I guess I don't really understand that distinction." So, Steele kept digging, arguing, "If you've got a government contract that is a fixed period of time, it goes away. The work may go away." Stephanopoulos reminded Steele that "we've seen millions and millions of jobs going away in the private sector just in the last year." (If the possibility of a job "going away" is the standard for having a real "job," then we're all unemployed.)

Add in there the fact that he's in possible trouble with the law because he paid off his sister 11 months after she DISSOLVED her company (because the work went away, I guess) and you'll see the confusion. Also the fact that he was paid for a number of years as the Lieutenant Governor of Maryland, which is, you know, a government job.

Perhaps worst of all is the fact that he's trying to get down with the kids and go all street on yo' ass:

Just ran into new RNC Chairman Michael Steele who watched President Obama's town hall in Indiana and wasn't impressed.

The Obama-backed stimulus, he said, "is just a wish list from a lot of people who have been on the sidelines for years.. to get a little bling, bling."

Ah, the Republican Party - where even the black people characterize black people as welfare kings and queens looking for a handout.

Today Rome Begins To Burn

We're hearing that there could be a budget vote as early as tomorrow, although with the Big Five meeting today, that doesn't seem physically likely, and the AP says no deal has been reached. Nevertheless, according to Greg Lucas:

Allegedly the spending reductions – and tax increases – have been agreed to and the focus of continuing budget talks is the shape of the so-called “economic stimulus” legal changes sought by Gov. Schwarzenegger and his GOP allies.

Those changes, such as relaxing state environmental review of less than a dozen highway projects and allowing more outside engineers to design such projects, having been a sticking point for the Republican governor since last year when he criticized – and this year vetoed — a Democratic budget plan for not doing enough to boost the economy.

The new taxes are said to include a half-cent boost in the sales tax, which generates roughly $4 billion annually, and a return of vehicle license fees to 2 percent of a vehicle’s value. At 2 percent, the license fees, much of which are deductible on federal taxes, would generate $6 billion in new revenue for the state – and increase over time.

Returning the VLF to a historically consistent number would be poetic for a failed governor who based practically his whole campaign on reducing it and breaking the state in the process.

What happens in between the taxes and the spending is going to be a key. Whether the GOP is fighting old battles by trying to invalidate past environmental laws, or whether they are demanding a state spending cap, those details matter. Dan Walters thinks that a "carefully written spending cap with realistic emergency provisions" could work in a swap for eliminating the 2/3 budget requirement, but when you're adding emergency measures and writing it so carefully, you might as well raise enough revenue to pay for services people desire and be done with it. Spending caps don't work.

In the meantime, while these details are hashed out, citizens are paying the price, as this week California begins to stiff creditors and defer payments to individuals and businesses.

Wendy Hansen, a 52-year-old single mom in Monrovia, says she cannot afford a delay in her anticipated state income tax refund of $1,800.

Without the check, Hansen said, she will have to put off debt payments, long-needed repairs on her house and treatment for a back problem that she believes has been aggravated by stress over finances.

An estimated 2.7 million Californians expecting income tax refunds this month won't receive them for now, because the state's prolonged budget impasse has emptied its treasury.

"It's horrendous," said Hansen, an office manager for a doctors' office. "I'm someone who counts on that refund every year to make ends meet."

This will disproportionately hit those how make too little money to owe taxes and expect their entire withholding to return to them, as well as those expecting public assistance payments. In other words, the least of society.

Who in Sacramento will speak for them?

Will IOUs Wake People Up?

I just heard Will.I.Am on NPR talking about education cuts in California. The budget crisis has gone mainstream. And once everyone gets the news that tax refunds, welfare checks and student grants will be suspended because the state is out of cash, a whole lot of other people might get some awareness as well. The dirty little secret about "liberal bastion" California is that we are not a civically engaged people, generally speaking. The budget has been in "crisis" for decades but not enough Californians have mustered up the interest in it. We have right-wing astroturf movements that play to base emotion, but not really citizen's movements that ask for basic fairness. Californians are 45th in the country in volunteering, 44th in attending community meetings and 45th in working on community problems. Chalk it up to traffic or self-absorption or what have you, but the general take is that Californians don't see much beyond what is in front of them. IOUs would change that. Well, maybe. It depends on if the banks will accept them, which is still being negotiated.

The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the elderly, blind and disabled; and $13 million in grants for college students.

Even if a budget agreement is reached by the end of this month, tax refunds and other payments could remain temporarily frozen. Chiang said a budget deal may not generate cash quickly enough to resume them immediately [...]

State officials have already designed an IOU template, Chiang said, and have been negotiating with banks over whether taxpayers could cash or deposit them if they are issued. The state could be forced to pay as much as 5% interest on delayed tax refunds if they are not paid by the end of May, Chiang said.

The last time the state issued such IOUs -- the only time since the Great Depression -- was in 1992.

In other words, the only way this delayed tax refund is going to work is if it causes MORE debt for the state. But let's go back to 1992. This was the last big recession in the country, and California again found itself unable to pay its bills. Tell me again how the budget problems aren't structural. Anyway, the state issued about $350 million in IOUs that year, about 15% of what is being prepared today. The process was not smooth:

IOUs have caused headaches for the state in the past. California issued $350 million worth of IOUs to 100,000 recipients in 1992 during a budget impasse between then Gov. Pete Wilson and the Legislature.

A four-year legal battle ensued after some workers had trouble cashing them. The dispute was settled in 1996 with some state workers getting paid time off for the inconvenience they experienced.

Beth Mills, a spokeswoman for the California Bankers Association, said individual banks statewide haven't decided yet whether they will accept the state IOUs this time.

Banks are barely willing to lend money, I just don't think they're going to be interested in accepting $2.3 billion in IOUs when the process was so difficult last time, and there is more uncertainty in the financial markets now. And even if they do, it will not be uniform across all banks, and customers are going to have varying experiences.

The State of the State speech that nobody watched proved the need for fundamental reform, but it generated barely a blip among non-elites. Having trouble cashing your disabled mom's assistance payment, that's a whole different story. Not to mention the fact that the continued erosion of jobs and the 5,300 public works projects that have been delayed by the state will create a lot of angry and idle minds.

Pitchforks and torches may be at a premium. And while it's hard to write a new Constitution in a riot, something needs to shake up this decayed and dysfunctional system.

Bernanke Signs Up For Stimulus; McCain Doesn't Understand Taxes

Now, his conception of a stimulus package and the progressive conception of one are likely to be quite different. But his rejection of neo-Hooverism is as important in the rarefied circles of official Washington as the Powell endorsement is to the Presidential race. Bernanke will be listened to by the Beltway chattering class.

Bernanke suggested that Congress design the stimulus package so that it will be timely, well targeted and would limit the longer-term affects on the government's budget deficit, which hit a record high in the recently ended budget year.

Any stimulus package would need to kick in quickly to entice people and businesses to boost spending and buck up the economy during the period in which economic activity would be otherwise weak, Bernanke said.

Bernanke said the package also should include provisions that would help break through the stubborn credit clog that is playing a major role in the economy's slowdown.

"If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers," Bernanke said. "Such actions might be particularly effective at promoting economic growth and job creation," he added.

This is vague, and there's nothing about funding infrastructure projects or state and local governments. Democrats need to shape this better, and if they have to, wait out Bush. But I'm not worried that there will be some spending, just what form it will take. Even the New York Times is recognizing the consensus around this issue.

But the extra spending, a sore point in normal times, has been widely accepted on both sides of the political aisle as necessary to salvage the banking system and avert another Great Depression.

“Right now would not be the time to balance the budget,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan Washington group that normally pushes the opposite message.

The latest thing from the McCain camp is to call this kind of stimulus and middle class tax cuts "redistribution of wealth" and "welfare", that 40% of Americans don't pay taxes (I thought they LIKED it when people didn't pay taxes... maybe that's just rich people) and why should they get a government handout? After all, now is not the time to experiment with socialism (says the governor who gives Alaskans thousand-dollar checks from oil revenues all the time).

It's ridiculous to say that 40% of the country doesn't pay taxes. If you buy a bagel anywhere, you're paying taxes. If you're on a payroll, you're paying taxes. The government collects revenue in a number of ways, and the economic ignorance of that statement is shocking. As Matt Yglesias says:

Payroll tax is a tax, ergo if you work you pay taxes, ergo if you work you could receive a tax cut. It’s true that the method by which you deliver tax cuts to people with no income tax liability is via a refundable tax credit, but that doesn’t change the fact that you’re talking about reducing the tax burden on people who pay taxes. You’re offering them a tax cut, in other words. Or as McCain puts it, “socialism.” Meanwhile, George W. Bush is nationalizing banks and John McCain wants to buy up bad mortgages so that those who currently own them don’t need to pay any financial penalty for their unsound lending practices.

The only "welfare" we have in this country is corporate. Obama hit back on this pretty well.

Lately, Senator McCain has been attacking my middle class tax cut. He actually said it goes to, "those who don't pay taxes," even though it only goes to working people who are already getting taxed on their paycheck. That's right, Missouri – John McCain is so out of touch with the struggles you are facing that he must be the first politician in history to call a tax cut for working people "welfare."

The only "welfare" in this campaign is John McCain's plan to give another $200 billion in tax cuts to the wealthiest corporations in America – including $4 billion in tax breaks to big oil companies that ran up record profits under George Bush. That's who John McCain is fighting for. But we can't afford four more years like the last eight. George Bush and John McCain are out of ideas, they are out of touch, and if you stand with me in 17 days they will be out of time.

To relate it to stimulus, if you want the economy to move in the short term you put money into the hands of people who will spend it immediately and not just store it away. The danger is in JUST doing that - job creation needs to be an element, and I think we're going to see that in the next package.

Rudy The Lion Tamer

Have people seen this? (Unfortunately, the video's in a proprietary format so i can't embed, but believe me, you'll want to go over and see it.)

It's a clip from the movie Giuliani Time, showing a 2000 "parody" video from a press roast with Rudy acting as, no joke, an AFRICAN TRIBESMAN admonishing a Bronx Zoo lion for being lazy and on welfare. When he tells the zookeeper to release the lion and "send him to a job center" and the zookeeper resists, he goes after the guy with his spear.

So, Rudy is a) comparing welfare recipients to animals, b) dressed up in blackface (or at least war paint) a la Al Jolson, and c) threatening to kill anyone who doesn't agree with him.

It's a trifecta. Wow.

California Republicans Set Their Budget Priorities

And those priorities are...

Leaving poor people on their own to die:

After holding up the state budget nearly a month past deadline, Senate Republicans offered Tuesday to end the impasse if Democrats would move tens of thousands of poor families off welfare and make dozens of additional program cuts.

The linchpin of the plan, Ackerman said, is a $324-million cut in the state's welfare program. The cut was initially proposed by the governor in January, but Schwarzenegger had not been aggressively pushing for its inclusion in the spending plan adopted by the Legislature [...]

Advocates for the poor were alarmed to see the governor's January proposal revived. They said it would result in as many as 40,000 families losing state assistance.

... and ensuring that the planet continued to be destroyed by man-made causes:

Several Republican Party Senators have threatened to block the entire state budget unless the California Legislature accepts a recent polluters’ plea to ignore global warming pollution when assessing a project’s environmental impacts under CEQA. This “ostrich exemption” would allow polluters to continue sticking their heads in the sand, pretending that projects like oil refineries, freeways, and suburban sprawl simply don’t create greenhouse gases. It’s dangerously loopy logic, but if they can convince the Senate to play along, we could see California’s bourgeoning fight against global warming come to a skidding halt.

Hey, at least we know where they stand, right? Now I know why they were hiding their criticisms for so long...