TW: California is barreling towards its July 1 fiscal deadline without resolution. This should be interesting. California is a partial metaphor for the rest of the nation's fiscal situation. This piece's core point- "The [CA] public imagined that they could have world class government services with extraordinarily low levels of taxation" is applicable to the balance of the nation.
The California situation frames numerous issues:
1) Fiscally speaking Californians mouths are bigger than their stomach's and their system is good at feeding the mouth without digesting properly. The governance structure in CA can relatively easily initiate new spending programs (via referendums) but cannot raise the commensurate taxes (need 2/3 majorities for that and the state districts are gerrymandered to elect strident partisans from both sides).
2) CA creates systematic risk for the rest of the country. If CA were to default on its bond obligations, we would be talking about another cascading financial crisis as other muni bonds across the nation would come under new scrutiny (rates would rise etc.). A CA default is highly unlikely as I believe the bondholders are ahead of just about every stakeholder in CA but for education. In other words CA would have to stop paying firemen, police, health care expenses first before defaulting on the bond payments.
3) CA symbolizes the challenge of variable revenues amidst a demand contraction. As CA (or any other state) contracts is spending in line with its contracting tax revenues, it feeds the downward cycle of overall demand. States unlike the Federal government do not have the leeway to deficit spend to counter the overall demand contraction.
4) But for the federal government to "bailout" CA creates a major moral hazard. If states think Washington will ultimately bail them out then their incentives to address their own problems is greatly diminished.
5) Would the rest of the country support "bailing out" CA?
For these last two reasons, I do not believe Obama will "bail out" CA. The political support issue is important but should ultimately be secondary. The moral hazard issue should be paramount. There are ways for that issue to be overcome (i.e. by CA initiating governance reforms to prevent the deficit from recurring) but the only way those reforms will happen will be through a game of chicken with the federal government. While I support playing the game, these games are how disasters occur and depressions are created. Things should never get to this point.
From Economist:
"...NPR interviewed two mayors from California cities—San Diego and Santa Anna—on the subject of the state's budget crisis and the state government's efforts to close the yawning gap between revenues and expenditures by taking or borrowing money from metropolitan budgets. The mayors were obviously not very pleased with this approach, but what surprised me was how sanguine they seemed about the crisis in general, and how unable they were to discuss the actual issues involved. The mayors appeared to believe that so long as their local budgets were sound, no amount of state level cuts would much affect them. They also stood firmly in the belief that California voters were entirely in the right in placing strict constitutional limits on tax increases, and they declared that the "literally bloated bureaucracy" needed to live within its means.
It's all well and good to talk about a bloated bureaucracy, but state legislators could cut government employment in Sacramento to the bone without making much of a dent in the budget crisis. It isn't the pencil pushers spending the money, it's the demands of the public, expressed through their elected representatives but also directly, in statewide ballot initiatives.
The public has imagined that they could have world class government services with extraordinarily low levels of taxation. This is a fantasy, and one is sorely tempted to let the state figure this out for itself. Presumably, after the sudden release of thousands of prison inmates has spurred a spike in crime, drastic cuts to top universities generate mass academic brain drain, and shortfalls in key social services lead to a wave of well-publicised suffering, Californians will begin to get the picture—you get what you pay for.
For now, the administration seems inclined to take this approach...presidential advisors have determined that California is not yet at the brink and ought to work harder to close its budget gap by itself. Obama officials are also nervous that a California bail-out will lead to a wave of requests from other states
...Structural budget problems in California and elsewhere are a major roadblock, and no aid should be forthcoming until binding negotiations have taken place between state and federal officials, establishing a path to long-run budget stability. But this is the wrong place to hold a line against bail-outs.
For one thing, countercyclical aid to states is entirely appropriate. Most state constitutions prevent their governments from running annual budget deficits. This means that in recessions, pro-cyclical tax increases and service cuts are necessary. There should be a federal aid automatic stabiliser in place to prevent this (accompanied by a "tax" on state budgets during boom times).
...But it is also clear to me that this is the next Lehman. This is the domino you can't let topple. There are no good options available. A default would roil municipal debt markets and could seriously harm both state budgets and financial markets. Solving the budget crisis without addressing the constituional issues would involve pro-cyclical and economically destabilising budget cuts. Solving the crisis while addressing the constitutional limits on tax increases would prevent dangerous cuts to services, but would still be pro-cyclical, and is at any rate impossible in the necessary time frame.
The downsides to intervention are clear—moral hazard, growing demands from other states, the risk that California may not fix the underlying issues, the use of scarce political capital to obtain funds from Congress, and so on. But the adminstration has gone to great lengths to put a floor under this economy, guaranteeing that no major financial institutions would fail and racking up a trillion dollar deficit. Letting California go would throw much of that work out the window. How one observes the failure of a middling investment bank creating global financial havoc and then allows the world's eighth largest economy to crater over a matter of $24 billion is beyond me. I remain convinced that the adminstration will not allow it to happen"
http://www.economist.com/blogs/freeexchange/2009/06/slipping_into_the_sea.cfm
Showing posts with label California. Show all posts
Showing posts with label California. Show all posts
Thursday, June 25, 2009
Thursday, February 19, 2009
Tyranny Of the Minority: CA Continues To Rot
TW: Tyrannies of the minorities have really started to bug me. They are everywhere- Cuban-Americans preventing U.S. opening relations with Cuba, sugar growers preventing lower tariffs, Israeli right wing religious zealots driving the colonization of the West Bank and now here in the states Hooverite Republicans not understanding that all ideologies eventually will find a brick wall. Regardless the California saga continues in classic fashion. The Republican senate leader tries to compromise and what happens? The ideologues push him out of his position perpetuating the stalemate. I would populism left or right is usually a harbinger of poor governance.
From Economist:
"FOR days, California's State Senate has been embroiled in a battle over the state's next budget. Democrats control the body by a 24-14 margin, but decades-old reforms require them to cobble together a 2/3 supermajority to pass a budget or raise taxes. Almost every Republican in the Senate is a diehard supply-sider, adamantly against raising taxes—thus the battle has dragged on, and thus the party has ousted its leader because he was too open to compromise. The new leader, reports the San Francisco Chronicle, "is part of the conservative wing of the Senate Republican caucus and he has been adamantly against raising any taxes."
Leave aside the discussion of whether government by supermajority, which assigns all power to the minority party, makes any sense. Why won't any more Republicans break ranks? Because they've got firepower trained on them from conservative groups and talk radio, ready to oust anyone who makes a deal. Hugh Hewitt, a Southern California radio host, warns one Republican senator that a web site is ready to go up for a recall campaign against him if he breaks.The irony is overwhelming. Arnold Schwarzenegger, elected governor in 2003 thanks to a conservative populist revolt, is presiding over a complete disaster made worse by... a conservative, populist revolt."
http://www.economist.com/blogs/democracyinamerica/2009/02/terminated.cfm
Update: TW- A Republican "caved" so CA now has a budget...
From Bloomberg:
"Republican Senator Abel Maldonado of Santa Maria broke ranks with his party to cast the deciding vote in exchange for support for unrelated changes to election law. His support allowed the budget package to attain the two-thirds majority needed for approval.
“This could be a career-ender for me,” he told reporters in the Senate chamber in Sacramento before the vote. “In difficult times, you need to step up to the plate.”
From Economist:
"FOR days, California's State Senate has been embroiled in a battle over the state's next budget. Democrats control the body by a 24-14 margin, but decades-old reforms require them to cobble together a 2/3 supermajority to pass a budget or raise taxes. Almost every Republican in the Senate is a diehard supply-sider, adamantly against raising taxes—thus the battle has dragged on, and thus the party has ousted its leader because he was too open to compromise. The new leader, reports the San Francisco Chronicle, "is part of the conservative wing of the Senate Republican caucus and he has been adamantly against raising any taxes."
Leave aside the discussion of whether government by supermajority, which assigns all power to the minority party, makes any sense. Why won't any more Republicans break ranks? Because they've got firepower trained on them from conservative groups and talk radio, ready to oust anyone who makes a deal. Hugh Hewitt, a Southern California radio host, warns one Republican senator that a web site is ready to go up for a recall campaign against him if he breaks.The irony is overwhelming. Arnold Schwarzenegger, elected governor in 2003 thanks to a conservative populist revolt, is presiding over a complete disaster made worse by... a conservative, populist revolt."
http://www.economist.com/blogs/democracyinamerica/2009/02/terminated.cfm
Update: TW- A Republican "caved" so CA now has a budget...
From Bloomberg:
"Republican Senator Abel Maldonado of Santa Maria broke ranks with his party to cast the deciding vote in exchange for support for unrelated changes to election law. His support allowed the budget package to attain the two-thirds majority needed for approval.
“This could be a career-ender for me,” he told reporters in the Senate chamber in Sacramento before the vote. “In difficult times, you need to step up to the plate.”
Tuesday, February 17, 2009
Ideology Combines With the Tyranny Of the Minority: Chaos
TW: Perhaps you have followed the California mess. It is actually an on-going saga that brought down one governor, Gray Davis Democrat, and threatens to bring down the Governator and maybe the entire state. The fiscal morass in that state harks back to the late 70's and the infamous Proposition 13 movement which was a key trigger for the overall tax cutting mentality that helped Republicans adhere power nationally for thirty years.
One of the resulting changes in CA made it very difficult to raise taxes with 67% majorities necessary to implement tax changes. CA is obviously very Democratic but the Republicans have hung onto about 34% of the state senates seats and those 34% are very hard core anti tax ideologues. 34% of the representatives with theocratic adherence to an ideology rule the state. I suspect years from now when folks are dissecting the carcass of our economy vintage 2007-2011, they will ponder why ideologues were permitted to ruin our nation.
The state faces default on its debt if it does not close its current fiscal deficit. This problem is not entirely the fault of the Republicans, no doubt like many (most) states public spending has been excessive but recall these relatively stringent tax processes have been in place for decades, CA is not a state that went out during the "boom" years and initiated massive new public expenditures.
The proposed compromise is a mix of spending cuts and taxes. Obviously a left wing bill...not "bi-partisan enough". The Republicans want 100% spending cuts, but as the piece points out to do so solely with spending cuts is not particularly viable.
From LA Times:
"The math seems pretty simple. But apparently it's too rigorous for many Republican politicians.To avoid raising taxes and still balance the books in Sacramento, you'd have to virtually shut down state government. Some politicians are in denial. Some are demagoguing. Some are just ducking. Scared. The scared are rather pathetic...they cower before conservative bloggers, radio talk entertainers and activists of a declining party.It's Republican dogma in the Capitol that to vote for a tax increase is "career-ending." Even if true -- and there's evidence both ways -- so what?
Scared is a symptom of term limits, when legislators aren't around long enough to gather political self-confidence and standing; of gerrymandering that bunches like-minded voters into single districts to protect seats for a party and punishes bipartisanship
...Gov. Arnold Schwarzenegger and the four legislative leaders finally agreed last week on a package of $15.1 billion in spending reductions, $14.4 billion in tax increases and $11.4 billion in borrowing.That's close to what Californians want -- a mix. A statewide survey last month by the nonpartisan Public Policy Institute of California found that 56% of voters favor both spending cuts and tax increases to solve what 82% of the electorate considers "a big problem.
"The problem for GOP politicians, however, is that 52% of Republicans favor eradicating the red ink "mostly through spending cuts.
"But the numbers don't add up. The Legislature's two Republican leaders -- Assemblyman Mike Villines of Clovis and Sen. Dave Cogdill of Modesto -- came to that realization in December as they dug through the budget books. They also knew that even if it were possible to avoid tax hikes, their GOP colleagues didn't have the stomach for the kinds of slashing that would be needed in school, healthcare and prison programs.
"The only alternative now," Villines said Saturday, "is to literally go insolvent and over the cliff. And many of us believe that is irresponsible and giving up our constitutional responsibilities."Ardent anti-taxers say the governor and Legislature should simply whack the "bloated" bureaucracy by 10%. Even 20% if need be. Lay off and cut pay. Pare benefits too. After all, private companies are doing it.
Well, you could fire every state worker under the governor's control and the savings wouldn't come close to balancing the budget.
...According to the state budget document, there is the equivalent of 205,000 full-time jobs controlled by the governor...You could lay off all those state workers -- rid yourself of their pay and benefits -- and save only $24.4 billion...Meanwhile, you would have dumped 160,000 convicted felons onto the streets because all the prisons were closed after the guards and wardens were fired. There'd be no Highway Patrol because all the officers were canned. State parks would be closed because there were no fee-collectors or rangers...
...You could cut off all state money to higher education -- the two university systems and the community colleges. That would save the remaining $16 billion...you could eliminate virtually all state money for healthcare and social services -- grants for the aged, blind and disabled, assistance for the homebound, medical care for the poor, mental health treatment, welfare. . . . No exceptions.Of course, you'd then be turning away tons of money from Washington, which shares the costs. And you would be violating some federal laws. But there, it's done. You've avoided a tax increase. What a state!..."
http://www.bloomberg.com/apps/news?pid=20601070&sid=aApDmrqhLZtk&refer=politics
One of the resulting changes in CA made it very difficult to raise taxes with 67% majorities necessary to implement tax changes. CA is obviously very Democratic but the Republicans have hung onto about 34% of the state senates seats and those 34% are very hard core anti tax ideologues. 34% of the representatives with theocratic adherence to an ideology rule the state. I suspect years from now when folks are dissecting the carcass of our economy vintage 2007-2011, they will ponder why ideologues were permitted to ruin our nation.
The state faces default on its debt if it does not close its current fiscal deficit. This problem is not entirely the fault of the Republicans, no doubt like many (most) states public spending has been excessive but recall these relatively stringent tax processes have been in place for decades, CA is not a state that went out during the "boom" years and initiated massive new public expenditures.
The proposed compromise is a mix of spending cuts and taxes. Obviously a left wing bill...not "bi-partisan enough". The Republicans want 100% spending cuts, but as the piece points out to do so solely with spending cuts is not particularly viable.
From LA Times:
"The math seems pretty simple. But apparently it's too rigorous for many Republican politicians.To avoid raising taxes and still balance the books in Sacramento, you'd have to virtually shut down state government. Some politicians are in denial. Some are demagoguing. Some are just ducking. Scared. The scared are rather pathetic...they cower before conservative bloggers, radio talk entertainers and activists of a declining party.It's Republican dogma in the Capitol that to vote for a tax increase is "career-ending." Even if true -- and there's evidence both ways -- so what?
Scared is a symptom of term limits, when legislators aren't around long enough to gather political self-confidence and standing; of gerrymandering that bunches like-minded voters into single districts to protect seats for a party and punishes bipartisanship
...Gov. Arnold Schwarzenegger and the four legislative leaders finally agreed last week on a package of $15.1 billion in spending reductions, $14.4 billion in tax increases and $11.4 billion in borrowing.That's close to what Californians want -- a mix. A statewide survey last month by the nonpartisan Public Policy Institute of California found that 56% of voters favor both spending cuts and tax increases to solve what 82% of the electorate considers "a big problem.
"The problem for GOP politicians, however, is that 52% of Republicans favor eradicating the red ink "mostly through spending cuts.
"But the numbers don't add up. The Legislature's two Republican leaders -- Assemblyman Mike Villines of Clovis and Sen. Dave Cogdill of Modesto -- came to that realization in December as they dug through the budget books. They also knew that even if it were possible to avoid tax hikes, their GOP colleagues didn't have the stomach for the kinds of slashing that would be needed in school, healthcare and prison programs.
"The only alternative now," Villines said Saturday, "is to literally go insolvent and over the cliff. And many of us believe that is irresponsible and giving up our constitutional responsibilities."Ardent anti-taxers say the governor and Legislature should simply whack the "bloated" bureaucracy by 10%. Even 20% if need be. Lay off and cut pay. Pare benefits too. After all, private companies are doing it.
Well, you could fire every state worker under the governor's control and the savings wouldn't come close to balancing the budget.
...According to the state budget document, there is the equivalent of 205,000 full-time jobs controlled by the governor...You could lay off all those state workers -- rid yourself of their pay and benefits -- and save only $24.4 billion...Meanwhile, you would have dumped 160,000 convicted felons onto the streets because all the prisons were closed after the guards and wardens were fired. There'd be no Highway Patrol because all the officers were canned. State parks would be closed because there were no fee-collectors or rangers...
...You could cut off all state money to higher education -- the two university systems and the community colleges. That would save the remaining $16 billion...you could eliminate virtually all state money for healthcare and social services -- grants for the aged, blind and disabled, assistance for the homebound, medical care for the poor, mental health treatment, welfare. . . . No exceptions.Of course, you'd then be turning away tons of money from Washington, which shares the costs. And you would be violating some federal laws. But there, it's done. You've avoided a tax increase. What a state!..."
http://www.bloomberg.com/apps/news?pid=20601070&sid=aApDmrqhLZtk&refer=politics
Monday, February 9, 2009
No Surprise: Chicago Pissed Away $300 MM On the Parking Deal
TW: We posted on this when it happened.
http://treylaura.blogspot.com/2008/12/these-privatization-programs-are-insane.html
http://treylaura.blogspot.com/2008/12/chicago-under-benevolent-dictatorship.html
http://treylaura.blogspot.com/2009/01/well-that-did-not-take-long.html
But it is always good to see the obvious stated in print by an actual economist. The net net Daley traded $300 million of future revenue over the next 75 years in order to fix the next two or three years budget shortfalls. Disgraceful governance.
From the Chi Tribune:
"Mayor Richard Daley reaped a windfall and avoided further budget cuts when he secured fast-track City Council approval of a 75-year lease of the parking-meter system, but an economist's analysis concludes he also gave up hundreds of millions down the line.The complex agreement, the first of its kind in the United States, nets the city a one-time cash payment of nearly $1.2 billion when the deal is closed this month.But the city could have earned $1.5 billion—in today's dollars—if it kept the meters and simply raised rates to the same levels it granted the winning bidder, according to H. Woods Bowman, a professor of public service at DePaul University.
..."There's nothing that would prevent the city from doing what the private sector is doing," Bowman said, noting aldermen already took heat for approving the rate increases in the deal...The reason they are doing it is because they can get the money now and close their budget gap."
...Pete Scales, spokesman for the city's Budget and Management Office, said Bowman's calculations don't take into account the risk of such a lengthy lease."[TW: this is happy horse dung from the City, what risks or at least what risks that could not have been mitigated in the future by the City]
http://tinyurl.com/d5qq77
http://treylaura.blogspot.com/2008/12/these-privatization-programs-are-insane.html
http://treylaura.blogspot.com/2008/12/chicago-under-benevolent-dictatorship.html
http://treylaura.blogspot.com/2009/01/well-that-did-not-take-long.html
But it is always good to see the obvious stated in print by an actual economist. The net net Daley traded $300 million of future revenue over the next 75 years in order to fix the next two or three years budget shortfalls. Disgraceful governance.
From the Chi Tribune:
"Mayor Richard Daley reaped a windfall and avoided further budget cuts when he secured fast-track City Council approval of a 75-year lease of the parking-meter system, but an economist's analysis concludes he also gave up hundreds of millions down the line.The complex agreement, the first of its kind in the United States, nets the city a one-time cash payment of nearly $1.2 billion when the deal is closed this month.But the city could have earned $1.5 billion—in today's dollars—if it kept the meters and simply raised rates to the same levels it granted the winning bidder, according to H. Woods Bowman, a professor of public service at DePaul University.
..."There's nothing that would prevent the city from doing what the private sector is doing," Bowman said, noting aldermen already took heat for approving the rate increases in the deal...The reason they are doing it is because they can get the money now and close their budget gap."
...Pete Scales, spokesman for the city's Budget and Management Office, said Bowman's calculations don't take into account the risk of such a lengthy lease."[TW: this is happy horse dung from the City, what risks or at least what risks that could not have been mitigated in the future by the City]
http://tinyurl.com/d5qq77
Tuesday, January 13, 2009
Why Do We Do This?
TW: My gratuitous observation of the day. Why do we need the above? The scene is from this morning at a south suburban home near Chicago where a man is holding his wife hostage. Unfortunate certainly, unique by no means as these situations have been occurring for decades.My question is why do we fund tactical assault teams with armored vehicles and high powered weapons (generally overweight white males btw) to march around like special forces amidst a "24" episode.
Thirty years ago we had this scene on say Adam-12 twice a season, the situation was addressed without so much drama with a handful of regular police officers and perhaps a street wise hostage negotiator. But now we have the above.
Saturday, January 3, 2009
Well That Did Not Take Long
TW: Was perusing the Chi Trib this morning (a process that takes about 3 minutes usually due to the shrinking content of that paper), but ran across an article on the Chicago City budget. SHOCKINGLY, a rainy day has arrived already and that parking meter fund set aside for posterity is already in line to be tapped. Yep it took all of one month for the City to start in on the fund. We posted on the topic last month when the plan to capitalize 75 years of revenue was announced.
http://treylaura.blogspot.com/2008/12/these-privatization-programs-are-insane.html
From the Chi Trib:
"Just weeks after Mayor Richard Daley said the city's new budget wasn't overly optimistic, his chief financial officer announced Friday that revenue fell short by $31 million in recent months amid a worsening economy.If the downward trend continues, City Hall will have to find more ways to cut costs or boost revenue, said Paul Volpe, whom Daley has tapped to be his new chief of staff...Volpe also said the city could tap a $324 million rainy-day fund to be created when Chicago closes on the 75-year lease of its parking meters for nearly $1.2 billion"
http://www.chicagotribune.com/news/local/chi-daley-city-budget-03jan03,0,4749873.story
http://treylaura.blogspot.com/2008/12/these-privatization-programs-are-insane.html
From the Chi Trib:
"Just weeks after Mayor Richard Daley said the city's new budget wasn't overly optimistic, his chief financial officer announced Friday that revenue fell short by $31 million in recent months amid a worsening economy.If the downward trend continues, City Hall will have to find more ways to cut costs or boost revenue, said Paul Volpe, whom Daley has tapped to be his new chief of staff...Volpe also said the city could tap a $324 million rainy-day fund to be created when Chicago closes on the 75-year lease of its parking meters for nearly $1.2 billion"
http://www.chicagotribune.com/news/local/chi-daley-city-budget-03jan03,0,4749873.story
Thursday, December 11, 2008
Tuesday, December 9, 2008
Chi Town Hits a (Very) Soft Patch
TW: Man, we were rocking (the Obama thing etc.) but the last couple of days have been tough. Yesterday, Chicago Tribune- owner of our paper, our primary baseball team (sorry Nardo), our TV station and a key architectural landmark- goes bankrupt and Ron Santo for the umpteenth time gets shafted by the Hall of Fame voters in favor of yet another so so New York Yankee.
Then today Blagojevich just takes the cake. We are used to benevolent dictatorship, e.g. Daley mayoralties, and a fair amount of corruption (see George Ryan, Dan Rostenkowski and a hundred others). But Blago has some real cojones, it is no surprise I suppose merely further affirmation of how messed things are.
From the prosecutor statement via TPM:
"Regarding the Senate seat, the charges allege that Blagojevich, Harris and others have engaged and are engaging in efforts to obtain personal gain, including financial gain, to benefit Blagojevich and his family through corruptly using Blagojevich's sole authority to appoint a successor to the unexpired term of the President-elect's former Senate seat, which he resigned effective November 16. The affidavit details numerous conversations about the Senate seat between November 3 and December 5. In these conversations, Blagojevich repeatedly discussed the attributes of potential candidates, including their abilities to benefit the people of Illinois, and the financial and political benefits he and his wife could receive if he appointed various of the possible candidates.
Throughout the intercepted conversations, Blagojevich also allegedly spent significant time weighing the option of appointing himself to the open Senate seat and expressed a variety of reasons for doing so, including: frustration at being "stuck" as governor; a belief that he will be able to obtain greater resources if he is indicted as a sitting Senator as opposed to a sitting governor; a desire to remake his image in consideration of a possible run for President in 2016; avoiding impeachment by the Illinois legislature; making corporate contacts that would be of value to him after leaving public office; facilitating his wife's employment as a lobbyist; and generating speaking fees should he decide to leave public office.
In the earliest intercepted conversation about the Senate seat described in the affidavit, Blagojevich told Deputy Governor A on November 3 that if he is not going to get anything of value for the open seat, then he will take it for himself: "if . . . they're not going to offer anything of any value, then I might just take it." Later that day, speaking to Advisor A, Blagojevich said: "I'm going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain." He added later that the seat "is a [expletive] valuable thing, you just don't give it away for nothing."
Then today Blagojevich just takes the cake. We are used to benevolent dictatorship, e.g. Daley mayoralties, and a fair amount of corruption (see George Ryan, Dan Rostenkowski and a hundred others). But Blago has some real cojones, it is no surprise I suppose merely further affirmation of how messed things are.
From the prosecutor statement via TPM:
"Regarding the Senate seat, the charges allege that Blagojevich, Harris and others have engaged and are engaging in efforts to obtain personal gain, including financial gain, to benefit Blagojevich and his family through corruptly using Blagojevich's sole authority to appoint a successor to the unexpired term of the President-elect's former Senate seat, which he resigned effective November 16. The affidavit details numerous conversations about the Senate seat between November 3 and December 5. In these conversations, Blagojevich repeatedly discussed the attributes of potential candidates, including their abilities to benefit the people of Illinois, and the financial and political benefits he and his wife could receive if he appointed various of the possible candidates.
Throughout the intercepted conversations, Blagojevich also allegedly spent significant time weighing the option of appointing himself to the open Senate seat and expressed a variety of reasons for doing so, including: frustration at being "stuck" as governor; a belief that he will be able to obtain greater resources if he is indicted as a sitting Senator as opposed to a sitting governor; a desire to remake his image in consideration of a possible run for President in 2016; avoiding impeachment by the Illinois legislature; making corporate contacts that would be of value to him after leaving public office; facilitating his wife's employment as a lobbyist; and generating speaking fees should he decide to leave public office.
In the earliest intercepted conversation about the Senate seat described in the affidavit, Blagojevich told Deputy Governor A on November 3 that if he is not going to get anything of value for the open seat, then he will take it for himself: "if . . . they're not going to offer anything of any value, then I might just take it." Later that day, speaking to Advisor A, Blagojevich said: "I'm going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain." He added later that the seat "is a [expletive] valuable thing, you just don't give it away for nothing."
Saturday, December 6, 2008
Thursday, December 4, 2008
Chicago Under Benevolent Dictatorship
TW: This Chicago parking meter deal has me chafed. I have mentioned before that more than most understand we are governed by the equivalent of benevolent dictators (POTUS relative to national security, the Fed relative to monetary policy etc.). Certainly Chicago is governed by a benevolent dictator as epitomized by this deal. I have also mentioned benevolent dictators while anti-democratic are neither new to the US nor necessarily bad.
But if you have a dictator you better be damn sure to get one that knows what they are doing (hence W. Bush has been a real problem) and they should be truly benevolent and far-sighted. Unfortunately Mayor Daley and his ilk are mortgaging the future of our great city in pursuit of short-term budgetary and hence political gain. This deal not only uses future cash flows to pay for current spending it imposes a completely regressive tax on the citizens of Chicago while cynically providing limited funding for "low-income Chicagoans".
And thanks to the ineptitude and toadiness of the alderman and media, while they shriek and moan about the increases, not one word is uttered about using your children's and grandchildren's cash flows to pay for next year's budget.
From the Chicago Tribune:
"...Anticipating big shortfalls, Daley plans to set aside as much as $675 million of the one-time parking meter windfall to help balance the city's budget [TW: plus another $100 million for "low-income people" whatever that means and I would bet you $100 the rest gets pulled into the current budgets much sooner than later]. Last year, Daley had said the meter money would be kept in reserve instead...
Several aldermen also raised concerns about being given only 72 hours to review, evaluate and approve the deal [TW: that is what dictators do, ram things through]...Volpe [budget director] said interest rates are currently very low and the city wants to act now in case those rates increase in this "volatile market." [TW: this is complete BS, almost no one expects interest rates to go up in the short-term and I assure the folks making a 75 year deal are not focused on short term anyway]. He also said the city needs the money as soon as possible [TW: which says it all, this is about addressing one year's budget by selling out the next 75]..."
http://newsblogs.chicagotribune.com/clout_st/2008/12/aldermen-debate.html
But if you have a dictator you better be damn sure to get one that knows what they are doing (hence W. Bush has been a real problem) and they should be truly benevolent and far-sighted. Unfortunately Mayor Daley and his ilk are mortgaging the future of our great city in pursuit of short-term budgetary and hence political gain. This deal not only uses future cash flows to pay for current spending it imposes a completely regressive tax on the citizens of Chicago while cynically providing limited funding for "low-income Chicagoans".
And thanks to the ineptitude and toadiness of the alderman and media, while they shriek and moan about the increases, not one word is uttered about using your children's and grandchildren's cash flows to pay for next year's budget.
From the Chicago Tribune:
"...Anticipating big shortfalls, Daley plans to set aside as much as $675 million of the one-time parking meter windfall to help balance the city's budget [TW: plus another $100 million for "low-income people" whatever that means and I would bet you $100 the rest gets pulled into the current budgets much sooner than later]. Last year, Daley had said the meter money would be kept in reserve instead...
Several aldermen also raised concerns about being given only 72 hours to review, evaluate and approve the deal [TW: that is what dictators do, ram things through]...Volpe [budget director] said interest rates are currently very low and the city wants to act now in case those rates increase in this "volatile market." [TW: this is complete BS, almost no one expects interest rates to go up in the short-term and I assure the folks making a 75 year deal are not focused on short term anyway]. He also said the city needs the money as soon as possible [TW: which says it all, this is about addressing one year's budget by selling out the next 75]..."
http://newsblogs.chicagotribune.com/clout_st/2008/12/aldermen-debate.html
Wednesday, December 3, 2008
These Privatization Programs Are INSANE!
TW: Chicago is leading the way in privatizing public revenue streams. We have done so with the Chicago Skyway and Mayor Daley is proposing to do the same with our parking meters. These deals would more accurately be described as capitalization schemes. The City of Chicago is trading 75 years of revenue in return for $1.2 billion. The deal is getting huge press mainly as in order to get the $1.2 billion upfront the city is proposing to let the private firm raise meter rates by up to four X over the next four years. No doubt by weaving the increases into a "capitalization" scheme the city believes the increases will be more palatable but my far greater concern is what the deal means for the future finances of Chicago.
Perhaps if the $1.2 billion was put away into some form of annuity or investment vehicle (preferably not invested in CDOs or Icelandic currency), then such a deal would not be destructive to the long-term financial health of the City. However, the actual plans for the money are much different. The vast majority of the money will be used for standard operating budgets over the next three years
"The Daley administration said $400 million will go into a long-term reserve, $325 million will be spent in city budgets through 2012 and $100 million is earmarked for programs helping low-income people. An additional $324 million is headed toward a fund city officials said "may be used to help bridge the period until the nation's economy begins to grow again."
So about one-third of the money will be set aside (with no guarantees it will not be grabbed say next year) and the balance will be deployed over the next three years including that "$100 million of low-income" which is mere vig to insure the votes of the city alderman to approve the plan.
Chicago is trading 75 years of revenue to shore up the next 3 year's budgets!!
These capitalization schemes are toxic waste being planted in a bi-partisan manner throughout the country, they are fiscal insanity. They are literally equivalent to a 20 year old capitalizing her life time earnings and then going on a three spending binge.
http://newsblogs.chicagotribune.com/clout_st/2008/12/city-parking-me.html
Perhaps if the $1.2 billion was put away into some form of annuity or investment vehicle (preferably not invested in CDOs or Icelandic currency), then such a deal would not be destructive to the long-term financial health of the City. However, the actual plans for the money are much different. The vast majority of the money will be used for standard operating budgets over the next three years
"The Daley administration said $400 million will go into a long-term reserve, $325 million will be spent in city budgets through 2012 and $100 million is earmarked for programs helping low-income people. An additional $324 million is headed toward a fund city officials said "may be used to help bridge the period until the nation's economy begins to grow again."
So about one-third of the money will be set aside (with no guarantees it will not be grabbed say next year) and the balance will be deployed over the next three years including that "$100 million of low-income" which is mere vig to insure the votes of the city alderman to approve the plan.
Chicago is trading 75 years of revenue to shore up the next 3 year's budgets!!
These capitalization schemes are toxic waste being planted in a bi-partisan manner throughout the country, they are fiscal insanity. They are literally equivalent to a 20 year old capitalizing her life time earnings and then going on a three spending binge.
http://newsblogs.chicagotribune.com/clout_st/2008/12/city-parking-me.html
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