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California Gets Stimulated...Or Does It?

by Susannah Kopecky, published

February has been an exciting time for California and the nation. It has also been an unsure one for many California residents, while we waited for a final agreement by state leaders on a 2009-2010 state budget. By Tuesday, February 17, it was expected that the California Senate and Assembly would vote on a final proposed budget on Saturday, February 21, 2009. At the same time, on Tuesday, February 17, President Obama signed into law the $787 billion federal stimulus program, which is supposed to help alleviate the economic hardship in California.

Interestingly, the White House has estimated that Californians could be helped the most by the passage of the stimulus, with estimates of the creation of nearly 400,000 new jobs as a result of the spending. (The current unemployment rate in California may be as high as 10 percent.) If accurate, this would account for more than 10 percent of the projected 3.5 million new jobs expected to be created as a result of the spending program.

It has been estimated that California could receive more than $25 billion (with the Greater Los Angeles Area possibly receiving more than $6 billion) of the nearly $800 billion in aid, made available by the American Recovery and Reinvestment Act, or ARRA. (Does this remind anyone else of FDR-era program names?) More than $70 billion of the bill has also been marked for investment in renewable, green technologies. Forbes calls California "the biggest beneficiary" of the ARRA, owing in no small part to its status as the largest of the lower 49 states, and certainly the most populous. It is assumed that many of the dollars to be handed out have a rather fluid destiny; that is, not every single dollar is marked for a specific location.

Some hope that the funding will go toward California schools, police and other state services. Already, there are reports that the billions of federal dollars coming to California may be spent in ways less seemingly stimulatory than simply desired. The high-sped rail project Californians voted on in the November polls, may be aided by ARRA money earmarked to the tune of nearly $10 billion for rail projects.

If California were a ship, it would be precariously perched on the water, taking in water while the fleet watched, throwing buckets. Facing a $41 billion deficit, state leaders have themselves to blame. Gov. Arnold Schwarzenegger is not just sitting back, however, while he continues to threaten laying off an additional 10,000-20,000 state workers, on account of the state not being able to pay them... or residents, for that matter (IOU, anyone?).

Some of the reported ways in which state leaders have suggested cleaning up the budget debacle include more than $14 billion in increased taxes (sales tax, gas tax, licensing/automotive taxes and income tax changes) and about $15 billion in spending cuts (K-12 education, college systems, mandatory furloughs for state employees). It boggles the mind, the way state leaders almost cavalierly put off making a budgetary decision. Obtaining the will to make hard decisions, and also grasping the impact of decisions, are two abilities that leaders and lawmakers should have.

Next time around, perhaps a good thing would be to make all elected officials take and pass basic Economics 101. First rule: irresponsible spending cannot go on forever without consequences.

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