California Gets Stimulated…Or Does It?

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

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.