“No, gentleman, we have tried spending money. We are spending more than we have ever spent and it does not work. And I have just one interest, and if I am wrong, somebody else can have my job. I want to see this country prosperous. I want to see people get a job."
Henry Morgenthau Jr., U.S. Secretary of the Treasury under Franklin D. Roosevelt,
speaking at private meeting with the chairman of the House Ways and Means Committee in May 1939.
In 1975, the New York Daily News ran the headline, “Ford to City: Drop Dead.”
I don’t know if you remember the late 1970s in New York. I was 10 years old and living in South Carolina at the time, so I don’t. But there was a movie that came out a few years later called The Warriors.
It was a tale of a street gang trying to find its way back home to Coney Island. It portrayed a savage landscape with few police, where teenage angst ruled.
Of course I love the film and still do (what can I say, it had a killer sound-track.) But now that I am 40 and own a house filled with children, I’d prefer that it remain on celluloid.
Enough is Enough
Yesterday, the voters of California said enough was enough and shot down five separate initiatives that the policy makers said would get the state back on track.
The upshot is California now faces a $21.3 billion deficit (according to its Governator, Arnold Schwarzenegger), which will balloon to $42 billion shortfall through June 2010.
This means that California will be forced cut spending in education and cut more state workers. California has more than 10% unemployment and has been hard hit by the housing slump. It’s no wonder, because in 2006 housing affordablity was running at 102%. That means that the average mortgage was 102% of the average salary.
And like your dad told you when you got out of college, you should never pay more than 33% of your income on a house.
It’s no wonder that in a state faced with huge taxes and cascading real estate prices, the voters didn’t want to pay more. Nor is it a surprise that California state politicians have record low aproval rating… Or that the other 49 states don’t want to hear about it.
Now, Treasury Secretary Geithner Is Saying “CA: Drop Dead”
The Treasury Secretary recently said that the $700 billion bailout package can’t be used to help states or cities. Geithner told a House Appropriations subcommittee in Washington today the law is reserved for financial companies.
It would be one thing if California were alone. New York, alas, is currently $18 billion overdrawn. And Illinois is $9 billion in the hole. Don’t forget about Texas, Maryland and Flordia. The truth is, U.S. state goverments are a combined $350 billion short of funds.
There was a day when $350 billion seemed like a lot of money. That day was in 2006, when every state had a surplus based on housing taxes.
The sad part is that we know where the money will come from. It will come from our pockets, and our schools and our law enforcement. Along with 12.8 trillion other dollars that Obama is spending.
That said, we should think of the bright side. In about four years there will be some really good B-movies. Warriors, come out and play…
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