By MIKE ZAPLER

Gov. Arnold Schwarzenegger has been warning for months that California’s budget is hurtling toward the proverbial cliff — the point where the state cannot pay its bills.That time is about to arrive, and the fallout could be severe and far-reaching, particularly if the legislative budget stalemate lasts.

In February, state Controller John Chiang will suspend $3.7 billion in payments for at least 30 days. Further, IOUs in lieu of payments could be issued soon.

by David Goldman

You’ve probably noticed: The Obama administration and Congress are talking about spending an unprecedented sum of money to try to revive the economy.

President Obama and House Democrats laid down the marker with an $825 billion package of spending and tax cuts.

Dozens of proposals. Hundreds of pages of legislation. Billions of dollars.

What are some of the headline proposals, and what is the debate all about? The legislation is a work in progress, but here is an overview.

California’s budget deficit is well known by now, an estimated $40 billion dollars (yes, that’s billion, with a b). In spite of having known about this gap for months the state legislature and governor have failed to agree on a revised budget. This after a record-breaking late budget for this fiscal year in the first place - due by June 15, 2008 it was signed into law on September 23, 2008. Now, just a few months later, the state executive and legislative branches are haggling over the budget - again - and failing to reach an agreement - again. Meanwhile it is estimated that the state will run out of cash in late February.

The situation is so dire that the state controller has warned he will have to delay payments to taxpayers, businesses, social service programs and student aid to conserve money in the state’s checking account. Finance officials project the state will run out of cash in late February, but the state controller will have to make a decision by Feb. 1.

They ignore how their inaction could actually make the situation worse.

In just a few weeks, California is expected to begin issuing state refunds to more than 10 million taxpayers — a welcome injection of cash into the ailing economy.

There’s just one catch: The state may delay the checks or issue IOUs instead…

…According to the Franchise Tax Board, the state returned $10.7 billion to individuals and businesses last year. The average state refund was $853 for individuals and $13,284 for businesses.

Almost $11 billion that will NOT help revive the economy due to the inaction of politician. Politicians who don’t take unpaid furloughs to help ease the budget crunch or have to fear layoffs.

But it’s not just the governor and the legislators. California’s government is full of people who think that someone else should make the sacrifice:

After Schwarzenegger’s announcement of the furloughs, it took just one working day for six statewide elected officials to say the furloughs shouldn’t apply to their minions. Yep, six Democrats denounced the hardship it would create and said they didn’t have to abide by the governor’s order. They include Treasurer Bill Lockyer, Secretary of State Debra Bowen, Attorney General Jerry Brown, Lt. Gov. John Garamendi, Controller John Chiang and schools chief Jack O’Connell.

But there’s good news, if karma can be considered good news:

State Controller John Chiang has said the first group to receive IOUS is likely to include legislators.

Republished in full, from our email Inbox this morning. (All emphasis added, formatting for clarity only)

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Abridged letter from Troy Clarke, President of General Motors - followed by a response from our son, Gregory Knox:

Dear Employee,

Next week, Congress and the current Administration will determine whether to provide immediate support to the domestic auto industry to help it through one of the most difficult economic times in our nation’s history. Your elected officials must hear from all of us now on why this support is critical to our continuing the progress we began prior to the global financial crisis……………….

As an employee, you have a lot at stake and continue to be one of our most effective and passionate voices. I know GM can count on you to have your voice heard.

Thank you for your urgent action and ongoing support.

Troy Clarke President General Motors North America

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

From Gregory Knox,

In response to your request to call legislators and ask for a bailout for the United States automakers please consider the following, and please also pass this onto Troy Clark, the president of General Motors North America for me.

You are both infected with the same entitlement mentality that has bred like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping the nation, awaiting our new “messiah” to wave his magical wand and make all our problems go away, while at the same time allowing our once great nation to keep “living the dream”.

The dream is over!

The dream that we can ignore the consumer for years while management myopically focuses on its personal rewards packages, at the same time that our factories have been filled with the worlds most overpaid, arrogant, ignorant and laziest entitlement minded “laborers”, without paying the price for these atrocities and dreaming that still the masses will line up to buy our products

Don’t tell me I’m wrong. Don’t accuse me of not knowing of what I speak. I have called on Ford, GM, Chrysler, TRW, Delphi, Kelsey Hayes, American Axle and countless other automotive OEM’s and Tier ones for 3 decades now throughout the Midwest and what I’ve seen over the years in these union shops can only be described as disgusting.

Mr Clark, the president of General Motors, states:

“There is widespread sentiment in this country, in our government, and especially in the media that the current crisis is completely the result of bad management. It is not.”

You’re right - it’s not JUST management. How about the electricians who walk around the plants like lords in feudal times, making people wait on them for countless hours while they drag ass so they can come in on the weekend and make double and triple time for a job they easily could have done within their normal 40-hour week?

How about the line workers who threaten newbies with all kinds of scare tactics for putting out too many parts on a shift and for being too productive (mustn’t expose the lazy bums who have been getting overpaid for decades for their horrific underproduction, must we)? Do you really not know about this stuff?

How about this great sentiment abridged from Mr. Clarke’s sad plea:

“Over the last few years, we have closed the quality and efficiency gaps with our competitors.”

What the hell has Detroit been doing for the last 40 years?!?

Did we really JUST wake up to the gaps in quality and efficiency between us and them?

The K car vs. the Accord?

The Pinto vs. the Civic?

Do I need to go on?

We are living through the inevitable outcome of the actions of the United States auto industry for decades.

Time to pay for your sins, Detroit …

I attended an economic summit last week where a brilliant economist, Alan Beaulieu surprised the crowd when he said he would not have given the banks a penny of “bailout money”. Yes, he said, this would cause short term problems, but despite what people like George Bush and Troy Clark would have us believe, the sun would in fact rise the next day. And something else would happen. Where there had been greedy and sloppy banks new efficient ones would pop up. That is how a free market system works. It does work . . . .if we would let it work.
But for some reason we are now deciding that the rest of the world is right and that capitalism doesn’t work - that we need the government to step in and “save us”. Save us? Hell, we’re nationalizing. And unfortunately, too many of this once fine nation’s citizens don’t even have a clue that this is what’s really happening. But they sure can tell you the stats on their favorite sports teams. Yeah - THAT’S important.

Does it occur to ANYONE that the “competition” has been producing vehicles, EXTREMELY PROFITABLY, for decades now in this country?….

How can that be???

Let’s see:

* Fuel efficient

* Listening to customers

* Investing in the proper tooling and automation for the long haul

* Not being too complacent or arrogant to listen to Dr W Edwards Deming four decades ago

* Ever-increasing productivity through quality, learning and six-sigma plans

* Treating vendors like strategic partners, rather than like “the enemy”

* Efficient front and back offices

* Non-union environment.

Again, I could go on and on but I really wouldn’t be telling anyone anything they really don’t already know in their hearts. I have six children, so I am not unfamiliar with the concept of wanting someone to bail you out of a mess that you have gotten yourself into - my children do this on a weekly, if not daily basis, as I did at their age. I do for them what my parents did for me (one of their greatest gifts, by the way) - I make them stand on their own two feet and accept the consequences of their actions and work them through. Radical concept, huh.

Am I there for them in the wings? Of course - but only until such time as they can be fully on their own as adults. I don’t want to oversimplify a complex situation, but there certainly are unmistakable parallels here between the proper role of parenting and government.

Detroit and the United States need to pay for their sins. Bad news people - it’s coming whether we like it or not

The newly elected Messiah really doesn’t have a magic wand big enough to “make it all go away”. I laughed as I heard Obama “reeling it back in” almost immediately after the vote count was tallied. “We might not do it in a year.or in four.” Where was that kind of talk when he was RUNNING for the office.

Stop trying to put off the inevitable. That house in Florida isn’t worth $750,000.

People who jump across a border really don’t deserve free health care and welfare benefits.

That job driving a forklift for the big 3 really isn’t worth $85,000 a year.

We really shouldn’t allow Wal-Mart to stock their shelves with products acquired from a country that unfairly manipulates their currency and has the most atrocious human rights infractions on the face of the globe.

That couple whose combined annual income is less than $50,000 really shouldn’t be living in that $485,000 home.

Let the market correct itself people - it will. Yes it will be painful, but it’s gonna be painful either way. And the bright side of my proposal is that on the other side of the pain is a nation that appreciates what it has, doesn’t live beyond its means, gets back to basics, and redevelops the work ethic that made it the greatest nation in the history of the world, and probably turns back to God.

Sorry - don’t cut my head off. I’m just the messenger sharing with you the “bad news”.

Gregory J Knox
President
Knox Machinery, Inc.
Franklin, Ohio 45005

I received the following email today from Citizens Against Government Waste; all emphasis is added:

The HillaryCare proponents in Congress are making good on their campaign promise!

Under the guise of helping children without health insurance, the advocates of a government-run, universal healthcare system for all Americans are pushing for a massive expansion of the State Children’s Health Insurance Program (SCHIP) - increasing the cost of this program to you, me, and all taxpayers

If they succeed, this would be a giant first step toward making their vision of a socialist, Canadian-style healthcare system a reality in this country.

The House and Senate will consider legislation on SCHIP as early as next week, and it’s urgent that you tell your Senators and Representative to oppose the expansion of SCHIP and the tax increases that would be required to pay for it.

SCHIP was originally designed to help low-income families who earn too much to qualify for Medicaid gain access to health insurance for their children. The proposals being pushed by the HillaryCare advocates would increase the SCHIP income eligibility level from the current 200 percent of the federal poverty line (approx. $40,000 in annual income for a family of four) to 300 or even 400 percent of the federal poverty line (approx. $61,950 and $82,600 in annual income, respectively); might allow states to expand coverage even further to other individuals; and might even increase existing benefits to a practically unlimited benefits package.

These proposals could triple spending on SCHIP, from $25 billion to as much as $75 billion over five years, and make more than 71 percent of American children - including many who already have private insurance - covered under either SCHIP or Medicaid.

To pay for this big-government healthcare expansion, its advocates have proposed increasing the federal cigarette excise tax by as much as 156 percent and raising taxes elsewhere. Trust me, this will be just the first of many tax increases to come as SCHIP, like virtually every other entitlement program before it, ends up costing more than expected and sucking up increasing amounts of your tax dollars!

[A]fter the failure of HillaryCare in the 1990’s, the universal healthcare proponents have wised up. They know they can’t impose a government takeover of America’s healthcare system - and the massive tax increases needed to pay for it - all at once without provoking a resounding public outcry. Instead, they’ve adopted an incremental approach, where they will slowly expand existing government healthcare programs until they crowd out private insurance.

The backers of this plan think they can get all Americans dependent on the government for our healthcare before we know what hit us!

Please tell your Senators and Representative to oppose legislation that would expand SCHIP and increase the federal cigarette excise tax, or any other taxes, to pay for it.

Sincerely,

Thomas A. Schatz
President

Socialized medicine, by focusing solely on the patients - who, of course, should be the PRIMARY focus - makes no allowance for research and development. R&D is VERY expensive and is currently funded by the profits made by privately owned medical facilities. The U.S. has been the world leader in medical research because our capitalist system makes this very expensive R&D profitable which, besides being good for the patients, is good for the economy.

Socialized medicine strangles R&D. Countries with socialized medicine just ride on the coattails of the U.S. If we also socialize medicine on whose coattails will we ride?

Economic crisis notwithstanding, the U.S. is a wealthy enough country to provide medical care for its people - ALL of its people. The best way to ensure that the poor and uninsured get care is to provide, not a medical system funded and controlled by a government with limited resources, but an insurance program that allows them to get care in the privately owned system.

Don’t miss this very important point - truly socialized medicine does not allow competition by private businesses. They sign up for the government program or they shut their doors. Socialized medicine equalizes healthcare, not by raising the standard of care overall, but by lowering it overall, to the lowest common denominator. It takes away the basic right to choose from whom we get our health care. It will be from the government program or not at all.

Is that really the direction we want to take? Do we want to leave our children a country with third rate medical care and crushing entitlement spending?

I don’t.

Remember Hope for Homeowners? We didn’t think so. In July, Congress passes the only housing rescue to date: a plan to guarantee up to $300 billion worth of mortgages and prevent more than 300,000 foreclosures.

But to participate, banks must take steep losses — and doing so is voluntary. The anti-climactic upshot: A piddling 321 applications have been filed since the program’s Oct. 1 launch - and not one loan workout has been completed.

A year from now I’d like to see a report on how much of that $700 billion ends up in campaign coffers.

Tax the rich and they’ll leave?

In 2004, [California] voters narrowly approved Proposition 63, the Mental Health Services Act, which imposed an additional 1 percent tax on personal income above $1 million.

The funds generated from this “millionaire’s tax” were intended to expand county mental health programs. Taxpayer and business groups opposed the measure for a couple of obvious reasons. First, California is already a high-tax, high-spending state that didn’t need any more revenue. Second, as we predicted, Proposition 63 would exacerbate California’s income tax volatility.

Although the final vote for Proposition 63 was tallied more than four years ago, evidence suggests that California’s most wealthy have continued to vote on this measure - with their feet.

A recent survey from TNS Research, an international business research firm, found the California counties of Los Angeles, Orange and San Diego had the first, fourth and sixth highest number of millionaires in the country. However, even as the national population of millionaire households grew by 5.9 percent in 2007, Los Angeles County lost about 7,000 of these households. Orange and San Diego Counties lost millionaire households as well.

Milton Friedman’s maxim that few things are as mobile as rich people and capital, is proven starkly by data showing the wealthy are leaving California in record numbers.

And if they don’t leave, this happens:

Our own history shows that the very wealthy benefit from leftist policies of high tax rates, “targeted” taxation and industrial policy.

The ugly truth is that the really wealthy can manipulate the political system to their own ends better than ordinary people. They can lobby for specific tax breaks that only they can take advantage of. They can get government trade protection for their companies. They can get bailouts. If all else fails, the truly wealthy can simply relocate their wealth into whatever area the government policies du jour make the most profitable.

In the extremes, they can simple sit on their wealth and wait for the political winds to change.

The history of Europe since WWII has shown that it really pays to be a big company in a socialist country. Socialists like stasis. Socialist politicians like to guarantee jobs. They like predictable tax revenue. To this end they select a handful of major companies and in return for heavy regulation, protect them internal and external competition. The largest companies in Europe are much larger compared to the size of their national economies than are the largest companies in America. The largest companies in Europe also keep their top positions while a great deal of turnover by comparison occurs in American companies.

America saw the same thing happen between 1945-1980. At the zenith of the Left’s influence in America the tax code grew so riddled with loopholes and shelters that the wealthiest paid little taxes. For three years in the 1970s, Malcomb Forbs, then the world’s richest man, paid zero income tax. After the Reagan tax reforms, such a thing would be unthinkable today.

The Democrats want to put us on a road back to the 1970s when the rich got off scot free, corporations grew fat and lazy behind trade barriers and high taxes, and inflation and deteriorating government services slammed the middle class. It will happen again. The perverse outcomes are guaranteed by the incentive structure built into our political system.

Why do we have to go through all that again?