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California Budget Crisis Escalates, Schwarzenegger and Dems at Odds?

Dec. 15, 2007 (EIRNS)—The announcement this week by California Governor Arnold Schwarzenegger's budget "experts," that the state's budget deficit for 2008-09 has jumped to at least $14 billion, has precipitated a public scramble of brain-dead politicians looking for someone to blame, and a flood of simple-minded "solutions," along the lines of "cut spending/increase taxes." The Governor announced that he will declare a "fiscal emergency" after January 1, while his supporters are lining up behind major spending cuts. Arnie's call last month for at least a 10% across-the-board cut is now dismissed as inadequate.

On the Democratic side, such recent defenders of Schwarzenegger as Speaker of the Assembly Nunez and Senate Majority leader Perata, have moved to distance themselves from him, though they publicly continue to say they are waiting to see what he will propose. "We are committed to working with him," said Nunez, and are "not drawing any lines in the sand." Privately, Nunez is reported to be fuming, as he stood by Arnie during last year's budget standoff, and is now losing credibility, as the promises of a balanced budget, and no further cuts in social welfare and health care programs, have vaporized.

The budget deficit is expected to continue to grow, as the new deficit figure of $14 billion is due to a steep decline in revenues. Revenues to the state are primarily raised through income taxes, sales taxes, and capital gains from stock sales. All three are falling, with the "housing crisis" leading the way. Meanwhile, proposals for an agreement on a Massachusetts-style state health insurance plan and water management are casualties of the growing deficit.

Legislators are admitting that they missed the boat on the budget, and are complaining that they are getting inadequate forecasts for the economy. One Democrat told LPAC that he was told that LaRouche's HBPA is unnecessary because the housing industry is "coming back," and there will be more jobs for Californians related to exports, due to the weak dollar. This report, he said in disgust, came from the Democratic Budget Office of the Assembly!