Saturday, May 15, 2010

Schwarzenegger Makes Tough Decisions; Is Nova Scotia Heading In A Similar Direction?

RawStory.com has an article here in regard to the cuts coming out of the Governator's office in California.

Here's a list of some programs that will be hit by the budget cuts:
  • California's welfare-to-work program
  • Childcare for low-income families
  • Community mental health
  • A freeze on local school funding
  • Cuts to state workers' pay
  • State worker pension reform
  • State parks
  • Prison system
The transition individuals who depend on these programs will experience as they find new solutions will certainly be painful. Local governments and communities will certainly have to step up to assist their neighbors in need. Thankfully, the new budget does not increase taxes which would be devastating to an economy suffering 12.6% unemployment.

There is a large amount of opposition to the budget, but no other real solutions are being offered to fill the $19.1 billion budget deficit. In fact,  Schwarzenegger's budget only closes the gap by $12.4 billion, leaving $6.7 billion in deficit spending for a State government already drowning in debt. While the state Democrats are attacking the Governor for the cuts, fiscal conservatives could make a strong argument that this budget is too liberal as is and further cuts are required to address the remaining deficit.

Earlier today I was listening to Marc Faber discuss why he was long on the Euro over the US dollar even though many believe the Euro will take a big hit as the EU attempts to bail out Greece. His primary reason for picking the US dollar over the Euro was California. The bankruptcy (or bailout) of the State of California, because it is significantly larger than Greece, will burden the US economy far more than the bankruptcy of Greece will damage the European economy. In the new budget, California is counting on $3.4 billion in help from China, Saudi Arabia, South Korea, and Europe Washington, D.C., and one can only believe that will be just the beginning of what it will take to get California back on its feet as the state continues to run massive deficits.

Now. Take a hard look at your national or regional government and the people running it. Are they enabling a situation to occur similar to that of California or Greece? Are they further indebting the public they are supposed to serve and leading them to an era of poverty?

Here in Nova Scotia the NDP recently passed a budget running a $222 million deficit. Nova Scotia's total debt is $14 billion, with a 36.9% debt-to-GDP ratio. In Canada, this is second only to Quebec.

Bruce Wark from The Coast made the following commentary in regard to Nova Scotia's debt:
I quickly flipped to the budget table showing government expenses: $3.6 billion for health; $1.3 billion for education; $971 million for social supports such as welfare, money for poor kids and public housing. All that added up to more than $5.8 billion or almost two-thirds of Steele's $9 billion budget. Health, education and welfare must, therefore, be largely responsible for the elephantine NS debt, I concluded.

My reasoning stirred more nagging questions. Why does our technology-driven health system put expensive band-aids on the ailments of affluence---heart disease and stroke, cancer and diabetes----when real health depends on things like adequate nutrition, loving relationships, plenty of leisure and a decent income? Ka-ching! Why do we coop young people up in classrooms for at least 15 years memorizing stuff they could learn in half the time and saddling them with serious debt in exchange for the paper credentials required to get a good job? Ka-ching! And could it be that we spend almost $1 billion every year supporting people who fall through the cracks because we'd rather maintain an expensive poverty system than work toward shrinking the income gap between richest and poorest?

With the Bank of Canada keeping interest rates near 0, Provincial governments have been enabled to borrow to destroy business stimulate economies through the recession. Governments, like the Province of Nova Scotia, typically even bring out a committee of witch doctors statist & keynesian economists promoting the deficits to promote job growth (all the while ignoring that fact that deficit spending for the past decade hasn't helped Nova Scotia job growth).

Is a province like Nova Scotia in dire straights currently? Nope. But just wait until interest rates rise, and they will.

During the early 1970s the US inflated their currency much like the Bank of Canada is doing right now. They did it to pay for government deficits and an unjust war in Vietnam. By the end of the decade the country was suffering through stagflation; the economy was in a recession and price-inflation was on the rise in a big way. The Federal Reserve could have continued to inflate, sending the economy into a hyper-inflationary spiral (like the Weimar Republic in Germany, Zimbabwe, Argentina, and many other irresponsible governments) or they could raise interest rates as high as 21% to choke off the inflation. They raised interest rates, choked off inflation and stablized the economy. If government debt then had been as large as it is today, many western governments would have been forced to default due to massive increases in interest payments (much like many Americans were forced to default on their mortgages after their teaser rates jumped).

In years to come Canada will face a similar decision. We're borrowing large amounts of money to pay for our governments' deficits and an unjust war. Due to the inflationary policies of the Bank of Canada over the past few years, we too will face the option of hyper-inflation or spiked interest rates. If we choose spiked interest rates, our governments are screwed. Interest payments will consume significant portions of government budgets forcing higher taxes, massive budget cuts, or both. If we choose hyper-inflation we're all screwed anyway, so fuck it.

15 comments:

Chris said...

Horrible.

If the jobs were in the United States, this would not be an issue. The bubbles merely hid this fact.

We are on the long but short road back to Marx.

Chris said...

The historical record shows what a failure "charity" was for over 2000 years. Now, the boneheads want to reinstitute it. Horrible.

Chris said...

It is interesting that the red shirts in Thailand, a very rich country for the elite, are asserting their economics rights. Good for them, good for those who are willing to sacrifice to get their fair share.

Furlong said...

Unemployment in Nova Scotia is just as high as in California and we are not (yet) suffering as they are.

We are on the long but short road to fascism.

The historical record shows what a failure the "war on poverty" has been for the past 50 years. Now the boneheads want to continue the war with their socialist policies.

Its interesting that the tea parties in Kentucky are asserting their individual rights. Good for them, good for those who are willing to work to reign in government induced impoverishment and reject the reigning establishment.

(you should be happy at least with the Penn democratic primary results. Establishment favored, ex-republican, now moderate dem Arlen Specter for a real left-winger Joe Sestak.)

Chris said...

"Unemployment in Nova Scotia is just as high as in California and we are not (yet) suffering as they are."

??????? Are you unemployed?

"We are on the long but short road to fascism."

You have no idea what fascism is.

"The historical record shows what a failure the "war on poverty" has been for the past 50 years. Now the boneheads want to continue the war with their socialist policies."

LOL, I guess that is why the poverty of the history of humanity was eliminate in the 1950s in New Deal countries. LOL, the evidence speaks against you..

"Its interesting that the tea parties in Kentucky are asserting their individual rights. Good for them, good for those who are willing to work to reign in government induced impoverishment and reject the reigning establishment."

Because we can hire immigrants for slave wages, so it is all goood!

Furlong said...

"??????? Are you unemployed?"

No...amazingly enough...some people are still employed in Cali as well.

"You have no idea what fascism is. "

You have no idea what fascism is.

"LOL, I guess that is why the poverty of the history of humanity was eliminate in the 1950s in New Deal countries. LOL, the evidence speaks against you.. "

If poverty was eliminated in the 1950s...why did LBJ start the war on poverty in the 1960s?

Chris said...

"No...amazingly enough...some people are still employed in Cali as well."

Then how do you know that our unemployed are not suffering as much as theirs?

"You have no idea what fascism is."

Sure I do. It is called reading history.

"If poverty was eliminated in the 1950s...why did LBJ start the war on poverty in the 1960s?"

Excuse me, starting in the 1950s. The 19% poverty rate had dropped dramatically by the 70s and 80s.

Still, considering that the historical poverty was well above 19%, I would say that the production of the 1950s wiped out a good chunk of it.

Furlong said...

"Then how do you know that our unemployed are not suffering as much as theirs?"

I was referring to their government.

"Sure I do. It is called reading history."

My point was that there is not one, absolute, universal definition for some terms.

"Excuse me, starting in the 1950s. The 19% poverty rate had dropped dramatically by the 70s and 80s."

The poverty rate dropped in the 70s and 80s because of the new deal?

Chris said...

"I was referring to their government."

Our government regulates, which why California is fucked. Did you forget this fact? The Canadian dollar is the strongest it has been EVER, BECAUSE we regulate.

"My point was that there is not one, absolute, universal definition for some terms."

Yes there is. Jump is jump, Josh. It has a very definite meaning, because jumping is an action. Fascism, similarly, has real examples in history. It is something. IT IS NOT JUST A SCARE WORD THAT YOU THROW AROUND TO GAIN POINTS>

"The poverty rate dropped in the 70s and 80s because of the new deal?"

Yes, that is right. The long-term effects (elimination of poverty) and short-term effects (most poverty eliminated in the 50s) of the New Deal was to drive up wages. The new support for the unions did this quite nicely.

Furlong said...

"Our government regulates, which why California is fucked. Did you forget this fact? The Canadian dollar is the strongest it has been EVER, BECAUSE we regulate."

Its not the strongest it has ever been. California is one of the heaviest regulated states in the US.

"Yes there is. Jump is jump, Josh. It has a very definite meaning, because jumping is an action. Fascism, similarly, has real examples in history. It is something. IT IS NOT JUST A SCARE WORD THAT YOU THROW AROUND TO GAIN POINTS>"

Do I need to provide legit examples of words in the dictionary with multiple examples?

"Yes, that is right. The long-term effects (elimination of poverty) and short-term effects (most poverty eliminated in the 50s) of the New Deal was to drive up wages. The new support for the unions did this quite nicely."

I love how the industrial revolution had absolutely no bearing on the standard of living in your mind.

Chris said...

"Its not the strongest it has ever been. California is one of the heaviest regulated states in the US."

LOL, the banking system IS FREAKING NATIONAL>>> STOP CHANGING THE GOAL POSTS BY LYING ABOUT REALITY>>>

"Do I need to provide legit examples of words in the dictionary with multiple examples?"

No, what you need to do is show how a really-existing fascist state meets your definition.

"I love how the industrial revolution had absolutely no bearing on the standard of living in your mind."

Very meager bearing on the standard of living. And, yes, if you want me to bring it up over and over again I can. The industrial revolution did not cause the level of wealth in Western countries among the lower classes. The poverty of the lower classes up to 1950 shows this to be true.

Furlong said...

"LOL, the banking system IS FREAKING NATIONAL>>> STOP CHANGING THE GOAL POSTS BY LYING ABOUT REALITY>>>"

So California is suffering the hardest in the US right now because of poor national banking regulations? Obviously there is something unique about California...perhaps their over-regulations?

"No, what you need to do is show how a really-existing fascist state meets your definition."

Why? You define Communism without the need to show a really-existing state to meet your definition.

"The industrial revolution did not cause the level of wealth in Western countries among the lower classes. The poverty of the lower classes up to 1950 shows this to be true."

And the increase in the standard of living for the lower classes and the increase in the size of the middle class during the 19th century is attributed to...

Chris said...

"So California is suffering the hardest in the US right now because of poor national banking regulations? Obviously there is something unique about California...perhaps their over-regulations?"

Yupper, banking is one big difference between Nova Scotia and Cali. The other, of course, is the movement of factory jobs to China, the leadership of a far right retard, and, I KNOW YOU'LL LOVE THIS ONE, A RETARDED TAX LAW ENACTED BY RETARDED LIBETARDS AND CONSERVATARDS> CALIFORNIA HAS ONE OF THE WORST TAX LAWS IN THE NATION BECAUSE OF THE SMALL-BRAINED MORONS WHO DONT WANT TO PAY SOME TAXES>> GREECE IS EXACTLY THE FUCKING SAME>>> TAX EVASION HAS LED TO A HUGE PROBLEM..

"Why? You define Communism without the need to show a really-existing state to meet your definition."

I never defined communism that way. I defined Marxism that way. Marxism is a theory, not a really existing entity like a communist or fascist state.

"And the increase in the standard of living for the lower classes and the increase in the size of the middle class during the 19th century is attributed to..."

The increase for the lower classes was very, very small. The increase for the middle class was due to capitalism.

Furlong said...

"The other, of course, is the movement of factory jobs to China, the leadership of a far right retard, and, I KNOW YOU'LL LOVE THIS ONE, A RETARDED TAX LAW ENACTED BY RETARDED LIBETARDS AND CONSERVATARDS> CALIFORNIA HAS ONE OF THE WORST TAX LAWS IN THE NATION BECAUSE OF THE SMALL-BRAINED MORONS WHO DONT WANT TO PAY SOME TAXES>> GREECE IS EXACTLY THE FUCKING SAME>>> TAX EVASION HAS LED TO A HUGE PROBLEM.."

Using jobs moving to China as an excuse does not fly because NS suffers high unemployment as well. Tax evasion as well...good luck proving California suffers from more tax evasion per capita than NS. Anyway, none of this changes the fact that Cali and Greece both has been spending beyond their means. If tax evasion is the biggest problem, spending billions of dollars you do not have is not the solution.

"Marxism is a theory, not a really existing entity like a communist or fascist state."

Communism is a really existing entity?

"The increase for the lower classes was very, very small. The increase for the middle class was due to capitalism."

Funny...the poor are still poor today. Is a homeless man living on the streets of Canada today better off than a homeless man in the 1800s? I don't see it. The fact the middle class grew during the 19th century is indication enough that people were brought out of poverty into the middle class due to the industrial revolution.

Chris said...

"Using jobs moving to China as an excuse does not fly because NS suffers high unemployment as well. "

No, because NS has had high unemployment for a long, while California has not.

"Tax evasion as well...good luck proving California suffers from more tax evasion per capita than NS."

Greece has tax evasion, Josh; California has a law the prohibits increases in the property tax, which is capped at 1%. If your jobs have disappeared and the bubble has burst, then that means you must increase taxes to cover the shortfall in revenue.

"Anyway, none of this changes the fact that Cali and Greece both has been spending beyond their means."

LOL, California was solvent before the crisis, Josh. That is not spending "beyond their means".

"If tax evasion is the biggest problem, spending billions of dollars you do not have is not the solution."

Again, you don't seem to understand that California was okay before the crisis. It is not like they made all those agreements just to "spend beyond their means. They made them based on a steady, long-term tax revenue.