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Good Financial News But Be Even More Vigilant

by John on 05/26/2013

california big dealPoor California, they’re so stupid.  Now the Golden Gate state is confused about what to do with a financial surplus.  That’s right a surplus.

We have not seen that word — surplus — in a decade.

And who knew the state that brought us entertainment, culture, and vapidness is now bringing us financial responsibility.

But it’s not just California being fiscally smart; Connecticut, Wisconsin, and Utah are reporting the same surplus problem.

But still there are pitfalls.  We need to pay attention even more now.

Remember, we still have the same Democrats and Republicans running and corrupting our national government.  And the economic structure that led to the Great Recession is also still in place.

califreakinfornia-california-funny-tshirt300First, let’s set the record straight on the politics of this good economic news.

Notice the four states that have accomplished this financial resurrection.  California and Connecticut are run by Democrats; Utah and Wisconsin are controlled by the GOP.  Remember this because the national parties will take credit for it.  The truth: there is a difference in running a state government compared to running the federal government.  Local and state politicians to get things done ignore the extremist bromides of the federal party planks.

The formula was real simple: cut spending and increase revenues on the wealthy.  We finally got away from the two stupid formulas both parties have been trying to sell us over the years.

Democrats want to throw taxpayer dollars at shovel ready jobs that turn out to be cost over-runs thanks to crony contractors and union shenanigans.  All the money spent is usually, if not always, greater than the tax returns.

Republicans told us if you cut taxes on the wealthy and businesses they will invest in more jobs and bring even more dollars into government, but we never saw the returns equaling or exceeding taxpayer investment since most of the wealthy and the businesses pocketed the taxpayer proceeds.

Jerry BrownHopefully that type of thinking is done.  Hopefully you will see our recovery as something that happened in spite of our two major political parties.

Democrats should look at Jerry Brown as an example of how to govern fiscally.  Not since Clinton did we have a Democrat who does what he says economically.

Republicans should go back to Ike and stop following Reagan, Nixon, and George W. Bush and stop paying off the corrupt corporations that are controlling our government policy and expenditures in defense, energy, and the media – and let the new economy flourish.  GOP should condemn more loudly Cheney’s famous stupidity by telling him deficits do matter.

Next, everyone should tip a glass of California Zinfandel (the red, not the white) to (using his formal name) Edmund Gerald Brown for his thought process about what to do now that he has a surplus.

Notice, he is not getting euphoric about this new windfall.  He’s actually looking at the real source of the new revenues – an excessive amount of taxes paid on capital gains from the wealthy selling their stocks at the end of 2012 knowing the Bush era tax cuts were history.  He wants to put it into a rainy day fund for the next economic collapse.

He’s right.  Consider these factors:

Those tax increases are most likely a one-time thing.

The stock market is probably at a peak after doubling since the financial collapse in 2008.  As Chance The Gardener says in the film Being There, “growth has its seasons.”  We may have reached the end of a growth season.

The Fed might be plowing up the growth fields as well.  We are getting hints from Bernanke that quantitative easing and the raising of rates may be happening soon.

There’s a lot of talk that tax reform could raise capital gains rates closer to income tax rates.

Despite recovering from the Great Recession, our economy remains under the same structural problems.  We will continue to swing between boom and bust cycles.  We’re seeing the real estate market heat up again.  Fannie and Freddie, with growing revenues, are paying back Uncle Sam which is helping to reduce the federal budget deficit.

But already the morons in Congress are resting on the falling deficit numbers.  They still think if we raise taxes on the wealthy and cutting defense budgets are all we have to do.  As a result, they’ve stopped any discussion on the long-term deficit explosion from entitlements that could ruin us over the next 15 to 20 years.

If you think these economic surpluses or revenue streams from an uptick in real estate are going to last then we’ve learned nothing from 2008.

Still, we need to invest.

Our roads need repair.  Look no further than the bridge collapse in Washington State.

But we also need high-speed, fuel efficient trains and mass transit to remove as many cars from the roads.  Investment to reduce our consumption is needed.

But we also need to invest in an array of new energy sources.  That includes getting all government energy from US sources.

We also need to invest in environmental safeguards for fracking.  We actually are on our way to energy independence.  But we need to make sure we don’t make a mess of our lands here.  This is our chance to become the world leader in everything again while we leave the quagmire of the Middle East behind.

We also need high-speed internet for every American.

But – and here’s the big BUT — for these investments, government must place standards and financial safeguards on contractors and unions.  What government says is the cost of the project, then that is the price of the project.  Taxpayers pay no more.  Cost over-runs come out of the pay to the contractors and the workers.  Government and contractors need to be efficient for taxpayers.

As the GOP has always said, but rarely done, let’s run government like a business.

So how do we get the rest of the country to act like California?

Pass Simpson-Bowles.




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