Budget Emergency – dump your Cal paper NOW!!
I knew I shouldn’ta done it: I went to the guv’s budget website to find what is up, and was flabbergasted at what I saw www.ebudget.ca.gov. What does this have to do with investing? Everything. If you have a mutual fund that is Calif tax exempt bond fund, Cal paper, or anything remotely similar, dump it now at whatever price you can get. California government is headed for financial Armageddon, and there ain’t a dang thing anyone can do ‘bout it.
I did some cocktail napkin calculations, but first a few numbers (rounded off, so I won’t have to find my 99¢ calculator).
income = $70B, spending =$110B, deficit = $40B.
how it is spent: $50B education, $30B welfare, $10B jails, $20B everything else. cocktail napkin #1
How ‘bout a straight across 33% cut in all spending? Do you really think you can get a 1/3 cut in CHP, school hot lunch program, and prisons? OK, let’s try again.
cocktail napkin #2
This time, take politicians at their word. Guv and R’s say no tax increase, and D’s we ain’t gonna balance the budget on the backs of the poor and elderly. OK, that takes, $30B in welfare spending off the table. So, $40B shortfall and $80B to take it from, so all non-welfare spending is cut 50%. Do you really think you will be allowed to close half of all UC and Cal-State campuses? Try again.
cocktail napkin #3
Try to be a bit more realistic. You raise taxes $10B or about 15% (hey, let’s have another Prop 13 tax revolt), and cut welfare by 10% (horror, horror: starving children and old folks who cannot get their meds, appearing daily on the nightly TV news about the draconian effects of budget cuts). That leaves “only” $25B left to cut, so everything not welfare is cut 30%. OK, do you think you will be able to cut Medical-B and Cal Grants and Cal Worksfs by 30%? Get serious.
cocktail napkin #4
OK, there is no #4. If you have one, please let me know. Oh, and by the way, do not forget to CC the guv and the state legislators.