Schwarzenegger Seeks Obama’s Help


[Skip to the end]

Still haven’t seen any discussion of a per capita revenue distribution to all the States?

$500 per capita would give California maybe $19 billion and be ‘fair’ to all the States.

It would also support aggregate demand (spending power) output and employment, which presumably is a national priority?

Feel free to send this suggestion to your representatives!

Schwarzenegger Seeks Obama’s Help as Budget Gap Defies Solution

By Michael B. Marois and William Selway

Dec. 24 (Bloomberg) — CaliforniaGovernor Arnold Schwarzenegger wants President Barack Obama to help ease large- scale cuts to the most populous U.S. state’s already diminished social programs amid a $21 billion anticipated deficit.

Schwarzenegger, a Republican, plans to ask for relief totaling as much as $8 billion, according to a California official who asked not to be identified because details haven’t been resolved. Instead of seeking one-time stimulus money or a bailout, the state wants the U.S. to reduce mandates and waive rules stipulating minimum expenditures on programs such as indigent health care, the official said.

California has been among the states most affected by the economic recession. It has the lowest credit rating and recorded the nation’s second-highest rate of home foreclosures, trailing only Nevada. Unemployment peaked at 12.5 percent in October amid the loss of 687,700 jobs from the year before, when the jobless figure was 8 percent. Wealth declined as the stock marketlost 40 percent of its value in 2008.


[top]

Letter to the Governor of California


[Skip to the end]

Letter to the Governor of California

Dear Governor Schwarzenegger

I note that the State of California is planning to issue IOUs
(registered warrants) from tomorrow (July 2) to ease your cash situation
in the face of the political dispute you are having over the budget with
the Democrats.

My latest blog – California IOUs are not currency … but they could be!
– analyses this situation and suggests that you “tax-empower” these IOUs
– a move that will radically enhance the options available to you. You
can read the blog here

In summary:

1. It would be economic madness to start cutting your deficit now given
the extent of labour market deterioration your state is currently
enduring.

2. The present plan to issue IOUs will hurt the most disadvantaged
members of your community because the warrants will not be readily
tradeable and it is unclear whether banks will be prepared to hold them
for the interest payment on redemption (that is, cash them).

3. You can easily eliminate this disadvantage by making the IOUs
eligible for payment of Californian state taxes and fines. This one
change to your current plan will allow you to create your own sovereign
currency and the IOUs will become widely accepted within the community.
Even those who are not being directly paid in IOUs would be happy to
hold them because they would realise they could extinguish their tax
obligations to your government using them.

4. You could then use these IOUs forever for state purchases as a
substitute for USD and avoid issuing more debt.

5. You will also be able to directly employ the 2.1 million Californian
citizens who are currently unemployed with the IOUs and start using this
idle labour to advance public purpose via community development
projects.

If you need any further advice on this please do not hesitate to
contact me.

best wishes
bill



William F. Mitchell
Professor of Economics
Director, Centre of Full Employment and Equity
University of Newcastle
New South Wales, Australia


[top]