In the last 18 hours, we've gone from stirrings of a possible deal to what has been called a "stall." The stall, as Speaker Bass notes, is the "elephant in the room," Proposition 98 and education cuts.
Further complicating this mess, we have more credit rating downgrades. Moody's now has us down to a Baa1 credit rating, and Fitch has us at BBB. Basically, we are hovering just a step or two from Junk bond status, and in terms of the interest rates that we are having to pay right now, the difference between our bonds and junk bonds really isn't that great.
It is pretty clear by now that at least some part of the budget gap will be made up with more borrowing. The wherewithal for a full cuts-only budget just isn't there, on any side really. So instead, we are borrowing from the future, not just in the pure borrowing sense, but also in that we are cutting our investment in education. However, with these credit ratings that we now have, it will be the current borrowing that will be the object of budgetary consternation for the next few years.
Of course, the fact that we have to use these IOUs has made the problem far worse, to the tune of at least $26 million in July alone. But while George Skelton can see that the Governor's overreaching has much to do with our IOU summer, he also brazenly repeats a conventional wisdom repeatedly borne out to be inconsistent with the facts. You know the schpiel, the May 19 election was supposed to mean that the voters wanted cuts, cuts, cuts. Of course, Skelton, and most of the Broderists calling for a "mandatory" shock doctrining of the state, repeatedly fail to acknowledge the facts that most Californians want a balanced package of cuts and taxes.
But why bother noticing what California's voters actually want when you can read tea leaves from 24% of the electorate that understood/cared about what was going on in May that they bothered to vote. I mean John and Ken say that there is rage boiling over about taxes, and we can't dare tax the oil companies, or the rich, or the people will explode. Never mind the fact that it simply isn't true, we MUST cut everything, because that is what the Real Serious People know to be true.
Will we ever default on our bonds? No, our constitution really won't allow for that. But can you blame the credit rating agencies for looking askance at our system? They see it is broken, and in financial circles, that calls for high interest rates. But while Skelton and the conventional wisdom of the Sacramento swamp imply that we just should have cut and be done with it, there are only easy answers in a system that has lost its conscience.
Of course, we really aren't that far away from that, are we?
