Tag Archives: bear sterns

California Cities Going Under, No Bear-Sterns Style Bailout in Store

I posted yesterday about the painful irony of the Fed bailing out egregious greedheads Bear Sterns but refusing to lift a finger to help the majority of states that are falling into the red.

Edit by Brian: Look over the flip.

And its not just Vallejo, now its Los Angeles too:

Facing a tough financial year, officials proposed a reduced $21.9 billion Los Angeles County budget that may yet take hits from potential state and federal cuts, while Mayor Antonio Villaraigosa proposed a $7 billion city budget that calls for employee layoffs and higher service fees.

Villaraigosa’s 2008-09 spending plan comes as the nation’s second-largest city faces a projected $406 million shortfall.

The plan calls for eliminating 767 city jobs and mandating “short-term layoffs” that could force employees to take several unpaid vacation days.

The difference between a private entity like Bear Sterns and a public one like LA or Vallejo, or California which is facing an enormous deficit of its own, is that public entities do more than employ a lot of people. They also provide essential services to children, the elderly and the ill.

The Center on Budget Policies and Priorities outlines some potential solutions.

Federal assistance can lessen the extent to which states take pro-cyclical actions that can further harm the economy.  In the recession in the early part of this decade, the federal government provided $20 billion in fiscal relief in a package enacted in 2003.  There were two types of assistance to states: 1) a temporary increase in the federal share of the Medicaid program; and 2) general grants to states, based on population.  Each part was for $10 billion.  The increased Medicaid match averted even deeper cuts in public health insurance than actually occurred, while the general grants helped prevent cuts in a wide variety of other critical services.  The major problem with that assistance was that it was enacted many months after the beginning of the recession, so it was less effective than it could have been in preventing state actions that deepened the economic downturn.  The federal government should consider aiding states earlier, rather than waiting until the downturn is nearly over.

The thing is, we’ll have to rely on our Democratic congress taking effective action. I think we can, I think we can…

Meanwhile, global food shortages are now hitting California stores:

Rice is a popular dish in many Bay Area homes, but now there’s a shortage that is making the cost of the staple unstable.

The cost of a 50-pound sack of jasmine rice has soared to $21.99. There have been so many buyers flocking a Costco in Mountain View that two other brands of rice were completely sold out Monday.

How bad will it get before our Democratic Congress takes effective action?