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Sunday, May 24, 2009

Katrina II? : Missing clout and Abstent Help






Congress has no plan to aid California budget

By Phil | May 24, 2009

WASHINGTON – Congress left town on Friday for its annual weeklong Memorial Day break, in no rush to respond to California's simmering financial crisis.

Indeed, while the state has more clout than any other on Capitol Hill, there are no signs that it will translate into financial help anytime soon.

As Republican Gov. Arnold Schwarzenegger and legislative leaders prepare to make drastic cuts to erase what is now estimated to be a $24.3 billion budget deficit, the response from Democrats who control Congress has been tepid.

Consider the statements coming out of congressional offices:

• House Speaker Nancy Pelosi of San Francisco: "The speaker has been in discussions with the delegation, the governor, the treasurer, the House Financial Services Committee chairman and the treasury secretary to determine available options," said her spokesman, Drew Hammill. "The speaker plans to continue this dialogue, and hopes that the governor and the Legislature will come together to address this problem."

• Sen. Dianne Feinstein: "Senator Feinstein is deeply concerned about the budget crisis in California, but the borrowing proposal that has been discussed does not appear workable … State leaders must put forward a clear, detailed plan. The state is going to have to make some very painful cuts, but the failure of the budget-related proposals in this week's special election makes this unavoidable," said her spokesman, Gil Duran.

• Rep. Doris Matsui of Sacramento: "I am working with Chairman (Barney) Frank, who held a hearing this week on the municipal bond market, and others in Congress on the appropriate federal government response to California's budget crisis, and I hope the governor and Legislature will work together to address the budget issues as well."

Republican Rep. Dan Lungren of Gold River said he's not surprised by the relative quiet.

"You know something? There's an old saying about someone on death row: the sight of the gallows tends to concentrate the mind terribly," he said.

Lungren said the reality of California's fiscal mess is finally hitting home: "Would it make people nervous who have been ignoring this? I guess so. We've been ignoring the elephant in the room for too long."

He said the idea of guaranteeing loans for the state is "a bad idea" and that it has little support in Congress.
So far, Republicans have been mostly united in their skepticism of providing any type of bailout.

Republican Rep. Kevin McCarthy of Bakersfield is among those who question why Congress should step in to help at all: "California gets to make the decisions, but we pay the bills. It's like when you're growing up and you make your parents take the loan out for your car and you get to drive it … Why should we take the burden for their mistakes?"

But McCarthy said he expects Democrats to introduce legislation to guarantee loans for states and cities, broadening it beyond California as a way to try to build political support. He said it should be rejected.

"Billions of dollars in taxpayer stimulus money has already been sent to Sacramento, so how do you convince taxpayers of other states to once again send or guarantee more federal tax dollars to bail out Sacramento, without then bailing out every other state and municipality all over this country?" McCarthy asked. "This would truly send a bad precedent and is ultimately misguided because in the end, bailouts are not paid for by state governments or the federal government – they are paid for by taxpayers."

Boxer and Matsui want the federal government to guarantee emergency loans for the state, while Pelosi has yet to endorse the idea, at least publicly.

"Even after California takes the necessary steps to close this budget gap, the state will still need to do short-term borrowing until tax receipts come in," said Zachary Coile, Boxer's spokesman. "Senator Boxer is concerned that without a federal loan guarantee, banks will charge the state extremely high interest rates that will only worsen California's budget crisis."

Source: The Sacramento Bee

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