Contributed by Chriss Street. Michigan took control of Detroit on March 1st by appointing the equivalent of a bankruptcy trustee. Detroit committed municipal suicide through crony capitalism and union feather-bedding; it refused to cut spending and balance its budget. Perhaps Detroit’s downfall prods Congress to get serious about cutting federal spending.
Contributed by Chriss Street. With California running new deficits even after raising income taxes to the highest in the nation, homeowners should be prepared for politicians to try to overturn Proposition 13 that for 35 years has limited property tax rate increases.
Contributed by Chriss Street. President Obama claimed in his weekly radio address that the “fiscal cliff deal” reduced the deficit by $737 billion over the next ten years; in November he’d demanded $1.6 trillion in tax increases and refused the Republicans’ initial offer of $800 billion. By contrast, Ronald Reagan should have been called the “Great Negotiator” for the spectacular deals he was able to negotiate.
Contributed by Chriss Street. State Controller John Chiang announced that revenue for November fell $806.8 million, or 10.8%, below budget. Democrats thought they could hammer “the rich” by convincing voters to pass Proposition 30 to create the highest state income tax in the nation. But it appears high-income earners have “voted-with-their-feet”, resulting in a $1 billion shortfall in taxes, and the beginning of a new financial crisis.
Contributed by Chriss Street. Support for Proposition 30, the income and sales tax increase touted by Gov. Brown, has fallen below 50%. Now public employees’ unions are spending fortunes to get voters to rescue their lifestyles. Meanwhile, state politicians have increased deficit spending this year by more than the $6 billion Prop 30 might bring in—and Gov. Brown is threatening with a doomsday scenario if it fails.
Contributed by Chriss Street. During the “Great Recession,” the California private sector was forced to slash employment and spending, but the public sector made only modest cutbacks. Much of this state and local spending was funded by selling municipal bonds to elderly investor who were told the “muni” market was safe because the default rate was very low. But a Federal Reserve study debunks that myth and accuses the credit ratings agencies of “luring investors” into buying these bonds.
Contributed by Chriss Street. According to a SEC regulatory filing, Berkshire Hathaway Inc. managed by world famous investor Warren Buffett, dumped half of its $16.5 billion investment in the municipal bond market. The Wall Street Journal described the huge secretive sale of munis by such a dominant investor as a “red flag.” The quick sale – and willingness to take a big loss – just before negative news was disclosed is highly suspicious.
Contributed by Chriss Street. The American taxpayer is about to be saddled with another multi-billion bail-out of sub-prime mortgage loan losses from the stealth Federal Housing Authority (FHA) lending program that has been offering ultra-low 3.5% down payments since 2009. Delinquency rates are already at 9% in California and expanding rapidly across the United States.
Contributed by Chriss Street. Four years ago, Nobel Prize winning economist Joseph Stiglitz and the Roosevelt Institute, where he serves as Senior Fellow, enthusiastically heralded the 2008 election as the beginning of at least a decade of expansion of government intervention into the American economy. But it has come as a shock to Stiglitz and the Roosevelt Institute that voters have already turned against the values of the days of disco.
Contributed by Chriss Street. The liquidity of the Orange County Treasurer’s Investment Pool was hammered last week when the City of Tustin withdrew $40 million and the State of California announced its intentions to pull out $90 million. No other member of the Auditor-Controller bureaucracy was willing to accept the head job, following the resignations of the County Treasury Oversight Chairman, the Auditor-Controller, and the Assistant Auditor-Controller.