"Not Armageddon But One Crisis After Another" - David Alan Stockman

The economic situation in the US is still precarious and the debt ceiling debate did not generate the debate we truly need at this crucial juncture.  True, we need to rein in spending, but not (only) the entitlement programs, and spending on military, on big business subsidies and tax giving away to the rich.

Interestingly, an insider of Regan's administration, generally viewed as conservative and anti-tax wing, provided some insightful and pertinent solutions.  If only half of his proposal got seriously debated, this country would have a chance to correct its course.  But that is not going to happen soon.

San Francisco Chronicle reported that David Alan Stockman, director of the Office of Management and Budget in the Reagan administration, sat down to discuss the federal debt and the economy.  The summary of his analyses is:

I think we have an economy today that's on the edge of insolvency. We'll be dealing with an age of sacrifice, austerity and an age of pain. You have to stop pretending that we're in a normal business cycle.
The Republicans are just focusing on tax cuts while Democrats are defending their spending and they aren't willing to compromise. You're going to need to allow the Bush tax cuts to expire and, on top of that, find some new revenue sources. The Republican Party is being reckless in historic proportions, reckless to the extreme.
Obama's got to stop talking about taxing only the top 2 percent. Tax increases are going to have to include the middle class.

The politicians have had their head in the sand for so long about this issue that I really don't think they can compute reality anymore.
We need a drastic downsizing of our war machine, especially after they got Osama bin Laden. We should be rethinking whether we need an $800 billion defense budget. That's a vital part of the equation.

In a pure world, I think you could cut a lot of spending. There would be a way of getting back to a government where we do a social safety net on a means-tested basis, but that is never going to happen in this world.

Revenue is absolutely necessary, both as a practical matter and a matter of numbers. We should put a variable levy on imported oil at $100 (a barrel); whatever the price is coming in, you pay a levy to bring it to $100. We increase the power of the economy, both supply-side and demand-side, if we give investors a certainty of the price.

If we have a Tobin tax - a small tax on every transaction in this casino we used to call the stock market - we can easily generate $100 billion in revenue. We have a massive high-frequency churning in these markets today, and they're not accomplishing anything that's productive for the rejuvenation of the private economy.

We don't have entrepreneurial capitalism anymore, we have crony capitalism. We've had a tremendous reverse Robin Hood redistribution of income to the top. I don't think it's Armageddon. I think it's just one crisis after another.

Though I cannot say I agree with him point to point, most of his analyses are right on target and would lead to a fairer, more sustainable society.

He doesn't have nice things to say about the Democrats but he reserved most severe criticism on the Republicans.  Would they listen?  I'm not optimistic.  This country is heading towards precipice and it would be a miracle to stop the suicidal madness.

At Home © Matthew Felix Sun

California - the Fool's Gold

Much anticipated and dreaded new budget for California was put forth by the new governor Jerry Brown and all the fears were realized and then some.

Governor Brown presented us a rather honest budget, which needs to eliminate a budget gap of about $25 billion out of $86 billion budget.

He proposed cuts to some social services, lowered salaries for non-union state employees and a huge cut to the three-tiered university systems in California.  University of California, the jewel of the public universities in the nation, will get 25% less from the state and that translates into about 13% of the total budget, which includes funding from state, grants and students' fees.

University of California posted the image below to demonstrate the stress the University is facing:



In the past decades, California was justifiably called the Golden State, who led the nation in innovation.  That economic engine was largely the product of excellent public educational system this state used to have.  Things changed after tax-restructuring in 1970s (Proposition 13, 1978) and the funding for education became less and less adequate.  Finally, we are to see that students' fees are to surpass the funding from the state.

This budget is a bitter pill and we must swallow.  It was Californians' own undoing.  We are kill the goose that lays the golden eggs in order not to starve to death.  In the long run, if the tax situation did not change (Republicans are still opposing to any tax increase), we will have neither eggs nor goose.

The color of State of California is that of the fool's gold.