The Situation Worsensin California

While the whole nation pays tribute to Michael Jackson, the situation of the state where he is buried becomes increasingly unbearable: The three great Californian banks decided to no longer discount IOUs from the State of California after Friday. After that, the only resort will be credit unions, which are institutions that lend usuriously and will take an important percentage of the check that is given to them. As for the development of a secondary market for these IOUs, there seem to be complications: Would we be afraid to learn the truth about the value of California signature?

The passing from June to July and the additional $2 billion deficit that came with it do not seem to move Californian senators and representatives. Democrats have radicalized themselves and refuse even to negotiate with Governor Schwarzenegger.

The stakes are high; the Democratic majority in the Californian houses gives them more than the right to obstruction. Nothing is possible without them in a state where 60 percent of votes are required to approve the budget. It’s in this context that California saw its ratings lowered from A to BBB.

The Governor, as a good Republican, attempts to reduce social benefits and especially the fraud related to these benefits. Thus, his commendable objective of diminishing fraud in the system is based on a contested estimation of fraud. There are also measures regarding pensions for new recruits, as well as other social matters. He is, it seems, ready to increase taxes if these measures are approved, which should save $1.7 billion of the $26.3 billion.

This debate will continue at many levels in the United States, where the budget deficit will be a record high, if it is approved. But what matters most is the nature of the debate: What are we trying to overcome and why? What is the logic behind such actions?

Let’s hope the budget will be voted on shortly: This will allow for situation to gradually normalize. It is difficult to imagine how President Obama could not intervene in this debate. He is in Italy for a G8, which is, in fact, partly a G13, and where the preliminary work is as vague and rhetorical as the others.

Poor California…