By KEVIN O'LEARY / LOS ANGELES
54 mins ago
With his round face and sad eyes, Oracio Sandoval, 33, sits at a Los Angeles County welfare office in Carson, Calif., armed with a thick pile of job-application forms. Out of work since January, Sandoval is struggling to stay afloat financially. Married with two children, he and his wife used to make $3,000 a month. Now they rely on her $800 from Starbucks and their CalWORKs payment of $250. "It's not much, but it helps. We just barely make ends meet for rent and the bills. I am not sure how much longer we can go on like this," he says.
Sandoval, like many of California's 39 million residents, is caught up in the pain of the worst recession in 50 years and a state's flailing attempt to balance its books by making brutal cuts in programs long seen as essential. The Sandoval family is but one of more than 154,000 welfare cases in Los Angeles County. Governor Arnold Schwarzenegger says the state should abolish its welfare program. Doing so would save $1.3 billion and rip a large gaping hole in the safety net that now keeps more than 500,000 California families like the Sandovals out of homeless shelters. (Read "With a New Budget, Now Californians Brace for the Pain")
States across the nation are suffering the effects of lost tax revenue in the worst economic downturn since the Great Depression. California's woes are similar and different in kind, played out on a grand scale in a state that boasts the world's eighth largest economy and a Hollywood star in the lead role. After voters rejected a slew of convoluted budget-balancing measures, the governor has proposed cuts to programs that would make California more like a struggling Third World state than 21st century America: welfare subsistence benefits would end, 1 million poor children would lose health care, college aid for the state's best and brightest would be phased out, nonviolent prisoners would be released, hundreds of state parks would be shuttered, and thousands of teachers would lose their jobs. (Read about the 25 people to blame for the financial crisis.)
"California could become the only state in the First World without subsistence benefits for poor children," says Frank Mecca, executive director of the County Welfare Directors Association of California. If California ends CalWORKs, the state's welfare-to-work program, it would save $1.3 billion but lose three times that amount in federal money. (Since President Bill Clinton's reform, welfare has been run by the states, which receive block grants from the Federal Government that they spend as they wish. Mecca says no other state has ever said no to the federal money, nor has one proposed a flat-out elimination of welfare for families with children.) (Read "Can Marijuana Help Rescue California's Economy?")
As California faces a $25 billion budget shortfall, which it must resolve by July 1, the state is on the brink of financial disaster, and ripples from its fiscal collapse could adversely affect both the nation's economic rebound and, potentially, the Federal Government's credit status. The Republican governor and GOP legislators say they will not raise taxes, especially after Schwarzenegger and six Republican legislators joined a budget deal with Democrats in February that combined deep cuts and $12.8 billion in higher taxes. Now the budget shortfall has spiked again as state tax receipts have dropped 27% from a year ago. Democrats and advocates for programs under the knife will fight the cuts, but neither money nor time are on their side.
In addition to its multibillion-dollar deficit, California faces a severe cash-flow crisis and state controller John Chiang warns that the state could run out of money in July. California has the worst credit rating among the 50 states, so its leaders have pressed the Obama Administration and Congress to act as a co-signer on the state's borrowing. As with AIG, California officials argued, the state is too big to fail. "A fiscal meltdown by California ... would surely destabilize the U.S., if not worldwide financial markets," state treasurer Bill Lockyer wrote U.S. Treasury Secretary Timothy Geithner on May 13. Yet experts say such action by the Federal Government, while not a bailout, could possibly endanger the nation's AAA credit rating. Without short-term assistance, California could plunge deeper into chaos and become a drag on the nation's economic recovery. (The Page: "California Budget Deadlock Broken.")
This week, however, the Obama Administration said it was not going to do anything to help California right now, believing that the state should try to get its budget mess in order first. There are good reasons for the Treasury not to rush to California's aid. If it backstops Sacramento, rewarding the state's bad behavior, it would set an example for other states to follow. A nightmare scenario: the Federal Government backs California's loans, which leads to a downgrading of the Treasury's credit rating and the unnerving of the global credit markets. Spooked, the Chinese government, which currently bankrolls a large portion of the U.S. deficit, decides to take its money elsewhere. The ripples from California's crisis would then extend far beyond the Sandovals and other families on the wrong end of the budget ax.
(See TIME's gallery of Businesses Bucking the Recession")
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Here we go again with the can we afford to let them go bankrupt. From a human perspective, no. Not having, "subsistence benefits for poor children," is outrageous. But...in the State of Colorado we have an amendment to our constitution that requires we balance our budget every year....and we do. Painfully. But fiscal management is part of governments responsiblity to it's citizenry. The State of Califorania is going to have to fix it's mess. They made it. If their elected representatives cannot get the job done..then they should be shown the door. If you cannot afford to live in California, leave. People have in the past had to migrate around the country to find work. This is no different. I am a Progressive Democrat and even I have had enough of the bailouts.
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I actually need to get some sleep, or I would reply in more depth to your comment. In short, I agree that budgets need to be balanced, but nowhere in the US should that mean that social services or welfare/subsistence programs should be cut in such drastic measures. This is not about a bank failing, or any of the other companies bailed out.
It is ridiculous to say, "If you cannot afford to live in California, leave." Many of the people you could be referring to could not afford even a bus ticket out of the state, let alone moving their families. And this is not because they are failures in any way -- this economic meltdown has had deep effect in the state of California across all lines, and a simple migration of population will not fix these problems. Where are the jobs available in other states? Would Colorado be willing to endure an influx of Californians who would need countless jobs, housing, perhaps health care and social services? Or would it be as it was during the Depression, when states such as California did not want to absorb the "Okies" from the dust bowl?
Frankly, there is only one place I have heard of in the US that has a surplus of jobs, and that is a particular community in Wyoming. That cannot cover everyone. Some people will be able to move out of state, but there are so many others who simply would not be able to afford that option. They are trying hard to make it to the end of the month with anything to eat, let alone being able to afford the price of moving to another state and setting up job interviews/housing/etc.
As is often quoted, "California is the 8th largest economy in the world." The forces at work here with economic breakdown are not as simple as the politicians in Sacramento not being able to balance the budget. Part of the issue is the way the process is set up, about which many have voiced the desire to change the majority level needed in order to break deadlocks. But in the meantime, no matter what political changes need to be made, I would hope that the people who need help the most (and usually had no major part to play in creating this mess/budget crisis/etc.) are not left to rot simply because the politicians should be "shown the door" or they should "move to fix their problems."
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