To date, the economic decisions made by both the Democratic Congress and the Obama Administration have been predicated upon Keynes' notion that the government can increase aggregate demand, thereby stimulating economic activity and reducing unemployment and deflation.

In fact, the centerpiece of Obama's short-term stimulus program was a massive now-$862 billion collection of tax cuts and spending increases he signed into law last spring. Obama had one shot at really helping the economy and he took it, holding nothing back.

It doesn't seem to be working out all that well, does it.

As Heritage notes, the plan was doomed from the beginning because it was based on the erroneous assumption that deficit spending can increase total demand in a slack economy.And now a new poll shows that most of American's don't believe in Keynesian Economics.

While influential 20th Century economist John Maynard Keynes would say it’s best to increase deficit spending in tough economic times, only 11% of American adults agree and think the nation needs to increase its deficit spending at this time. A new Rasmussen Reports national telephone survey finds that 70% disagree and say it would be better to cut the deficit:

The Rasmussen study notes:

In fact, 59% think Keynes had it backwards and that increasing the deficit at this time would hurt the economy rather than help.

To help the economy, most Americans (56%) believe that cutting the deficit is the way to go.

Eighty-three percent (83%) of Americans, in fact, say the size of the federal budget deficit is due more to the unwillingness of politicians to cut government spending than to the reluctance of taxpayers to pay more in taxes.

The following post is from our friend Logan Andrews at the Sacramento Citizen. In light of the fact that on Wednesday a proposed initiative to suspend California’s landmark legislation to reduce greenhouse gas emission (AB 32) was cleared by the Secretary of State’s office, it's a must read for anyone interested in California politics.

The initiative would suspend implementation of Assembly Bill 32, which called for reducing California’s greenhouse gas emissions to 1990 levels by 2020. Supporters now have until July 5th to gather the needed 433,971 signatures to qualify for the November ballot:

On Thursday the Mojave Desert Air Quality District (MDAQD) sent a letter to Governor Arnold Schwarzenegger regarding implementation of the controversial AB 32 – California's Global Warming Solutions Act of 2006.

Under AB 32, the state will attempt to lower its emissions of greenhouse gases to 1990 levels by 2020, and 80 percent below that threshold by 2050.

California’s growing population makes these ambitious targets, particularly the latter, which will likely require a reshaping of everyday life for individuals, businesses and local governments.

Written by the Chairman of Mojave Desert Air Quality District's Governing Board, Charley Glasper, the letter outlines a laundry list of concerns and is significant for one crucial reason: The letter could mark the beginning trend of a local government revolt against California’s Global Warming Solutions Act. In part, the letter notes:

California's continued fiscal woes are prompting more political observers to raise the question of whether or not California could file a Petition in Bankruptcy under Chapter 9, Title 11 of the United States Code, a chapter of the United States Bankruptcy Code available only to “municipalities.”

The pro-bankruptcy argument goes something like this: By filing for bankruptcy California could rescue itself from financial oblivion when government simply runs out of options to restructure outstanding debts. After all, that is the essence of why our federal Constitution provides for Bankruptcy as a remedy in the first place – to give the Debtor another chance.

If California could stretch the reach of Chap. 9 of the Bankruptcy Code, an option written exclusively for “municipalities,” to include it, being a state, California too could file Chap. 9 Bankruptcy and seek the protection of the Bankruptcy Court to reorganize its financial affairs and debt structure, including California’s contractual obligations of all kinds.

Under this scenario, a Bankruptcy Judge would then appoint a Trustee for the Debtor’s Estate – literally, all of California’s financial mess.

The Trustee would then be endowed by the Bankruptcy Code with the power to reject or accept or restructure existing contracts. This means that California, with the stroke of a Bankruptcy Judge’s pen, would be no longer bound by its pension, union, and other contractual obligations, leaving open lots of room for negotiation and giving this state back some serious leverage for bargaining its way out of the current financial disaster.

However as Paul Solman points out in this Q&A from PBS Business Desk, there's a big problem with the "bankruptcy" scenario:

A large and growing portion of the state's contractual commitments are to pensioners, among whom, full disclosure obliges me to reveal, is my sister. That's after 30 years in the LA County school system as a bi-lingual pre-K teacher to mostly Hispanic-American students -- a spectacular teacher, if the testimonials of her principal, present colleagues, and former students were to be believed. (Her funniest former student is TV's Carlos Mencia. My sister's pretty funny herself.)

But quite apart from whether my sister has earned her pension, California has a legal obligation, written into its state constitution, to pay employees what they've been promised before anyone else. The state would first have to DEFAULT on its bonds, far from an impossibility, as I pointed out here last spring.

Look, there are three major interest groups playing a game of chicken in California: its taxpayers, its employees, and its lenders. (Its vendors and social welfare recipients have little leverage in the game.) My guess is that the lenders are likely to take the next hit. No guesses at all after that. But like most iterations of chicken, the blinking will probably come late in the game.

Either way, one thing is for sure California's lawmakers have a difficult road ahead. Now more than ever it is time lawmakers come face to face with the financial reckoning that they have put off time and again.

Much like the federal picture, without serious spending cuts and reduction in the size of government, lawmakers will have to rely on heavier taxation — which would kill the economy, reduce revenues, and put us even further behind on debt reduction. The only real way to fix the problem is to dismantle Leviathan and stop relying on band-aid budgets and budgetary shell games.


Cross posted at the Sacramento Citizen

In yet another stunning display of misplaced priorities, California's majority party has passed a bill to eliminate free parking in the Golden State.

Despite a $20 Billion deficit faced by California lawmakers, the majority party isn't working on resolving the state's fiscal crisis as one might think. Instead they are hard at work trying to figure out how best to alter the behavioral patters of Californians to fit their end goals.

Step number one: Eliminate free parking and put "cash registers curbside" to help meet carbon emission goals.

Last week the California Senate adopted SB 518 authored by Senator Lowenthal (D-Long Beach). The measure would impose state parking regulations that forbid local communities from using state funds, either directly or indirectly, to subsidize parking.

In other words, the bill enacts a state mandate attempting to eliminate “free parking” for the stated purposes of fighting global warming and enacting “social equity.”

"Free parking has significant social, economic and environmental costs," Lowenthal said. "It increases congestion and greenhouse gas emissions."
Republicans opposed the measure, saying the Legislature should not be meddling in how much people pay to park.

The legislative measure stems from a February informational hearing entitled "Reducing Congestion and Greenhouse Gas Emissions through Parking Policy.” So what's so bad about free parking? The informational hearing showed the public how free parking is truly the root of all evils. You see, free parking is responsible for:

-Incentivizing car ownership and driving which adds to traffic;
-Contributing to rapid urban sprawl & "extravagant" energy use;
-Making housing more expensive;
-Free parking is a leading contributor to global warming & climate change; and of course
-Failing to provide an additional revenue stream to state & local governments.

The reality is that parking is an inherently local matter. Through their zoning ordinances, cities and counties mandate how many parking spaces each new development must provide. In most cases, these minimum parking requirements are set to ensure free parking to all users of the development at the maximum level of demand.

Instead SB 518 allows the state to decide how a local government decides where you can park, or how much it will cost.

The great irony of course is that by eliminating free parking the Democrats will hurt those they claim to care for the most - the working poor.

Supporters of these legislative measures have noted that eliminating free parking 'may create financial difficulties' for the economically disadvantaged. Unfortunately there is no "may" about it.

The Progressive Policy Institute, a think tank affiliated with the Democratic Leadership Council, noted:

In most cases, the shortest distance between a poor person and a job is along a line driven in a car. Prosperity in America has always been strongly related to mobility and poor people work hard for access to opportunities. For both the rural and inner-city poor, access means being able to reach the prosperous suburbs of our metropolitan economies, and mobility means having the private automobile necessary for the trip.

People who use transit because they do not have a car face limited mobility and diminished job prospects.

Before enacting anther social engineering policy for political purposes Legislators should consider the amendment suggested by Senator Roy Ashburn (R-Bakersfield). Sen. Ashburn proposed amending the bill into a Legislature specific pilot program which would eliminate the taxpayer subsidized parking for Senators and Assemblymembers. California lawmakers currently park for free underneath the Sacramento Capitol.

After all, shouldn’t those who are so willing to implement their political will on the State be forced to live by the same rules as regular Californians? If after two years of riding public transit Legislators still believe eliminating free parking is the cure for all societies’ ills, then by all means, have at it.

Cross Posted at The Sacramento Citizen

As the NRO Editors note, by all accounts, federal fiscal policy has now run completely off the rails. Budgetary pressures have been building for years because of unconstrained entitlement spending and Washington’s unchecked appetite for ever-more activist government. But what had been a chronic problem that all involved knew needed corrective action has now become, in the Obama years, a full-fledged disaster in the making.

According to the president’s budget, released yesterday, the federal deficit for 2010 is expected to reach nearly $1.6 trillion, a record. And that would come on top of a $1.4-trillion deficit in 2009 and before another $1.3-trillion deficit in 2011. Between 1789 and 2008, the U.S. government borrowed a total of $5.8 trillion. But in just the first three years of the Obama administration, the government is set borrow $4.4 trillion more.

The WSJ is calling President Obama's budget "One of the greatest spend-while-you-can documents in American history":

One rule of budget reporting is to watch what the politicians are spending this year, not the frugality they promise down the road. By that measure, the budget that President Obama released yesterday for fiscal 2011 is one of the greatest spend-while-you-can documents in American history.

We now know why the White House leaked word of a three-year spending freeze on a few domestic accounts before this extravaganza was released. No one would have noticed such a slushy promise amid this glacier of spending. The budget reveals that overall federal outlays will reach $3.72 trillion in fiscal 2010, and keep rising to $3.834 trillion in 2011.

As a share of the economy, outlays will reach a post-World War II record of 25.4% this year. This is a new modern spending landmark, up from 21% of GDP as recently as fiscal 2008, and far above the 40-year average of 20.7%.

In the "out years" in mid-decade, the White House promises that spending will fall all the way back to 23% of GDP. Even if you choose to believe such a political prediction, that still means Mr. Obama is proposing a new and more or less permanently higher plateau of federal spending...

If this budget is Mr. Obama's first clear demonstration of his long-term governing priorities, then it's hard not conclude that this spending boom is deliberate. It is an effort to put in place programs and spending commitments that will require vast new tax increases and give the political class a claim on far more private American wealth.

Despite talk of "tough choices" in yesterday's document, the Administration wants $25 billion in new spending for states for Medicaid, $100 billion for yet another jobs "stimulus," big boosts in spending for low-income family programs, for health research, heating assistance and education. If Mr. Obama's priorities become law, federal outlays will have grown an astonishing 29% since 2008...

...the reality is that even these still-high deficits are based on assumptions for growth and revenue gains from record tax increases starting January 1, 2011. And what a list of tax increases it is—no less than $2 trillion worth over the decade. The nearby table lists some of the largest, all of which the Administration and its economists claim to believe will have little or no impact on growth. If they're wrong, the deficits will be even larger.

Read the full WSJ article HERE.