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6 October 2008
The Begginator

California bailout: collateral or collateral damage

Even in October, it’s stunning to see Gov. Arnold Schwarzenegger, right after the end of a two-month budget impasse in his state’s assembly, go trick or treating at the U.S. Treasury. Call him the Begginator. The treat: a $7 billion federal guarantee of California debt, which it can no longer finance short-term except at exorbitant rates. We’re not sure what the trick would be, but it’s hard to get a lot nastier than the state’s massive layoffs of civil servants, and reduction of many others to minimum wage, during the budget standoff.

It’s childish, I know, but Schwarzenegger’s real-life role as governor can’t help but evoke his film heroics. While this fall is a horror show for the U.S. economy generally, Arnold prefers a role where he inflicts the horror, a he-man who blows away problems by sheer will. And I can’t remember any Schwarzenegger flick where he actually has to beg for money.

In fact, that was a question that lurked in the background but went unanswered in a lot of Arnold’s movies: Who pays for this mission? We watch whole swatches of this and other planets go up in flames but nobody ever has to write a check, before or after.

So it goes for the state of California, which went deep into debt when credit was easy and sleazy rather than pay for its expensive social agenda by raising taxes to cover current revenue needs. I’m afraid the Golden State will just have to understand when Lone Star citizens call their senators and representatives and oppose a federal bailout of Calilfornia’s debt.

You know, if folks in the bicoastal media centers would just play a little fairer with “flyover” states like Texas it might be easier to see what stake we have in covering California’s gambling—er, market speculation—debts. We might could get talked into a little Enron payback. But instead the press in New York and Washington and the infotainmentplex in L.A. see Texas through a gun sight, darkly. Contemporary art, avant-garde music, progressive business, green agriculture, solar power—nobody wants to hear about that stuff. It goes against the accepted narrative. Where are the cowboys? And the polygamists?

Yup, we get used as a place for residents of self-professed greener parts of the country to dump toxic and nuclear waste and invest in strip mining and exploitation of cheap (often illegal) immigrant labor while they sneer at us for our backward environmental and labor policies. Well, for some of us (as John Lennon put it), we are doing what we can. But no national media buzz for anything progressive in the Lone Star State.

Don’t get me wrong. I love California. I’d love to live in San Francisco but, were I to do the kind of stuff I do for a living in the Bay Area, I couldn’t afford San Francisco. It’d be a crack neighborhood in Oakland. So, forgive me if I have little sympathy for the Golden State’s request for a federal loan, rather than borrowing on the international market (which has seized up), or—Orange County forbid!—raising taxes to cover its expenses.

California shouldn’t have put its future budget on the credit card right after the absurd recall election that put the Governator in power. Rather than balance its budget, the state sold bonds—besides the usual sort, for construction or education—to finance ongoing expenses. Economists warned at the time it was a mistake. But the move was politically expedient. Now, it seems, the state can’t roll over its debt, so it wants to do an AIG and get the Feds to cover the vig. So long as California refuses to tax itself enough to back its own debt it can apparently stick it to the federal government like some failed investment bank. I say, treat ’em like one. Attach some assets.

Before we agree to a bailout, I think we need to draw up one of them there collateralized debt obligations. For collateral, we’ll take San Diego. If California defaults we’re not rolling it over. And, let’s face it, California’s a shopaholic and speculator with greed and responsibility issues, so if course it’s gonna beg more debt forgiveness from the other 49.

If California can’t put up, the USA will foreclose on the city of San Diego and pay the state the $7 billion. Goodbye, toxic debt. Yes, I know San Diego’s worth more than that, but Uncle Sam needs to drive a hard bargain here. He’s been getting shafted everywhere he turns.

The city will then be auctioned off to the highest bidder (but the State of California will not be eligible). I hope Texas gets it but something tells me those New York boys will snap it up. On second thought, I’m betting on the Emirates.

Since San Diego sits on the border, it can be lopped off and ceded to the lucky winner without cutting a hole in the state.

If California keeps being unable to pay its bills, we’ll just keep cutting off pieces of coast and putting them up for sale. At some point, its citizens may get the message:

Raise taxes and cut services till the books balance.

Because if you think Texans believe in the movie star myth (let alone the hip-hop star myth) enough to pay off California’s debts, you must have forgotten. The only myth we’re supposed to believe in is self-sufficient cowboys on the range. Hollywood always says so.

Related toon:
Little Shop of Handouts
Turn over another new leaf:
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Putin or Chávez?

Which kind of strongman will be best for post-democratic America?

25 March 2008
Extinct Specie of Bear

Wall Street firm was, in fact, infirm.

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