June 25, United States California, the world's eighth largest economies, were forced into bankruptcy countdown 30 days. California Governor Schwarzenegger on 18 June in his speech, if not timely action, California government cash will be held on July 24, depleted, into bankruptcy.
According to media reports, 7/1/2010 fiscal year is California's first day, and up to 240 billion budget deficit has been frightened bond market investors. California's credit rating is in the United States States ranked last, Standard & Poor's recently again will California's credit rating for inclusion in the watch list.
California may be the United States first man to set foot on the bankruptcy of the State Government, but by no means the last one. United States Cato Foundation tax policy research officer Chris · Edwards (Chris Edwards) said, "because of the lack of fiscal discipline and on the United States State Government's financial position are the same, and California is gradually reduced to Banana Republic (means someone who was in serious financial crisis in South American countries), this is very sad. ”
The origin of the California bankruptcy
CARB prisoners may be the only insolvency crisis among the beneficiaries, the "Terminator" Schwarzenegger this time will give them free. Schwarzenegger plans to substantially reduce educational, medical and prison spending to reduce 240 billion budget deficit. If Schwarzenegger's proposal is passed, some prisoners will be released in advance in order to save money for California prisons.
June 18, Schwarzenegger urged people to support his 160 billion financial slimming programme. In June, he had at least in California do around 3 field like public speaking. He intends to cut prison expenditures 7.5 billion, to 5% of civil servants, and to the State of local government borrowing $ 2 billion.
But the Democratic Party in the State legislature is not in favour of Schwarzenegger's "throttle" programme, believes that this will prejudice the interests of vulnerable groups. They proposed the "open source" programme by increasing tobacco and fuel taxes to address the deficit-1 packet of cigarettes taxes on fuel duty rise $ 1.5 9.9%, vehicle registration fee increases to $ 15. They also strongly opposed to the local government loans, and on independent contractor tax 3%.
However, Mr. Arnold Schwarzenegger has repeatedly indicated that he will never signed any tax provisions of the Act. Thus, the current California Government and Parliament is in a continual State. California law provides that, even in urgent cases, increases in tax rates must first obtain State Parliament approved by a two-thirds majority.
Currently, California is in fiscal 2009, the last month of the new fiscal year will be begin on 1 July. According to the California government statistics, fiscal 2009 11 months before the fiscal deficit was $ 183.4 billion, and fiscal 2008 compared to the total deficit, inflation by 80%.
Sharp drop in income is the main reason for the deficit expansion. In May this year, the California financial income of $ 54.6, up down nearly 40%. Schwarzenegger said that "California government revenue back to 10 years ago, if inflationary factors, even back to the 1990s. ”
At the same time, California government fiscal 2009 11 months prior to the expenditure of $ 935.2, and fiscal 2008 compared to the total expenditure 1026.8 billion, and there is no sign of reduction. This led directly to the first 11 months of California government debt increased 183.3 billion.
The tax structure is revenue dropped one of the main reasons for the California tax on corporate and personal income tax on excessive. Follow Schwarzenegger's statement is 1% of the rich provides 50% of the tax, and the rich man's relationship with Wall Street wealth than with the California economy much more closely linked. So after the financial crisis, the California revenue dropped.
Edwards considers that California's Government revenue from business cycle impact is very large, long-term solution to the problem of a method is to reduce the income tax, raise the sales tax — tax than income stability.
In addition to the financial crisis led to a sharp decline in the income of the California current financial crisis also originated in the late 20th century produced a structural deficit. 1999 fiscal year, in the Internet bubble to the top, with Silicon Valley California revenue jumped 23%, and the corresponding to Californian dramatic expansion of financial expenditure. But California's fiscal revenue obviously does not maintain such a high growth rate, in the subsequent 10 years, California and not fundamentally reduce spending to overcome the structural deficit, so this time bombs power continues to increase.
United States to the Heritage Foundation's foster (J.D. Foster), opposed to raising taxes, he thought the swingeing cuts in expenditure is the only way out for California. "Members of Congress also live in reverie think they can always continue uncontrolled fiscal policy, but this illusion will eventually be broken because the bond market will refuse to California loan, California will still have to face reality. "Foster said. He had been in the United States White House and the Ministry of finance, budget and tax reform.
The cantons will become a banana Republic
In addition to Alabama, Michigan, Texas and New York, United States, other States and California, 1 July, the threshold of the new fiscal year. According to the United States National Conference of State legislatures to a recent report, the State will face in the new fiscal year for a total of 1210 billion budget deficit, an increase of 20%.
While the United States Governors Federation's report shows that the new fiscal year State personal income tax will shrink 6.6% year-on-year, sales shrink 3.2% enterprise income tax more decline 15.2%. This indicates that in the next few months, there will be more State Government step in California's footsteps, step on the road to bankruptcy.
Then, the United States Federal Government will hand help?
The Obama administration has recently refused to California's government debt financing 55 million guarantee. Foster also said that the United States Department of Treasury has table
Like this does not help California, because once out, it means that it does not need other fiscal self-discipline of State Government.Moreover, the Federal Government has faced severe deficit problem. As of may of this year, the first 8 months of the fiscal deficit has exceeded $ 9000. According to the United States Congress Budget Committee forecasts, the Federal Government's budget deficit to GDP ratio will double in the next 10 years. Edwards believes that the United States Government expenditures must be reduced. "Over the past 50 years, the United States Government income 20% of GDP, which in future will not change, the problem lies in government spending on the rise. "Edwards said.
He suggested that the United States withdraw the Ministry of education, "before the 1980s, the Federal Government does not have the Ministry of education, educational work entirely by more than 50 States own and now the Federal Government's Ministry of education annually spend $ 80 billion, but the Federal Government is not necessary to interfere with education services. "Foster believes that the Obama administration and the Congress does not have the courage to complete the task of reducing deficit, because this requires considerable political price.
"The Government into the dilemma now is their own responsibility, but to find a will not make anyone angry solution is not possible. "Foster said.
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