A survey of 2,800 U.S. colleges prepared by the Institute of International Education and the U.S. State Department underscores once again how much the budget of the University of California relies on high tuition and fees paid by foreign students.

The survey showed California had far and away the most international students with 161,693. Some 42 percent of the students are from China and 13 percent are from India. Five UC campuses had at least 8,000 international students: UCLA (11,942), UC San Diego (10,652), UC Berkeley (10,063), UC Irvine (8,064) and UC Davis (8,048).

The numbers illustrate that for all the criticism leveled at UC President Janet Napolitano in a 2016 report by state Auditor Elaine Howle, the UC system’s most important fiscal strategy relies on attracting foreign students. They pay about $44,000 annually, triple what in-state students pay.

The audit showed that in 2008 – at the beginning of the Great Recession – about 5 percent of students in the UC system were international students or from other U.S. states. By 2016, the number was 15.3 percent. The large increase was linked by UC leaders to the sharp long-term decline in state financial support. Critics, however, said UC had refused to do any of the belt-tightening done in the rest of the state government in response to a 20 percent decline in state revenue a decade ago.

Howle’s most explosive allegation was that standards had been lowered so much for non-California applicants that qualified in-state students couldn’t get into to any UC. 

Napolitano rejected nearly all of Howle’s allegations but didn’t challenge her point that a huge change in UC admissions policies had been made with scant explanation to the public or to then-Gov. Jerry Brown and the Legislature. Under heavy pressure, she agreed to major increases in California student admissions – but not to stop relying on foreign students as cash cows. The main concession on that front from UC regents who strongly backed Napolitano: a 2017 decision to have a maximum of 18 percent of non-California students in the UC system. This has had little if any effect on how many are admitted because UC now enrolls far more total students – about 280,000 – then it did four years ago (248,000).

Californians enrolled in UC system set record this year

In June, UC announced that new records had been set in the number of Californians admitted as freshmen (71,655) and transfer students (28,752) at the system’s nine undergraduate campuses.

Meanwhile, it appears that tension related to the U.S.-China trade war has ended the years of annual increases in Chinese students at UC. According to recent reports, their enrollment is flat or slightly down at several campuses. UC San Diego Chancellor Pradeep Khosla lamented the development in an interview with the Los Angeles Times last month – not on fiscal grounds but because of the quality of the students, especially those in science majors.

But another factor besides tension between Washington and Beijing could be that colleges across the United States have reached the same conclusion that UC leaders did in 2008 and are now going after the same pool of high-paying international students as UC.

In August, USA Today reported that its analysis of federal data showed that “more than 240 public universities across the country admitted fewer in-state students in 2017 than they did five years earlier, and for 46 of those, the share of in-state students is down by at least 10 percent.”

Four years after the state Legislature passed a bailout of the California State Teachers’ Retirement System that will nearly double annual direct contributions to the giant pension fund, a newly released internal report raises the prospect that the infusion of extra dollars may not protect CalSTRS from future disaster.

The 2014 changes in funding required districts to more than double their CalSTRS contributions, phasing in an increase from 8.25 percent of teacher pay in 2013-14 to 19.1 percent in 2020-21. Individual teachers and the state government also were required to pay more. But about 70 percent of the new funding – which will push total annual contributions from nearly $6 billion in 2013-14 to $11 billion in 2021 – is coming from districts.

The assumption in 2014 was that this extra funding was so significant that CalSTRS’ long-term viability was assured. The nonpartisan Legislative Analyst’s Office billed the hikes as a “major state accomplishment.”

On Nov. 8, however, the CalSTRS board was presented with a “risk report” that included both upbeat and gloomy scenarios. As Ed Mendel reported on the Calpensions website, the report found that if investment returns met their 7 percent target, CalSTRS’ retirement liabilities would be 100 percent funded by 2046 – a vast improvement on the present 70 percent.

50% chance fund hits point of no return threshold

But whether a 7 percent projected annual return is reasonable isn’t just questioned by pension watchdogs like Stanford professor Joe Nation and former Schwarzenegger policy adviser David Crane. CalSTRS’ number crunchers concluded that “even with the new rate increases, there is still a 50 percent probability that the CalSTRS funding level will drop below 50 percent in the next 30 years, according to 5,000 simulations based on the current asset allocation,” Mendel reported. Going below the 50 percent threshold is considered by many pension experts the point of no return, with little prospect that stricken retirement funds could ever rebound.

The problem for CalSTRS isn’t just consistently hitting or surpassing the 7 percent annual return goal. It’s that as few as one or two bad years of returns have a compound effect on long-term liabilities. The weak performances by CalSTRS and the California Public Employees’ Retirement System when the Great Recession hit more than a decade ago still haunt the funds, which are the two largest government pension agencies in the U.S. CalSTRS went from being 100 percent funded in October 2007 to 60 percent funded in March 2009, according to a Calpensions report.

CalSTRS’ and CalPERS’ grim numbers are a big reason why state Democrats are pushing for major changes in Proposition 13, the state’s landmark 1978 measure capping property tax increases at 2 percent a year. An initiative ending the protection for commercial and industrial properties will be on the 2020 state ballot and has the potential to generate $11 billion in new revenue a year.

School districts growing desperate over budgets

It may be a tough sell in an era in which the state has run surpluses for several years – including a $15.8 billion windfall expected in fiscal 2019-2020. But the “split roll” change sought for Proposition 13 reflects in many ways the deep concerns in the education establishment that the cost of the 2014 CalSTRS bailout is making it increasingly difficult for school districts to craft balanced budgets.

As CalWatchdog reported Oct. 1, one reason that the Legislature adopted new rules on permissible levels of lead in school drinking water that some health experts thought didn’t go nearly far enough was that the California School Boards Association worried that tougher standards would have been far more costly. The new standards for state schools were seen as still leaving students at risk of developing the severe cognitive and behavioral problems associated with children and adolescents being exposed to lead.

As of July, CalSTRS had $224 billion in assets. It would need to have $320 billion in hand to be considered fully funded.

Events of the past week show Wells Fargo’s attempts to put a huge scandal behind it by paying a $185 million penalty and settling a class-action lawsuit for $142 million have failed because of fresh evidence of corporate malfeasance – grim news for the iconic San Francisco-based bank.

The fine and settlement were over what a Wells Fargo internal report showed were company sales agents –under pressure to meet quotas – opening up to 2.1 million unwanted checking, savings and credit-card accounts from 2011 to 2015. The revelation had already forced the resignation of CEO John Stumpf and led to the firing of more than 5,000 mostly low-level employees.

But now that the New York Times has broken the story of another massive scandal, more heads are rolling. The Times obtained an internal audit that showed more than 800,000 Wells Fargo customers were charged for auto insurance they didn’t need, forcing more than 270,000 to fall behind in their payments and leading to nearly 25,000 vehicles being repossessed.

While Wells Fargo’s board was specifically cleared in the internal report on unwanted accounts, the new round of bad news produced a dramatic shake-up even without a formal assessment of blame. The three longest-serving members – current chair Stephen Sanger and regular members Cynthia Milligan and Susan Swenson – will retire at the end of the year.

Sanger is being replaced by the board’s current vice chair, former Federal Reserve governor Elizabeth “Betsy” Duke, on Jan. 1. Wells Fargo depicted the board departures as routine, but market analysts said it was plainly related to shareholders’ anxiety over the emergence of a second mega-scandal. Not only has Well Fargo’s stock price gone down by more than 13 percent since March 1, there’s also a sense that regulators and federal lawmakers who have been harshly criticized by activists for letting Wall Street practices that led to the Great Recession go unpunished see a second chance to hold financial manipulators accountable.

Duke, the new Wells Fargo board chair, is also facing pressure to unilaterally begin a sweeping, independent investigation into company practices to determine if there were other policies that saw customers as “cash cows” to be exploited. A San Francisco Chronicle analysis made the case that a massive forensic audit may be necessary because only one wing of the financial giant – retail banking – had faced serious scrutiny. Writer Thomas Lee suggested there was a calculation to the limits on scrutiny and noted that a whistleblower first notified company executives of fraudulent accounts being opened on a massive basis by agents under pressure to meet quotas all the way back in 2001 – not 2011.

Trump SEC boss may cool regulatory zeal

Yet there is good news of late for embattled Wells Fargo officials. The Trump administration is sending out strong signals of a hands-off approach on financial regulation, according to a recent New York Times report. It noted that new Securities and Exchange Commission Chairman Jay Clayton cited costs to shareholders imposed by onerous rules in his confirmation hearing.

Clayton’s views appear to have had an effect. On Aug. 6, the Wall Street Journal reported that “Wall Street regulators have imposed far lower penalties in the first six months of Donald Trump’s presidency than they did during the first six months of 2016, a comparable period in the Obama administration.”

Whether or not Wells Fargo faces renewed pressure from regulators, it appears fully able to weather more scandals. The company, founded in 1852 in San Francisco, remains profitable and has more than 260,000 employees in all 50 states. While Wells Fargo’s stock price has dropped this year, it is still up by more than 60 percent since the start of 2013.

John Stumpf abruptly resigned Wednesday as CEO and chairman of the scandal-torn San Francisco-based banking giant Wells Fargo.

But much more fallout is expected over the revelation last month that Wells Fargo had fired 5,300 employees for fraudulently signing up customers for 2 million new services and accounts. The bank’s agreement to pay $185 million to the Consumer Financial Protection Bureau hasn’t remotely satisfied its critics.

In Calabasas on Tuesday, the state Assembly Banking Committee held a hearing in which witnesses denounced Wells Fargo for its actions. The criticism continued even after Wells Fargo executive David Galasso told the committee that Wells Fargo would go beyond the $185 million settlement in compensating customers who were victims.

Banking Committee Chairman Matt Dababneh, D-Encino, said he was considering introducing a bill in the Assembly targeting laws and regulations that allow banks to compel disgruntled customers to go to arbitration in just about every circumstance.

Wells Fargo has already used such state and federal laws to get several related individual lawsuits thrown out and sees the rules as a potent tool against expected class-action lawsuits in which former Wells Fargo customers say their credit ratings were damaged by the bogus accounts and services established in their names.

In Washington, meanwhile, senators of both parties have been pressuring the Justice Department to open a full-blown criminal investigation of the company and its top executives — and not settle for a large fine.

Under formal Justice Department policy, the decision to start such a criminal probe partly depends on ”the pervasiveness of wrongdoing within the corporation, including the complicity in, or the condoning of, the wrongdoing by corporate management.” Given that the 2 million phony accounts were being set up from 2009 to earlier this year — and that executives were aware of the problem for at least three years — the pervasiveness standard is seen as highly relevant to the Wells Fargo case. Under federal law, corporations bear responsibility for the criminal behavior of their employees if it arises in the workplace.

“If it was one person or even 100, you might argue that it’s a rogue contingent,” University of Virginia law process Brandon L. Garrett, author of ”Too Big to Jail,” told The New York Times. ”But you can’t seriously argue that 5,000 people have gone rogue. That’s systemic behavior. People above them had to have noticed. … Fines aren’t working. We’re not going to see deterrence until we see some high-­level individual cases.”

Wells Fargo scandal an issue in presidential campaign

The Wells Fargo scandal has also become an issue on the presidential campaign trail. Like Dababneh, Democratic nominee Hillary Clinton has denounced laws that compel arbitration in banking disputes.

There is also additional fallout at the state and local level. California Treasurer John Chiang and Illinois Treasurer Michael Frerichs separately announced that their states would limit use of Wells Fargo on an interim basis.

In Chicago, Mayor Rahm Emanuel’s administration announced that it was selling all its Wells Fargo securities — about $25 million worth. Last week, the Chicago City Council took a first step toward banning any city dealings with the California bank.

These lost customers don’t mean much to a company with $90 billion in sales and $23 billion in net profits in 2015. But in an era of anger over the perception that big banks paid a small price for their role in creating the Great Recession, disinvesting in and banning Wells Fargo could become a proxy way for elected officials to take a stand against Wall Street — even if the company is based in California.

In his speech, Kashkari called for three crucial steps:

• “Breaking up large banks into smaller, less connected, less important entities.”
• “Turning large banks into public utilities by forcing them to hold so much capital that they virtually can’t fail (with regulation akin to that of a nuclear power plant).”
• “Taxing leverage throughout the financial system to reduce systemic risks wherever they lie.”

That’s from a Business Insider account of his speech.

Kashkari, who ran the Treasury Department’s Troubled Asset Relief Program under both President George W. Bush and President Obama, worked for Goldman Sachs’ San Francisco office before his government job. After leaving the Treasury Department, he joined Newport Beach-based PIMCO. While he lost to Gov. Jerry Brown in a landslide, he was still considered an up-and-comer in California politics before moving to Minneapolis last year, where he assumed the Fed post in November. If he does seek California office again, as some political observers expected, his speech will likely be a focus for its perceived populist themes.

‘It’s very hard to see crises coming’

The Washington Post, Politico and many other East Coast media treated Kashkari’s comments as highly newsworthy and provocative. Reuters called his ideas “radical.” In a subsequent interview with the Post, Kashkari said, given the unpredictability of the global economy, it’s smart to adopt reforms during relatively stable periods to prevent future shocks before they happen:

If you look around the global economy, there’s a lot of uncertainty. There are people who are concerned about China’s slowdown and whether it’s going to be a hard or soft landing. All of those are out there, but it’s very hard to see crises coming.

 

Nobody was omniscient enough to call $100 oil or $150 oil a bubble. I’m not saying that it was a bubble; I think it’s supply and demand forces. But certainly nobody forecast it going down to $30. That’s just an example of an exogenous shock. Everybody’s eyes were open. None of the smart people saw it coming. What else don’t we see coming? …

 

[It] isn’t clear to me that just keeping investment banking separated from depository lending is necessarily by itself a solution. If we go back to the root causes of ’08, we had a nationwide delusion that home prices only go up. I participated in that delusion: I bought a house in California in 2005. Traditional banks made a lot of bad loans based on the premise that if home prices keep going up, these loans are going to be okay. …

 

To really be strong enough against a shock we haven’t thought of, we would either need much, much higher capital requirements — the banks are already pushing back hard against the capital surcharges — or we need to look at much stronger or more intense stress scenarios.

Kashkari, 42, a Hindu native of Ohio, has undergraduate and graduate degrees in mechanical engineering from the University of Illinois/Urbana-Champaign. He worked as an engineer for TRW in Redondo Beach before going to the University of Pennsylvania’s Wharton School for his MBA, which led to his Goldman Sachs job. When Goldman Sachs chairman/CEO Henry Paulson became U.S. secretary of the treasury in 2006, he hired Kashkari as an aide, laying the groundwork for his appointment as the assistant treasury secretary overseeing TARP.

In June, in a move that rated only a brief in the local newspaper, one California county found a way to express this frustration:

At the urging of Supervisor Ryan Coonerty, the Santa Cruz County Board of Supervisors voted Tuesday not to invest for five years with the five banks that recently agreed to plead guilty to felony charges.

 

The Department of Justice announced in May that four major banks — Citigroup, JP Morgan Chase, Barclays and the Royal Bank of Scotland — have agreed to plead guilty to felony charges of conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange spot market. In addition, a fifth bank, UBS, has agreed to plead guilty to manipulating the London Interbank Offered Rate and other bench mark interest rates.

 

While the action of Santa Cruz County alone may not have a major impact on Wall Street, Coonerty will be contacting other local jurisdictions across the country to urge them to consider taking similar action in order to send a message to Wall Street.

That’s the entire item in the Santa Cruz Sentinel. Scroll down; it isn’t the lead item in that day’s news briefs.

Former secretary of labor offers praise

But if this gesture wasn’t seen as very important in Santa Cruz, former Clinton administration Labor Secretary Robert Reich, a UC Berkeley public policy professor, disagreed later in June on his personal blog. Here’s part of the lengthy post:

A strong case can be made that employers shouldn’t pay attention to criminal convictions of real people who need a fresh start, especially a job.

 

But giant banks that have committed felonies are something different. Why shouldn’t depositors and investors consider their past convictions?

 

Which brings us to Santa Cruz County.

 

The county’s board of supervisors just voted not to do business for five years with any of the five banks felons.

 

The county won’t use the banks’ investment services or buy their commercial paper, and will pull its money out of the banks to the extent it can.

 

“We have a sacred obligation to protect the public’s tax dollars and these banks can’t be trusted. Santa Cruz County should not be involved with those who rigged the world’s biggest financial markets,” says supervisor Ryan Coonerty.

 

The banks will hardly notice. Santa Cruz County’s portfolio is valued at about $650 million.

 

But what if every county, city, and state in America followed Santa Cruz County’s example, and held the big banks accountable for their felonies?

 

What if all of us taxpayers said, in effect, we’re not going to hire these convicted felons to handle our public finances? We don’t trust them.

 

That would hit these banks directly. They’d lose our business. Which might even cause them to clean up their acts.

Coonerty hopes that other government bodies follow suit. The reprinting of Reich’s commentary on some prominent left-wing sites gives him  hope. He’s also now getting more favorable coverage of his plan from his hometown paper.

Whether or not it becomes a national cause, in California, it could possibly become a ballot initiative to help get out the liberal vote in the 2016 election. As this Southern California Public Radio story notes, ballot measures on “hot-button” issues are just another tool in the voter-turnout playbook in the Golden State for liberals and conservatives alike.

/calwatchdog.com/wp-content/uploads/2013/10/viva-las-vegas-poster.jpg”>Recently, Gov. Jerry Brown signed into law a new pact with Nevada, effectively conceding to Nevada Gov. Brian Sandoval’s demands that California be more open to economic development along the beautiful Lake Tahoe shoreline. It was a rare moment of agreement — created through deft political maneuvering on Nevada’s behalf — between two states that have taken different approaches to taxes, regulations, environmentalism and development.

For Californians, the moment should also be a teachable lesson about the differences between the two states — and how those differences will ultimately affect the quality of each state. But to understand how California will be affected, it’s important to first look at where Nevada was, where it is now, and where it’s headed.

It begins with the Great Recession.

Collapse

In the fall of 2008, just five years ago, the global economic slide that began in late 2007 took a turn for the worse. Millions of jobs were lost, the United States’ GDP shrunk, major financial institutions collapsed, the housing bubble burst, and unemployment rose to record levels.

The Great Recession hit America hard, but it hit some states harder. Nevada may have been hit harder than any other state — probably because it was doing so well before the recession struck.

Nevada experienced tremendous economic growth leading up to the recession. Between 2000 and 2010, Nevada’s population grew 35 percent. Housing prices skyrocketed, and new homes were being built at record numbers. Anyone walking down the Las Vegas strip would see constant, tremendous change. But the boom times ended with the national economic collapse — and Nevada, the brightest star, burned the fastest.

Nevada’s housing market remained in terrible condition well into 2012, though signs of improvement have since emerged. A January 2012 CNN Money piece laid out just how badly the housing market had become in Nevada:

A staggering 1 in 16 homes have been hit with a foreclosure filing, versus the national rate of 1 in 69 homes. And more than half of borrowers owe more on their mortgages than their homes are worth, compared to just over a fifth nationwide.

Meanwhile, home prices continue to plummet. S&P/Case Shiller recently reported that Las Vegas home prices fell by 9.1% over the 12 months ending in November, the second-worst performance among the 20 cities surveyed. The reason: a high number of foreclosure sales.

The myriad foreclosure prevention programs rolled out by the Obama administration have done little to stabilize housing and the economy in this hard-hit state, housing counselors say.

Unemployment skyrocketed after the housing market collapsed. In February of 2007, Nevada’s unemployment rate stood at 4.2 percent. California was at 5.0 percent. By September 2010, 14 percent of the people who were actively seeking employment in Nevada could not find a job; 12.4 percent of Californians were in the same predicament. As of August of this year, for when the most recent data is available, Nevada’s unemployment rate is down, but it’s still the highest in the nation, according to the Bureau of Labor Statistics. California isn’t far off.

Downfall

The downfall of Las Vegas didn’t help either. The desert destination, essentially the lifeblood of Nevada’s economy, felt something it hadn’t before: failure. A 2009 Guardian report captured just how bad the situation had become:

After a quarter of a century of phenomenal growth, Las Vegas has come to a shuddering halt. The seemingly endless supply of gamblers has dried up. So has the conference trade, hardly helped by a warning from President Barack Obama that bailed-out Wall Street banks should avoid “taking junkets to Las Vegas” on the taxpayers' dime.

Always good value, Vegas hotels have had to slash their room rates by 30% to fill beds. Downtown casinos are offering rates of barely $20 a night, while the four-star Las Vegas Hilton, where Barry Manilow is a resident performer, is offering rooms for as little as $39.

Unemployment in Vegas has reached 11.1%, compared with a national average of 9.4%. And a spectacular collapse in the local housing market has left seven out of 10 homeowners nursing negative equity.

On the city's world-famous Strip, two huge building sites are eerily quiet. Fontainebleau, a half-finished $3.9bn casino which intended to offer perks such as an Apple iMac computer in every room, went bust this month. Echelon, a $4.8bn resort bankrolled by Boyd Gaming, ceased construction last year.

Change of Plans

The Great Recession — and its distinct impact on life in Nevada — transformed the state from a booming region to one of the worst off in America. It also changed the way Nevada operated. Check back tomorrow for Part II of the series, where CalWatchdog investigates some of the changes that Nevada's governor, economic development agencies and private-public partnerships have embraced recently to fix the way the state operates.

By John Seiler

New data show a continued sharp decline in self-employed businesses in the United States. This is another indication that the “recovery” from the Great Recession is bogus. Things only are slightly less bad than before.

The decline comes as government taxes and regulations continue metastasizing. Big businesses can handle the government cancer because they have vast staffs of lawyers and accountants. Small businesses, especially the self-empllyed, can’t afford such treatments, are defenseless against the government cancer, and often die. In particular, Obamacare, with its absurd regulations and taxes/penalties, is slamming those not part of the System.

The chart shows what’s going on:

The analysis from the Economic Collapse Blog:

“Once upon a time, the United States was a paradise for entrepreneurs and small businesses, but now the control freak bureaucrats that dominate our society have created a system that absolutely eviscerates them.  This is very unfortunate, because by murdering small business, the bureaucrats are destroying the primary engine of job growth in this country.  One of the big reasons why there are not enough jobs in America today is because small business creation is way down.  As I mentioned yesterday, entrepreneurs and small businesses are being absolutely devastated by rules, regulations, red tape and by oppressive levels of taxation. …

“Sadly, this is what the bureaucrats that run things want.  They don’t want us to be independent of the system.  Instead, they are much more comfortable when as many of us as possible are heavily dependent on the system in one way or another.  If all of us have to go running to the government or to one of the big corporations for a job, then we are much easier to control.  But as the control freaks continue to construct their bureaucratic utopia, they are also killing off what once made the U.S. economy so great.”

The recent phony budget deal that Gov. Jerry Brown signed into law anticipated $4 billion in extra revenues from a booming economy.

Oops.

All the indicators coming out show that the economy is declining again, meaning tax revenues also will be falling again, not rising:

* Inflation is roaring back. CNBC reported today:

stripping out food and energy, core CPI rose 0.3 percent after a similar gain in May and above economists’ expectations for a 0.2 percent increase.

“We are getting a very, very sharp rebound in core inflation and much more than the Fed had bargained for. We will be at price stability and possibly through it before the end of this year,” said Eric Green, chief economist at TD Securities in New York.

Inflation will be even worse when oil and gas prices start increasing again, as they will, after the brief respite we’ve lately enjoyed.

* Gold price up. The price of gold, which for several months settled in at around $1,500 an ounce, resumed its sharp rise of the last decade and now is approaching $1,600. That’s a clear sign of future inflation.

* Manufacturing is declining. The New York Federal Reserve’s report on New York state’s manufacturing usually is a harbinger of what’s happening in the rest of America, including California. Reuters reported today:

A gauge of manufacturing in New York State showed the sector unexpectedly contracted for the second month in a row as new orders worsened, the New York Federal Reserve said in a report on Friday.

The pace of decline did moderate somewhat in July from the month before, with the New York Fed’s “Empire State” general business conditions index rising to minus 3.76 from minus 7.79 in June. However, it was still weaker than expected, since economists polled by Reuters had expected a reading of 4.50.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. In June the regional index had tumbled sharply, contracting for the first time since November 2010, but the larger national report for the month showed a modest uptick in the pace of growth.

New orders fell to minus 5.45 from minus 3.61, while shipments improved to positive 2.22 from minus 8.02.

* Consumers are depressed. Reported CNBC today:

U.S. consumer sentiment deteriorated in early July to the lowest level since March 2009 on increasing pessimism over falling income and rising unemployment, a survey released Friday showed.

* America is a big Greece. As Pat Buchanan wrote in a column today, titled “We’re All Greeks Now“:

The halcyon days are over. Government payrolls, as is happening from California to New York to Washington, D.C., will have to be slashed. Pension and health care benefits, not only for seniors, will have to be reduced. Retirement ages will have to be raised. From food stamps to foreign aid, programs are going to be capped and cut. 

The left believes it can get the money from the wealthy. But the top 1 percent of Americans in income already carry 40 percent of the federal income tax load, while the bottom 50 percent of wage-earners ride free. This, too, will have to end. 

We are either going to man up and radically reduce government at all levels in the United States, or the bond markets are going to do it for us, as they are doing it today for Greece, Ireland and Portugal. 

We’re all Greeks now.

I Told You This Would Happen

Since I started writing for CalWatchDog.com almost two years ago, one theme has been that California needs to prepare for coming economic bad times. It needs to become more business-friendly by cutting taxes and regulations, especially the jobs-killing AB 32. I wrote here on Jan. 8, 2010:

AB 32 was passed at the peak of the housing bubble, during which it seemed double-digit increases in housing prices – with the state skimming off its portion in taxes – would go on forever. In California, many thought, everything was “fantastic,” and “anything is possible.” It was a Disneyland of the mind. We could afford anything, including turning the state into a green-friendly economic showcase. Unemployment statewide in 2006 was just 4.9 percent.

Since then the housing bubble has burst, with California among the states hit the hardest. The state, along with the rest of America, is suffering through the worst economic slump since the Great Depression.

Unemployment has more than doubled to 12.5 percent in October – the worst since 12.6 percent in 1940, at the tail end of the Great Depression. If one includes those working part-time but wanting to work full-time and those who have stopped looking for work, the “underemployment” number is a staggering 22.5 percent.

Then-Gov. Arnold Schwarzenegger and AB 32 supporters in the Legislature and media guaranteed us that AB 32 would create so many “green jobs” that the economy would boom.

Well, here we are in 2011 and the economy is stuck in a hideous recession, worse in California than elsewhere. As the naysayers predicted, AB 32 made California’s business climate worse, not better.

I long have pointed out that both Brown and Schwarzenegger’s failed to prepare us for the return of the economic deluge, which now is upon us. Their hard-core, fanatical environmentalist extremist and tax-increase ideologies blinded them to reality.

Now most of us will be paying the price in lost income, lost jobs, broken families, damaged children, broken lives.

July 15, 2010