California stops paying bills Come Feb.1, tax refunds,welfare $, replaced by IOUs

[Pragmatic]

YOUR GOVERNMENT AT WORK
California prepares to stop paying bills
Come Feb. 1, tax refunds, welfare checks replaced with IOUs

Posted: January 26, 2009
9:47 pm Eastern



By Drew Zahn
© 2009 WorldNetDaily

California State Controller John Chiang
The state of California has run out of money.

Facing a $42 billion budget deficit, State Controller John Chiang told the Sacramento Bee he has already borrowed $21.5 billion to try to cover the state's checks, but by Feb. 1, there will be no more options left but to simply stop paying some of the bills – including tax refunds, welfare checks, student grants and other payments owned to California citizens.

"It pains me to pull this trigger," Chiang said at a news conference held in his office. "But it is an action that is critically necessary."

Federal law requires that many school and healthcare programs – a total of about $6.6 billion in California – must be paid, the Los Angeles Times reports, so Chiang has announced an expected payment freeze on $3.7 billion worth of the state's bills, most of it refunds owed to taxpayers.

But even with the freeze beginning next week, the Times reports, California will still fall $346 million short for the month of February, forcing Chiang to consider something only done once since the Great Depression: issuing IOUs.

continues below)



Formally called "registered warrants," the state's IOUs consist of little more than a piece of important paper that says the state owes a payee money, plus interest, to be paid at some point in the future.

The last time California issued registered warrants was in 1992, during two-month budget battle between then-Gov. Pete Wilson and the state's legislators.

But after the state issued almost $4 billion worth of IOUs, many banks stopped accepting them as deposits, claiming the five percent interest didn't pay for the hassle of processing them.

The Times reports that state officials have already designed an IOU template for February and begun negotiating with banks to avoid a repeat of 1992's problems.

Beth Mills, a spokeswoman for the California Bankers Association, however, told the Bee that the group's members still have "a lot of technical and operational questions we're trying to get some resolution on" about IOUs.

For now, state officials are hoping that Chiang's promised payment freezes can delay the budget crisis long enough for Gov. Schwarzenegger and the Legislature to find a solution.

Among the $3.7 billion in payments Chiang has targeted to freeze include $1.91 billion in personal income tax refunds, $205 million in court operations, $122 million scheduled to help counties with welfare administration, $13 million in student aid and over $700 million in aid to various disabled and needy groups.

State officials also got a glimmer of hope last week when they learned that more than $11 billion of President Obama's $825 billion economic stimulus plan may land in California's coffers.

"This takes a big bite out of the state's budget gap," Jean Ross, executive director of the California Budget Project, told the Times. "It is better news than many of us had anticipated."

Assembly Speaker Karen Bass, D-Los Angeles, however, warned that lawmakers can't rely on Washington to fix the problem.

"We have to make really horrible cuts, and we have to raise revenue," Bass told the Times. "We are just hoping whatever we get will help us avoid deeper cuts."

If the cuts aren't deep enough, California may be forced to consider issuing the IOUs.

Continued borrowing, Chiang said, is not an option.

"We are the eighth largest economy," Chiang said, speaking of California's rank among the world's nations, were it an independent country. But comparing it to other states, he said, "We have the 50th or we are tied for last in the credit ratings. We are a world economic power, but we have fiscal mismanagement in this state."



worldnetdaily.com — It's just a thought, but one wonders how illegal immigration might figure into this travesty. And what about all those darling ladies who have ever more babies to increase their welfare checks? But I must sound like a racist misogynist. Oh, well. I'll just work harder and more jobs and pay more taxes, and this problem will go away. Eureka!


re: They are already cutting checks back to one child. Only if the poster above knew this meant more homelessness...



Peace be upon you

[Pragmatic]

Canada's central bank predicts short recession
The Associated Press
Published: January 23, 2009
http://www.iht.com/articles/ap/2009/01/23/...ada-Economy.php

TORONTO: The head of Canada's central bank said Thursday the country is in a deep downturn, but he predicts it will be shorter than previous recessions.

Bank of Canada Governor Mark Carney said interest rate cuts, a government stimulus package and a weak Canadian dollar could lead to a shorter downturn than recessions in 1981-82 and 1990-92.

The bank is predicting three consecutive quarters of contraction for Canadian economic activity, including a 2.3 percent drop in GDP in the fourth quarter of 2008 and a dramatic 4.8 percent GDP drop in the current quarter.

Carney predicts a 1 percent drop in the second quarter followed by 2 percent growth in the third and 3.5 percent growth in the fourth.

"We expect that this recession won't be as long as former recessions," Carney said.
Today in Business with Reuters
U.S. House passes $819 billion stimulus package
Fed signals low rates will continue
Chinese prime minister injects note of optimism at Davos

Carney said the extraordinary easing up of monetary policy will help Canada recover. The Bank of Canada began cutting interest rate as the U.S. economy slowed in late 2007, but Carney only declared Canada in recession this week.

High commodity prices fueled Canada's resource-rich economy in the first half of last year, but the subsequent broad commodity decline has only slowed Canada's economy in recent months.

The Bank of Canada cut its trendsetting interest rate by one-half point to 1 percent on Tuesday, the lowest in history. Canada's central bank has cut 3.5 percentage points off the overnight rate since it began the current easing policy 13 months ago in an effort to stimulate the economy.

"We are entering this recession with effectively zero real interest rates," Carney said. "We normally enter with four or five percent real interest rates coming in. We've been cutting rates for some time, even though there is a lag on monetary policy that impact will start to be felt."

Carney also said he expects Prime Minister Stephen Harper's Conservative government to announce a substantial stimulus package on Tuesday. Opposition parties have vowed to topple Harper's government if the doesn't a significant plan.

Harper has said it will be substantial. An aide to the prime minister said Thursday the government will likely run a $64-billion Canadian deficit (US$51 billion) over the next two years to pay for it. The federal government has run a surplus for more than a decade.

"It is a contributing factor to the recovery we expect," Carney said.

The central bank's optimistic outlook for a recovery this summer, leading to robust 3.8 percent annual average growth next year, differs from many leading private-sector economists and parliamentary budget officer Kevin Page.

On Wednesday, both Page and IHS-Global Insight forecaster Dale Orr said the Canadian economy would not return to full capacity until 2013, two full years later than what the central bank predicts.

The credit crisis and the global sell off of commodities have slowed Canada's commodity-rich economy. Alberta's once booming oil sands sector has cooled as every major company has scrapped or delayed some expansion plans.


Peace be upon you

[Pragmatic]

Originally Posted by Pragmatic

YOUR GOVERNMENT AT WORK
California prepares to stop paying bills
Come Feb. 1, tax refunds, welfare checks replaced with IOUs

Posted: January 26, 2009
9:47 pm Eastern



By Drew Zahn
© 2009 WorldNetDaily

California State Controller John Chiang
The state of California has run out of money.

Facing a $42 billion budget deficit, State Controller John Chiang told the Sacramento Bee he has already borrowed $21.5 billion to try to cover the state's checks, but by Feb. 1, there will be no more options left but to simply stop paying some of the bills – including tax refunds, welfare checks, student grants and other payments owned to California citizens.

"It pains me to pull this trigger," Chiang said at a news conference held in his office. "But it is an action that is critically necessary."

Federal law requires that many school and healthcare programs – a total of about $6.6 billion in California – must be paid, the Los Angeles Times reports, so Chiang has announced an expected payment freeze on $3.7 billion worth of the state's bills, most of it refunds owed to taxpayers.

But even with the freeze beginning next week, the Times reports, California will still fall $346 million short for the month of February, forcing Chiang to consider something only done once since the Great Depression: issuing IOUs.

continues below)



Formally called "registered warrants," the state's IOUs consist of little more than a piece of important paper that says the state owes a payee money, plus interest, to be paid at some point in the future.

The last time California issued registered warrants was in 1992, during two-month budget battle between then-Gov. Pete Wilson and the state's legislators.

But after the state issued almost $4 billion worth of IOUs, many banks stopped accepting them as deposits, claiming the five percent interest didn't pay for the hassle of processing them.

The Times reports that state officials have already designed an IOU template for February and begun negotiating with banks to avoid a repeat of 1992's problems.

Beth Mills, a spokeswoman for the California Bankers Association, however, told the Bee that the group's members still have "a lot of technical and operational questions we're trying to get some resolution on" about IOUs.

For now, state officials are hoping that Chiang's promised payment freezes can delay the budget crisis long enough for Gov. Schwarzenegger and the Legislature to find a solution.

Among the $3.7 billion in payments Chiang has targeted to freeze include $1.91 billion in personal income tax refunds, $205 million in court operations, $122 million scheduled to help counties with welfare administration, $13 million in student aid and over $700 million in aid to various disabled and needy groups.

State officials also got a glimmer of hope last week when they learned that more than $11 billion of President Obama's $825 billion economic stimulus plan may land in California's coffers.

"This takes a big bite out of the state's budget gap," Jean Ross, executive director of the California Budget Project, told the Times. "It is better news than many of us had anticipated."

Assembly Speaker Karen Bass, D-Los Angeles, however, warned that lawmakers can't rely on Washington to fix the problem.

"We have to make really horrible cuts, and we have to raise revenue," Bass told the Times. "We are just hoping whatever we get will help us avoid deeper cuts."

If the cuts aren't deep enough, California may be forced to consider issuing the IOUs.

Continued borrowing, Chiang said, is not an option.

"We are the eighth largest economy," Chiang said, speaking of California's rank among the world's nations, were it an independent country. But comparing it to other states, he said, "We have the 50th or we are tied for last in the credit ratings. We are a world economic power, but we have fiscal mismanagement in this state."



worldnetdaily.com — It's just a thought, but one wonders how illegal immigration might figure into this travesty. And what about all those darling ladies who have ever more babies to increase their welfare checks? But I must sound like a racist misogynist. Oh, well. I'll just work harder and more jobs and pay more taxes, and this problem will go away. Eureka!


re: They are already cutting checks back to one child. Only if the poster above knew this meant more homelessness...



Peace be upon you

ED NOTE: if you notice they pulled this 1 week before checks come out...