California Dreaming

There is a simple reality that we as a society are having a tough time grasping. It doesn't matter, Federal, State, County or Municipal: our collective governments are all spending far more money than they have available and even if they don't want to acknowledge it, are all essentially bankrupt.

It's with that background that the following stories out of California this week have me incredulous. We have students at UCLA protesting upcoming tuition hikes ( I wonder how a 32% increase gets figured in the CPI) but at the same time the state of California is trying to get a handle on a $21 billion budget deficit. It doesn't get any better on a municipal level as San Francisco is staring square at a budgetary disaster or so says Steve Kawa, Mayor Gavin Newsom's chief of staff.

" I don't even know if I have words to describe how bad this is,".......

Next year's budget deficit is likely to top $400 million, Kawa said. That forecast could get even worse with federal stimulus money coming to an end next year and the state likely to help balance its own budget woes by cutting money sent to cities and counties.
"It may be the perfect financial storm," Kawa said. "It's going to be incredibly difficult to find a way to balance next year's budget without some severe impacts."

It gets even better. Check out this story in today's NYTIMES, With F.H.A. Help, Easy Loans in Expensive Areas :

SAN FRANCISCO — In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.
A week ago, he and a couple of buddies bought a two-unit apartment building for nearly a million dollars. They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.

Great. It doesn't take a genius to figure out how this will end. Speculators praying for a real-state uptick on the back of the taxpayer. I think more pain in on the way.