The California Budget Crisis and the Assault on the Working Class

Workers Action

Tobias Michaels

The California budget crisis is a phenomenon that applies to the approximately 24 billion dollar shortfall in the state budget. This number cannot possibly begin to explain the misery that will be inflicted upon the working class of California. The real question for the discerning readers is to ask themselves, why is this taking place? Are we confined only to the options that are put out before us?

Putting this crisis in its appropriate context

In order for us to truly understand California’s predicament, we must remember that California is part of the U.S. economy as a whole, and a major part of the economy. If California were to become its own country tomorrow, it would easily field an economy in the top ten of the world. With this fact in mind, we must also remember that manufacturing in the U.S has been dismantled over the last 30 years.

The collapse of manufacturing is important for two reasons: in manufacturing something with definable value is actually produced. There is no mysticism involved when something is physically produced because there is value in materials, shipping and most importantly labor. This was lost in California as it has been lost all over America. Second, this value brought with it family wages (wages in which workers in America could reasonably be able to support their families) which in turn gave workers in California purchasing power.

The loss of family wage jobs and purchasing power by the working class became a major opportunity for the banking system in California. Cheap credit and easy loans inspired working class people who could no longer buy goods at the level they were accustomed to, become willing players in the banking scheme. Without any real job opportunities, it was a pragmatic decision to make. For the banks it was a win/win, especially given their insurance policy — through AIG — applied to each predatory home loan. The bank was guaranteed to make a profit whether or not the loan was ever actually repaid.

This dynamic created a secondary market which led to home values being hyperinflated beyond their true value under the premise that the worth of a home always goes up. With the demise of the home mortgage industry beginning in 2007, a major force of taxable income vanished. This is not a crisis that plagues California only, it is nationwide.

One would assume that the U.S. Federal Government would not allow any state — especially California — to fall into such a financial crisis. So the question is, why is the government allowing California to suffer in such a way?

The U.S. national debt is incredibly high due to the cost of fighting foreign wars, bailing out banks, and having a massive, negative trade balance. Overseas governments and private investors are thus relied upon to feed the debt habit. Paying back these investors, while continuing to bail out banks and fight wars, are the priority for the U.S. government, while Californians and millions of others who will suffer from state budget deficits are told that the national government has no money to spare.

Wall Street functions with only one item on its mind: making profit. Where is the return on HIV/AIDS treatment that can be measured in financial terms? How does Wall Street benefit from government assistance to working class families?

Candidate for President of the United States Senator Barack Obama received approximately 20 million dollars from the mortgage industry during the 2008 campaign. Obama received so much money during the 2008 presidential campaign he was able to opt out of public financing all together. How can Obama not be ethically compromised by this fact after becoming President?

Regardless of press conferences where he admonishes the industry for its shady practices, how strong a champion can he be?

It is troubling that the response of the Obama administration places the burden of California’s budget crisis squarely on the back of working class Californians. When asked about the Californian budget crisis, the Secretary of the Treasury Tim Geithner responded, “A lot of the burden,” Geithner continued, “is going to be on them to lay out a path that gets their deficits down to the point where they’re going to be able to fund themselves comfortably.”

What this means is that California will have to solve a national mortgage crisis and the economic fallout on its own. This is not unusual, but the size and scope of the mortgage disaster makes a “bailout” of the state all the more necessary, an idea that has been fundamentally rejected by the Obama administration. The Geithner proposal of “reducing deficits” refers to the state eliminating human health services or educational opportunities. These “deficits” represent workers and other vulnerable people in California who have already been victimized by the economical fallout and can now expect declining support from the state.

The Bailout of the banks at the expense of workers in all 50 states

It is in this context, that we must now highlight a moral crime. The crime involves the bailout of the banks. California’s budget deficit amount to approximately $24 billion. In the last year, Wells Fargo received one payment of 25 billion dollars. This, of course, is a minuscule amount compared to the amount of money that the entire banking industry has received. The question must be asked, why are the needs of 37 million people being put on the back burner, while the needs of the banking industry is put front and center? Who is the federal government serving by this logic or rationale?

What does 24 billion mean to the working class in California? Below is a general list of programs that could be cut or underfunded:

• Schools
• Roads
• HIV/AIDS treatment
• Early Childhood Education
• College grant programs
• Human Health Services
• Parks and Recreation programs.
• State Welfare programs

This is a partial list of areas that will be impacted. These programs are for the working class, as the financial elite has little need for any of these. So why is it that the mortgage crisis, which was perpetuated with full complicity of the banking industry, must now fall solely on the backs of workers?

An assault on workers

The California budget crisis is an assault on workers. This is not the working class in California’s fight alone; it is a fight facing every worker in all 50 states. Workers must set aside differences within the working class and join together to fight back against these measures. The fight in California will soon be exported throughout the United States. These cuts already felt in California will soon come to South Dakota, Arizona, Florida, Oregon, etc., if they haven’t already.

California must be bailed out and the burden of this crisis must be placed squarely on the banking industry where the crisis originated. They have received trillions of dollars in taxpayer money and workers haven’t benefited at all from this money being used in the name of rescuing the free market.

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