[from the London Tribune]

 

 

Letter from Woodstock,

 

                                                Bear markets and the California Meltdown

Woodstock, New York

                                                                                                            July 29^th, 2003.

 

            The dog days of summer are upon us in the Catskills and the word around here is of Black bears in our woods and a bear market in the local tourist industry. We have more Bear sightings this year than usual but fewer signs of New Yorkers. The City people just don’t have the money for summer rentals, so estate agents have taken a hit everywhere from the Catskills backcountry to the pricey Hamptons beach front on Long Island. It’s a crude economic indicator, but when Woodstock sees more “day trippers” than “weekenders” something’s up, and it’s not anything good. 

Technically the American economy has been in recovery for over a year but with unemployment running at 6.5% nationally and 8.7% in New York City, it doesn’t feel that way. George Bush’s promised takeoff has turned into a job-loss recovery even if share values on Wall Street have regained lost ground this past quarter. One might think that the disconnect between Wall Street and the real economy would translate into a crisis of credibility for our President, but so far it hasn’t.

This is surprising. After all, it was Bush who promised us that his tax cuts for America’s wealthiest households would translate into a million new jobs. Since he took office we’ve lost over three million. At the same time the federal deficit has ballooned from a small surplus in 2000 to a deficit of over £280 billion for 2003. Bush blames the deficit on 09/11 attacks and the burdens of the “War on Terrorism”, but the cost of his tax cuts is almost three times as great as the cost of his presidential wars. And red ink stretches as far as the eye can see. The Federal deficit is anticipated to grow to £ 326 billion by 2013 and the interest payments alone could run around £262 billion. At the same time the mountain of personal debt that totals a £ trillion has crushed American householders. Last year 1.6 million Americans filed for bankruptcy, and a record 1.2 % of home mortgages were in foreclosure.

This represents a world of pain for which Democrats such Governor Howard Dean strive to hold George Bush accountable. But somehow the political fall-out keeps avoiding the White House, and falls on our State Governors and Big City Mayors instead. George Bush’s approval ratings remain at 60% while the approval ratings for New York’s Republican Governor George Pataki have fallen into the low 30%. But it seems that the state deficits of  £60 billion places Democratic officeholders at greater risk than they do Republicans.

The leadership of the conservative movement has understood that the new rule of thumb in local politics is that officeholder approval ratings fall in relation to the size of a state’s deficit and the severity of the consequent cutbacks in public services. Why else would Grover Norquist of Americans for Tax Reform (and a key member of Karl Rove’s Republican brain trust) have said that he hopes to see a state or two go bankrupt. “We need a state to be a bad example.” Norquist remarked, “so that the others will start to make the serious decisions they need to get out of this mess.” Clearly he has a candidate for sacrifice in mind and it’s California.

The most spectacular deficit of all has occurred in California where the state arrears are £ 22.735 billion and climbing and cutbacks have crippled the University of California and local governments. The economy of the State of California is fifth largest in the world, and its fiscal meltdown has not gone unnoticed by the financial press or by California voters. Thanks to the peculiarities of California’s electoral laws, Governor Gray Davis faced an extraordinary political campaign this summer to “recall” him for “malfeasance” from the office that he just won for a second term last November. The recall initiative was successfully passed this month with the collection of a million voter signatures that Darrel Issa, a San Diego businessman and Republican congressman was able to produce for the expenditure of mere million USD.  An election for Governor will take place on October 7^th where anyone who can collect 10,000 signatures can be a candidate. Issa is in the running along with four other republicans and possibly so is Arnold Schwartzenegger. With a large field, anyone could take power with a relatively small fraction of the total vote. In short, California’s fiscal distress has translated into a “power play” that could reproduce at the state level the congressional impeachment campaign against President Clinton in 1998. If this gambit succeeds, the “blue states” like California and New York will be the future battleground of the 2004 Presidential election.