Dem Governor Blames Bad Economy On… Wait For It

The Democratic governor of California, Gavin Newsom, has pointed to global warming as the reason for the state’s dramatic fiscal shift in the past two years, when it moved from a $100 billion surplus to a $28 billion deficit—and an even worse situation until last month’s emergency measures.

Estimates for the shortfall varied between $38 billion and $73 billion, as pointed out by CalMatters:

That is why, last month, before the normal budget process began, Newsom and the legislature took “early action” to cut the deficit by over $17 billion. Republican legislators criticized their proposal, calling it “gimmicky” and “balanced on hopes and prayers” because it depended primarily on new income, internal borrowing, and funding delays and changes to save money, although it did include some program cutbacks as well.

“What is causing California’s financial crisis?” The causes predate this by two years. A stock market crash, rising inflation pressure on the housing market, and a freeze on software industry IPOs due to dwindling investment made 2022 a challenging year for capital gains. As affluent taxpayers carried their losses forward, those blows persisted.

However, the budget that Newsom and lawmakers passed this summer did not adequately account for the declines in income. Due to severe winter storms, both the federal government and the state of California decided to postpone income tax reporting from April to November. This left the state’s budget process with an incomplete image. Programs that the state had previously promised to pay for have now become unsustainable.

While responding to a reporter’s query at Friday’s press conference, Newsom brought up the terrible storms:

“Q: How did we go from a $100 billion surplus to a massive deficit in such a short amount of time? How can we explain this to the people of California?”

“Hi there, Newsom! Yeah, it is right. Allow me to elucidate. $349 billion in extraordinary capital gains, or 11.6%, compared to the average of about 5.18% for conventional capital gains. It is about twice as much, though. So, there is a great deal of uncertainty. Prop 98 mandates that we set aside 93% of our surplus, which is — I must be cautious — either on the upper end or without precedent for one-time purposes; also, Prop 2 imposes rules for the Gann [see here]. We expected that there would be a deficit since we did not want the extra money to go toward recurring obligations. Those atmospheric rivers that rained heavily in December, January, February, and March caught us off guard. They prompted a federal declaration, which in turn caused FEMA and the IRS to shift their focus so that tax payments would not be due until, maybe, November 16th, instead of April 15th. This blackout period captivated the LAO, the financial sector, economists, and experts; what is more, it had an effect on IRS collections estimates (as other states experienced similar delays in tax payments due to weather)—and, interestingly, there was a recent meeting at the White House. Our financial delays are just more proof that we must address the effects of climate change, which is why I am really anticipating the discussions we will have next week in this space.”

In a climate change address at the Vatican, Newsom said he will be making a pilgrimage to Rome next week. Although Newsom is going abroad, he is doing so via an international plane, which is a major source of carbon emissions.

The storms that hit the state last winter were unrelated to climate change, according to scientists.

It is worth mentioning that Newsom was on vacation in Mexico when the worst of the snowstorms hit.

Author: Steven Sinclaire

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