From Volume 8, Issue 26 of EIR Online, Published June 30, 2009

U.S. Economic/Financial News

Feinstein on Obama Health-Care: How Could I Support That?

June 21 (EIRNS)—Following Sen. Dianne Feinstein's (D-Calif.) warning June 16 that she could not vote for Obama's health policy, if it takes billions of dollars in Medicaid funds away from California to cover uninsured patients in low-cost and rural areas of the country, Feinstein reiterated this warning on June 19, during an interview on CNN's State of the Union.

Responding to a question about Obama's health policy, Feinstein said: "Well, to be candid with you, I don't know that he has the votes right now. I think there's a lot of concerns in the Democratic caucus.... You have enormous problems in my state. California is bigger than the populations of 21 states and the District of Colombia put together. We have an enormous health-care industry, 350 hospitals; University of California alone has 34,000 health-care workers, has health care worth $4 billion a year.

"So it's complicated. Additionally, the state is in a state of financial catastrophe. I think that's clear. So if you change the Medicaid rate, for example, it has an impact on California of between $1 billion and $5 billion a year.

"Now how could I support that?

"Because it would take down the state."

State Governments Move to Austerity as They Run Out of Money

June 22 (EIRNS)—A June report prepared for the National Governors Association documents the gruesome California-style cuts in education (K-12, as well as higher education), Medicaid, state employment, and state employee benefits, that are taking place in 47 out of 50 states because they have run out of money. On June 30, 46 states have to come up with a new budget for the Fiscal Year 2010 that starts on July 1. The states are facing a $121 billion shortfall, at the same time that jobless rates are rising, and the stimulus money that covered the extension of unemployment benefits has run out.

The National Conference of State Legislatures did a survey reported in the Wall Street Journal, which showed that welfare cases have risen in 23 of the 30 largest states, due in part to ending of unemployment benefits. California, Oregon, and South Carolina have already reported increases in the welfare rolls.

States Negotiate for Doomsday Budgets; Deadline Is June 30

June 27 EIRNS)—Reeling from the economic collapse, 46 state governments are in the throes of trying to confirm some kind of balanced budget by the deadline of June 30 midnight, the end of their fiscal year, in the face of their revenue hemorrhages. In the first quarter 2009, state-level revenue dropped 26% year-on-year. Other revenues are likewise plunging. A special deadly feature of the hopeless state budget process at this point, is that they face cutting social services—health care and education, which comprise the largest share of state expenditures—just at the time the new flu virus is spreading nationwide.

For example:

Illinois: Gov. Pat Quinn and the Democratic state legislature came up with a minimal budget to "keep the lights on," involving drastic cuts in the state workforce, but still cannot come up with the revenue to avert a $9.2 billion budget gap. The legislators are split over the apparent (non)solution of raising taxes on personal income (3-4.5% increase) and corporate income (4.8-7.2% increase).

A June 23 protest rally in the capital, Springfield, brought 6,000 workers, seniors, and health-care staffers, whose mass impact shut down the statehouse for a time. On June 29, a nighttime vigil will be held in downtown Chicago; on June 30, there will be a daytime demonstration at the Thompson Center.

Pennsylvania: The had no budget agreement as of midnight June 30, and faces a repeat of its 1991 "suspended government" impasse, under far worse conditions of a collapsing economy today. On June 26, Gov. Edward Rendell (D) went to formerly industrialized York, Pa., to volunteer $500 million more in budget cuts, on top of $2 billion implemented over the past year. He advocates "temporary" tax increases for three years. But so far, no deal in Harrisburg.

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