From Volume 37, Issue 38 of EIR Online, Published Oct. 1, 2010

U.S. Economic/Financial News

States Hit with Dark Age Budget Cuts

Sept. 20 (EIRNS)—Americans and Britons may be aghast at the reported 25-40% ministerial budget cuts slated to be announced by Britain's Chancellor of the Exchequer Oct. 20, but many U.S. states are already being hit with death-dealing cuts nearly as severe:

In Oregon, state agencies submitted their plans Sept. 16 to help Democratic Gov. Ted Kulongoski close a $377.5 million budget shortfall. The Statesman-Journal of Salem reported that the cuts "amount to 8% of the remaining nine months of the two-year budget cycle and ... are on top of 9% cuts earlier this year to eliminate a projected $577.1 million shortfall." That's even after Oregon voters raised taxes by $727 million this year.

In Washington State, Democratic Gov. Christine Gregoire said Sept. 16 that she is cutting 6.3%, or about $520 million, from the current two-year budget, with the brunt of the reduction aimed at the state's Department of Social and Health Services, the Seattle Times reported.

In South Dakota, Gov. Mike Rounds (R.) is asking all state agencies to prepare budgets for next year that are 10% below this year's levels, the Capital Journal of Pierre reported. The state finance commissioner told the paper that the governor's cuts aren't binding and are only a request at this point, but...

In Tennessee, outgoing Gov. Phil Bredesen (D), is asking state agencies to trim their budgets by 1-3% ahead of next year, The Tennessean reported. That means overall state spending could decline by $45 million to $160 million.

In Texas, whose state budget is $21 billion in the red, state agency heads are being told to make 10% cuts.

Illinois has cut its budget 15% over the current biennium.

In the most extreme case, California, the state budget has been slashed from $104 billion to $68 billion over the past four years—nearly 35%.

Scavenger Economy Behind St. Louis Arsons

Sept. 20 (EIRNS)—At the point that bankrupt U.S. cities are wiping out their firefighting capability in order to cut the budgets, arson of abandoned homes is rising, purportedly to scavenge any kind of materials that can be resold. A case in point is St. Louis, Missouri, featured by the New York Times on Sept. 20.

There are 8,000 vacant buildings in St. Louis, and abandoned homes are being burned down so that the bricks can be sold, where the top price is $100 for 500 bricks. In one incident, a handicapped man barely escaped a fire when the abandoned house next to his was set ablaze. For the last two years, foreclosed and abandoned homes in Detroit and Cleveland have been stripped of copper pipes, wires, and anything that can be resold. Royce Yeater, Midwest director for the National Trust for Historic Preservation, told the Times, "It is a crime that has increased with the recession. Where thieves in many cities harvest copper, aluminum and other materials from vacant buildings, brick rustling has emerged more recently as a sort of scrappers' endgame," once everything else is gone.

Glass-Steagall in the Air

Sept. 24 (EIRNS)—Film-maker Oliver Stone, producer of the 1987 blockbuster "Wall Street," who has just directed a sequel called "Wall Street: Money Never Sleeps," places much of the responsibility for the current crisis on deregulation and the repeal of Glass-Steagall.

In a Sept. 23 interview with Salon, the interviewer comments that Stone's latest movie seems to say that all the blame (this was in 2008) can't be put on George W. Bush, and that Bill Clinton deserves some of the blame, too. Stone agrees, and goes on: "I would say Ronald Reagan started the whole thing, [moving America] away from the New Deal. Look, under Clinton we had the Commodity Futures Regulation Act [of 2000]—they always use 'modernization' as the great word. It's bullshit. Then they repealed a lot of the Glass-Steagall Act, which was crucial. Paul Volcker has criticized [the repeal] openly." Stone sees the long-term trend as America moving from making things, to making money, and that while wages have flattened since the 1970s, corporate and financial profits have gone from less than 10%, to over 40%.

Another reference to the fight over Glass-Steagall comes in a column by Richard Clark, a Silicon Valley technical writer and former college instructor, entitled "How we can take stolen profits back from banksters," published in OpEdNews on Sept. 23. Clark wrote: "We need a grass-roots money-reform movement to take banking away from private interests and put it back in the hands of government," like North Dakota, which has had a state-owned bank for nearly a century. Clark continued: "Last January, when Obama sided with Paul Volcker's plan to re-impose the Glass-Steagall Act, which would have led to a kind of breaking up of the big banks—they would have had to separate their investment/gambling operations from their traditional banking operations—the stock market began to fall apart, almost as if it had been prompted to do so by powerful actors operating behind the scenes who wanted to send a message to Obama and the nation: 'Don't bring back Glass-Steagall, or else!'"

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