In a state that is in every sense, bankrupt, the governor just signed another home buyers credit bill into effect!
Before we talk about the new credit details, lets review the background;Â Consider that California has a $20.7 billion deficit in the general fund budget over the next 16 months. California owes $8.8 billion in short-term loans that have to be paid off by June and over $120 billion in outstanding bonds and interest that will be paid over decades. The state’s pension fund, CalPers, has $16.3 billion more in liabilities than assets plus California also faces a $51.8 billion for the health and dental benefits of state retirees and future retirees.
Bottom line: the California has the lowest credit rating of any state in the nation, just above junk bond status. One major problem is the rise in California’s debt-service ratio (DSR). That is, the ratio of annual general fund debt–service costs to annual general fund revenues and transfers. This is often used as one indicator of the state’s debt burden. The higher it is and more rapidly it rises, the more closely bond raters, financial analysts, and investors tend to look at the state’s debt practices, and the more debt–service expenses limit the use of revenues for other programs. Debt servicing is projected to comprise 9% of general fund revenues by the end of 2014-15. According to Bloomberg News, the market believes a developing country like Kazakhstan, with about 15.7 million people, is less likely to default on its debt than California, which is the eighth largest economy in the world.
Well, now that we have reviewed the financial background, why not issue $200 million in tax credits to California home buyers?
The new (some say extension of the 2009 new home credit) bill, AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and closes the sale before Aug. 1, 2011, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Purchasers will be required to live in the home for at least two years or forfeit -repay the credit. Before acting on this preliminary information, one should first, consult your legal/tax professional.
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The Fed has used over half of its available bullets.. and we’re nowhere near the end of this crisis.
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So how bad is it? I hear all these ramblings, fancy financial terms and so on. But what does it all really mean? Does the US collapse? Do we see soup lines and down trodden people like the experience was during the Great Depression? Seems to me the US financial catastrophe is pretty simple. Our government and the citizens of the US have consistently spent more than they take in. At some point the debt becomes so great we are unable to pay it back, or manage it. When we are no longer able to pay our debts what happens? Do we surrender assets, land and military hardware to the foreign nationals we’ve been burrowing money from over the last two decades? Maybe a fire sale of America? The whole system is a sham and we only have ourselves and those shysters in Wall Street and the Scum of Washington DC to blame..Sorry to say but, Obama won’t be able to save us from this SNAFU. The concept of uncontrolled spending and deficit through credit has finally caught up with us. This decade is perhaps a time for reckoning in which our short sighted ways and embrace of Wall Street’s psychopathic free market capitalism garnered by greed and unequaled corruption will finally get the best of us..
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And to top it all off—ex-President George W Bush will be leaving U.S. with a $NSDJSD trillion dollar debt to be paid with declining home prices. Give me back Clinton’s 90s balanced budget economy any time compared to the nuts currently running Washington.
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