It's The Spending, Stupid!: June 2009 Archives

I have to wonder why Barney Frank is still in office.

First, he torpedoes any effort by Congress or President Bush to tighten controls on Fannie Mae and Freddie Mac, declaring they were both financially sound even though their lending practices were sketchy at best.

We all know what happened to Fannie Mae and Freddie Mac.

Now dimbulb Barney wants Fannie Mae and Freddie Mac to loosen their lending standards again.

Back when the housing mania was taking off, Massachusetts Congressman Barney Frank famously said he wanted Fannie Mae and Freddie Mac to "roll the dice" in the name of affordable housing. That didn't turn out so well, but Mr. Frank has since only accumulated more power. And now he is returning to the scene of the calamity -- with your money. He and New York Representative Anthony Weiner have sent a letter to the heads of Fannie and Freddie exhorting them to lower lending standards for condo buyers.

You read that right. After two years of telling us how lax lending standards drove up the market and led to loans that should never have been made, Mr. Frank wants Fannie and Freddie to take more risk in condo developments with high percentages of unsold units, high delinquency rates or high concentrations of ownership within the development.

Isn't this how we got into trouble in the first place? He doesn't get it, does he? He really doesn't get it.

With the prospect of the US Government deciding enough is enough when it comes to bailouts, it looks like Governor Schwarzenegger has finally remembered that he is indeed the governor and is finally doing something that might actually help California out of the $40 billion hole it dug for itself.

With a restructuring of the state income tax to a flat 6% that covers a much wider portion of the wage earners than the existing progressive (and very high) income tax and the willingness to lay off state employees, it could be the Governator has finally seen the financial light and is doing something he should have done after taking office: rein in profligate spending and stop tapping the taxpayer's wallets again and again and again.

Will these measures erase California's budget deficit? No, but they will make a significant dent. They also set a precedent that should be carried forward until state spending is under control.

Another state has also reached the conclusion that layoffs and furloughs of state employees are necessary at a time when the state's taxpayers are telling the legislature and the governor "Enough!"

The proposed budget for New Hampshire includes more job cuts after a conference committee couldn't agree on a wide swath of tax and fee increases many saw as a a detriment to the states economy because they were business hostile. Things like video slot machines at the state's race tracks (dog and horse tracks) as well as two other locations in the northern tier of the state were shot down, as were efforts to remove a tax credit that offset the Business Profits Tax,. An increase in gasoline taxes, as well as new taxes on capital gains, estates, and mortgage refinancing were defeated in committee.

Neither state has gone far enough to balance their budgets. New Hampshire will still see a substantial increase in state spending on top of the 17.5% increase it had to endure in the last state budget. California still has billions it must shave off of its state budget if it wants to avoid bankruptcy.

Hopefully both states have learned a valuable lesson. The question is whether they will remember that lesson.