Monday, July 5, 2010

The State Budget Electoral College

With elections coming up, Republicans and Democrats are fighting to control Congress.  In my mind, the voters reaction to the new hardships imposed by state austerity programs will direct the election.  Interestingly, the most problematic states are the largest, with the most electoral votes. 

California with 55 and New York with 31 lead the pack of basket cases.  Interestingly, both states are very left-leaning and Democrats have FAR more to lose.  Voters could easily turn on the liberal legislatures and make wholesale changes to party affiliation.  Other very troubled states include Illinois with 21, Michigan with 17, New Jersey with 15, North Carolina with 15 and Pennsylvania with 23.  Together these 7 states represent a total of 167 electoral votes or 60% of the total needed to win, 270.

Eight U.S. states, including Illinois, California, Pennsylvania and New Jersey, face credit downgrades because of budget stalemates.  A 9th, New York, has been without one since its year started April 1.  Credit downgrades increase borrowing costs and makes the budget deficits worse.

All are gripped by political deadlocks over how to resolve a massive collapse in tax revenue that included a $67 billion decline in the 12 months ended June 30, 2009, according to the Census Bureau.  The Nelson A. Rockefeller Institute of Government called that the biggest on record.

California, the lowest-rated state by Standard & Poor's at A-, was warned on June 8 that its $69 billion of debt outstanding might be cut unless the dogfight between Governor Arnold Schwarzenegger and the legislature over an $18.6 billion 2011 budget shortfall isn't solved.

Illinois, the5th-most populous state, had its credit rating lowered twice this month, on June 11 by Fitch Ratings to A from A+ and by Moody's on June 4 to A1 from Aa3.

Other states involved in budget fights include Louisiana, Massachusetts, Delaware and North Carolina, according to data compiled by Bloomberg News.

Five of the states choose governors this November:  California, Pennsylvania, Illinois, Massachusetts and New York.

New Jersey Democrats are wrestling with Republican Governor Chris Christie over his proposed $29.3 billion budget.  He proposes to balance it with $820 million in school-aid cuts and reductions in property-tax rebates.  An extension of an income-tax surcharge on millionaires passed by the legislature on May 20 was vetoed by the governor minutes afterward.

So, it appears that more local issues are going to be the pivoting factor in deciding the election.  On this basis, the Republicans, if they can hone their message of fiscal discipline, might be able to gain stronger footholds in Blue States.  That is, if the voters can be persuaded that George W. Bush's profligacy was merely an aberration.

Marko's Take


  1. Christie got his way on the budget and is now locked in a death-cage match with the Legislature on a property-tax cap at 2.5%. The Gov in NJ has a lot of power and he's promised to call the Leg back into session every day until the pass what he wants. Watch this guy: he's the most articulate conservative to emerge at the state level in years.

  2. DHH:

    We will be watching carefully!



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