Austerity Watch 3.24.11 — UK, California, New York

Austerity Watch Daily covers critical news about national sovereign debt,  Credit Default Swaps, state and municipal deficit actions, and discussions about the US deficit and debt.

States — Call it “pass the buck” or “kick the can.”   One of the most basic of human emotions is to pass one’s problems onto someone else.   The same holds true, unfortunately, for fiscal policy.  The New York Times reported today that states are increasingly passing their fiscal problems to cities. “The state budget squeeze is fast becoming a city budget squeeze, as struggling states around the nation plan deep cuts in aid to cities and local governments that will almost certainly result in more service cuts, layoffs and local tax increases,” the paper says.

California — Most Americans want to have their cake and eat it to when it comes to fiscal policy.   They favor low taxes and no cuts in government services.  Of course, that’s impossible to do, especially in a cash-strapped state such as California.   Support for Governor Jerry Brown’s plan for a special election to temporarily extend tax and fee hikes has dropped significantly among the state’s residents, according to a survey of 2,00o residents released Wednesday by the Public Policy Institute of California. Brown’s approval rating has also dropped.

“Even if the election happens, support also has declined for the five-year extension of income, sales and car taxes voters would be asked to approve: Only 46 percent of all adults and likely voters now support that plan, a decline since January of seven points among all adults, and eight points among likely voters,” according to The Oakland Tribune.

New York —  State Police arrested 33 protesters outside the office of Gov. Andrew Cuomo as the state gears up for its most acrimonious budget battle in recent years.   “The protesters were led by faculty and students from the City University of New York, which faces a 10-percent cut in funding under Cuomo’s proposed budget,” The Associated Press says. “The five busloads of demonstrators drew parallels to the fight for fundamental union rights under assault in Wisconsin’s statehouse in Madison.”

The CUNY representatives are not the only ones with a bone to pick with Cuomo.   His budget proposed in February seeks to close a $10 billion shortfall, one of the largest in the state’s history, and includes plans to slash state aid, close prisons and slash as many as 9,800 state jobs.

U.K. — Yesterday, Chancellor of the Exchequer George Osborne promised that the government’s budget would protect the country’s Middle Class and reduce the deficit.  As the Financial Times notes, that’s going to be tough to pull off.   For one thing, Fitch Ratings argues that a weaker-than-expected U.K. recovery would imperil the country’s AAA debt rating.  More austerity may be needed even if its politically unpalatable.

–Jonathan Berr