Patterico's Pontifications

5/14/2009

If the Feds Had to Play By Their Own Rules

Filed under: General — Patterico @ 6:50 am



At “Not the L.A. Times,” funnyman Roy Rivenburg reports:

Beleaguered General Motors took revenge on the Obama Administration today, surprising White House officials with a legal maneuver that forced the entire U.S. government into bankruptcy court.

“Nobody is too big to fail,” GM boss Fritz Henderson said, citing the nation’s trillion-dollar deficit, pork barrel spending and bloated Social Security retirement system. “We can’t ask taxpayers to continue bailing out such a mismanaged bureaucracy.”

You think Rivenburg is joking? Well, he is . . . but that doesn’t mean he’s wrong. Sometimes he’s eerily prescient. Last July, Rivenburg posted this satirical item discussing Gov. Schwarzenegger’s plans to sell San Diego as part of a plan to address the state’s deficit. Yesterday, the real L.A. Times reported that the Governor is proposing to sell a group of California real estate holdings, including the L.A. Coliseum, San Quentin, and the Del Mar Fairgrounds in San Diego County. For reals.

23 Responses to “If the Feds Had to Play By Their Own Rules”

  1. That’s absolutely brilliant! Sell some of the most prized real estate the state has, near the bottom of the market.

    Brother Bradley J. Fikes, C.O.R. (0ea407)

  2. Ohhh, what’s the opening bid for the Presido?

    Techie (9c008e)

  3. Why not Bro Brad? It’s free money for the State. That property will be taken back through eminent-domain as soon as the government decides it needs more money. Then they can sell it again to the next sucker while promising, “You’ll get to keep it this time, really…”

    Stashiu3 (460dc1)

  4. Too true, Stashiu3.
    California’s fiscal dysfunction has come home to roost, in a perpetually irresponsible Legislature and an enabling governor. I wonder if they’re counting on The Precious to bail them out.

    Brother Bradley J. Fikes, C.O.R. (0ea407)

  5. The Presidio, in San Francisco, was Federal Property, that has been turned over to a City non-profit trust IMS. Fortunately, the State of CA can’t touch it, but they do own the Cow Palace.

    Bro. Bradley, this is just a mechanism (selling at the bottom of a market) that re-inforces economic discipline against a foolish consumer (CA), that refused to alter its’ outlandish behavior when times were good (despite numerous warnings that the party couldn’t continue), and now must suffer the consequences of that foolishness.

    Plus, as a libertarian, I would think that you would be in favor of all levels of government shedding the real property that they have locked up, so that more productive uses could be implemented and/or greater protection for it put in place by owners who have “skin in the game”.
    Plus, once private owners are in place, property taxes will result, and these venues will become tax generators, instead of tax consumers.

    AD - RtR/OS! (be40b1)

  6. AD – RtR/OS!,
    Yes, as a Libertarian I would like more privatization. But this is a bad way to do it. Selling near the bottom of the market, when everyone knows the state is in a fiscal emergency, is the worst way to raise money. It’s a bad deal for the taxpayers. And it’s a one-time deal that doesn’t solve the state’s problem of spending more than it takes in.

    I’d rather the state cut spending and balanced its budget first, then put the properties out for sale in an orderly process.

    Brother Bradley J. Fikes, C.O.R. (0ea407)

  7. True that…What this does smell of is a form of the “Washington Monument” ploy.
    Arnold already threatened us with fewer public-safety employees, and releasing cons onto the streets,
    and he’s pretty well had his head handed to him on those topics;
    so now, we get the “I’ll be forced to sell all of this valuable property at fire-sale prices, whoa-is-us” crap!

    AD - RtR/OS! (be40b1)

  8. “. . .selling near the bottom of the market”

    And you know we’re at the bottom of the market . . . how?

    Official Internet Data Office (d07e83)

  9. Comment by Official Internet Data Office — 5/14/2009 @ 7:47 am

    That’s a good question re commercial RE.
    There has been a lot of discussion lately that commercial RE will possibly take a big hit later in the year as some large bond issues come up for renewal, or some such.
    Of course, the current vacancy factor can’t be too good for values either.

    AD - RtR/OS! (be40b1)

  10. OIDO,
    I said we’re “near” the bottom, not “at” the bottom. There is a difference.

    I based my statement on the fall of real estate prices from their bubble peak, roughly 50 percent in the most bubble-hit areas. That is close to being in line with pre-bubble trends.

    Of course, we could overshoot the correction on the way down. And I think prices will stagnate for a few years. But from everything I’ve read, we’re a lot closer to the bottom than to the top.

    Brother Bradley J. Fikes, C.O.R. (0ea407)

  11. “Sell some of the most prized real estate the state has, near the bottom of the market.”

    I’m sure San Diego County could really swing a nice deal for the Del Mar Fairgrounds if the state is in fire sale mode. And SD County is arguably in considerably better financial shape than CA is.

    Brad S (9f6740)

  12. I’ll revise my statement, since CRE is the real issue. I think that could fall a lot more, since it has been later in taking the hit that residential real estate has taken. This guy influences my thinking a lot.

    I still think it’s a bad idea for the state to sell now, into a down market. If California had the will to balance its budget, it would be in a stronger position to negotiate a higher price for its property, and could sell at a more deliberate pace. Again, my main concern is that the state is looking for yet another one-time fix without tackling its spending problem.

    Brother Bradley J. Fikes, C.O.R. (0ea407)

  13. “. . .selling near the bottom of the market”

    In Detroit, and a few other places, there are some residential properties with negative value. Not negative equity, but negative value. The tax bill and/or the mandatory repairs are more than the asking price of the house. So, if real estate can also be worth less than zero, how do we tell when a bottom is in place?

    Official Internet Data Office (d07e83)

  14. “…If California had the will…”

    Ah, that’s it, isn’t it?
    “Will”!
    They don’t, and without a complete house-cleaning in Sacramento (and at other levels), they never will.
    So, it seems that there is no “appropriate” time;
    So, might as well be now!
    It’s not like we’re stock-holders in the Great California Corp. or anything,
    looking at losing all of the equity in our holding.

    AD - RtR/OS! (be40b1)

  15. So, if real estate can also be worth less than zero, how do we tell when a bottom is in place?

    I never said we were at, the bottom. I said we are a lot nearer the bottom than the top. The actual bottom can only be determined in retrospect.

    The circumstances you pointed out in a few areas are obviously not representative of the real estate market as a whole, nor can they be, unless we have a total economic collapse. And then we’d have much bigger worries than bottom-calling.

    Brother Bradley J. Fikes, C.O.R. (0ea407)

  16. Public employee unions all over the country are fighting any attempt to cut spending on salaries. I wonder how this will impact the taxpayer’s perceptions of a unionized bureaucracy ?

    A study in 2005 by the nonpartisan Employee Benefit Research Institute estimated that the average public-sector worker earned 46% more in salary and benefits than comparable private-sector workers. The gap has only continued to grow. For example, state and local worker pay and benefits rose 3.1% in the last year, compared to 1.9% in the private sector, according to the Bureau of Labor Statistics (BLS).

    But the real power of the public sector is showing through in this economic crisis. Some five million private-sector workers have lost their jobs in the last year alone, and their unemployment rate is above 9% according to the BLS. By contrast, public-sector employment has grown in virtually every month of the recession, and the jobless rate for government workers is a mere 2.8%.

    There may be a reckoning coming. In California, it could be a ballot initiative on public employee salaries. Of course, a judge may do it as part of a default.

    Mike K (2cf494)

  17. Oh, but Mike, the heartless Rethuglicans are trying to starve the poor bureaucrats, and make them work for slave wages.
    It must be true, it was in the WSJ…
    http://online.wsj.com/article/SB124217531980213261.html#mod=djemEditorialPage

    AD - RtR/OS! (be40b1)

  18. What CA ought to do is not only void the union contracts, they need to slash the per diem and perks of the legislators and executives.

    No new cars, especially luxury cars. No chauffers or bodyguards. No meals in sit down restaurant, other than places like Denny’s and Norm’s.

    After that, look at taking a chainsaw to the bureaucracy. I would say a good 2/3rd could be done without.

    PCD (02f8c1)

  19. Only government could think in such a manner.

    This is the same school of thought that thinks the way to correct excessive spending is to spend 4 times as much as the prior excessive spending. As a cure.

    If people ran their household finances the way government does, the entire country would be in Bankruptcy Court.

    JD (1c1e84)

  20. “…in Bankruptcy Court…”
    Comment by JD — 5/14/2009 @ 9:08 am

    Soon, very soon!
    But Hey, we’ll be allowed to restructure just as if we are Chrysler, or not –
    depends on whether or not we can get permission from our local Soviet Acorn office.

    AD - RtR/OS! (be40b1)

  21. If people ran their household finances the way government does, the entire country Fed, Wall Street, and Treasury triumvirate, plus numerous oversight agencies, would be in Bankruptcy Criminal Court.

    Comment by JD — 5/14/2009 @ 9:08 am

    Fixed, with your permission, of course.

    I don’t opine much on the future in order to avoid foolhardy prognostications, but I have read that while real estate per se “may” be near an intermediate bottom, there’s plenty of room for the RE finance segment both residential and commercial to fall much further, particularly in the regions of the world that saw the most flagrant debt creation, or debasement. For the general public the financing side IS real estate. That’s what has been shrinking, but the dirt to a much lesser extent. In other words, what we are experiencing is less of a true deflation [contracting money supply, increasing buying power], and more of a forced liquidation and credit contraction. Subtle distinction perhaps, but there are different economic outcomes depending which one is in force, and eventually determining who wins and who loses.

    allan (eaf412)

  22. If people ran their household finances the way government does, the entire country would be in Bankruptcy Court

    JD, Obama is acting in precisely the same manner that he and Michelle conducted regarding their personal finances. First they took out a huge loan on their condo, then shortly after that took out a home equity loan. Then they rolled everything over into the loan for their house, and then once again took out a large home equity loan on THAT property. They probably think all of these kinds of machinations are quite normal.

    Dmac (1ddf7e)


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