COVERITLIVE.COM

10:03

michael smolens - Good morning. Much going on these days with, finally, a state budget agreement that will raise your taxes and a federal budget that President Obama hopes will help right the economy, among other things. If you have any questions or comments on these or other issues, fire away.

10:04

SignOnLiveChatModerator - Michael, welcome. We're glad to have you join us today. What is President Obama expected to talk about tonight in his address to Congress?

10:08

michael smolens - This speech probably will sound and feel like a State of the Union address, but technically, it isn't one because a new president doesn't give one, having been just elected. But all first-year presidents give a similar address.
Obama is expected to talk about his budget plans along with the broader economic problems facing the country. No doubt he will also discuss foreign affairs. But the economy is the big thing and in additioin to all the other moves he's making -- stimulus, bank bailout, mortgage relieve etc. -- his aides said yesterday he will focus on health care reform, which they believe is really the biggest long-term threat to the financial stability of the country.

10:09

SignOnLiveChatModerator - Michael, I'm not an economist and I know you aren't either, but it seems to me the state budget's combination of cuts and tax increases will hurt the economy by taking money out of it. Did the legislature add any stimulus provisions to the budget, and if so what were they?

10:15

michael smolens - There were some stimulus provisions in the way of tax breaks for corporations, small businesses and the film industry in particular. The idea is the tax cuts would help them preserve and create jobs, and possibly persuade them from moving out of state if they are thinking about doing that. As always with these things, there's great debate about whether the tax cuts will have the desired effect, or are just a sop to special interests.
The real stimulus will come from unlocking billions of dollars for public works projects, mostly for transportation, that had been held up because of the budget stalemate.
But clearly everything will cost more (because of the sales tax increase) and people will be paying more in income taxes. So that can have a dampening effect on spending, and thus hurt the economy. The flip side is if they closed the $42 billion deficit entirely through cuts, such huge spending reductions would have had a devastating impact on the state's economy.

10:20

SignOnLiveChatModerator - Michael, I've read that the income tax has gone up, but I don't know what that means for my paycheck. How can people find out how much will be withheld from their paychecks?

10:23

michael smolens -

The dust probably needs to settle a bit, but at some point you could ask your employer about the withholding change. They're going to have to do it, so they should know how it will work soon, if they don't already. I'm not sure about this, but I imagine that if you went to the state Department of Finance Web site or visited the site of a state tax organization, such as Cal-Tax, they would have more detail on how that will work. I'm not sure when the withholding kicks in.

10:29

SignOnLiveChatModerator -

To pass the budget, the Democrats agreed to hold a referendum to allow open primaries. In your opinion, how will the public respond? Some have said this could, if passed, have a sweeping impact on state politics.

10:33

michael smolens - We'll have to see what the public mood is when the open primary measure is on the ballot in June 2010. But right now I think the public is so fed up with the extreme partisan divisions in Sacramento -- and the ill effect that has had on how the state is run -- that they would give anything a try that might change the equation, which supporters say an open primary will do. But there will likely be a well-financed campaign against it by the political parties. An open primary measure on the 2004 ballot was defeated.
But while the promise that the open primary will bring in a nonpartisan atmosphere is probably a stretch, the notion that it could lead to more political moderates getting elected is credible.

10:37

[Comment From bfd]
sorry michael, political "moderates" are the last thing we need in sacramento right now. the state is looking at a massive taxpayer revolt, along the lines of jarvis.

10:42

michael smolens -

Whether or not that's what we need in Sacramento isn't what I was talking about. That's likely the result of an open primary system for good or ill, at least according to those who have studied the thing. But we won't know until we have one.
As for an anti-tax revolt, could be. Potential ballot measures to cut taxes and block higher ones are always potentent.

10:42

[Comment From bfd]
to say "huge spending reductions would have a devastating impact on the state's economy" is like saying going into rehab will have a devastating impact on your drug use problem. of course it will. that's the point.

10:47

michael smolens -

You don't think cutting $42 billion would hurt? Maybe, as in rehab, some folks think that's a good thing. But it likely would affect things we all use, such as highways etc. And maybe, as some think, that's what we need to get the budget straigntened out. But whether or not they should have cut $42 billion, that's such a big figure it wouldn't just affect somebody else.

10:47

SignOnLiveChatModerator - Michael, President Obama has passed a stimulus bill worth almost $800 billion. His treasury secretary hasn't gone into details but outlined a program to help banks. Some have said that saving our banking system could cost trillions. Given this amount of spending, how can Obama promise to cut the deficit in half by 2012?

10:50

michael smolens - That made me chuckle. He can promise, but can he deliver? We'll see. One thing to keep in mind is that a lot of the spending -- the stimulus spending, for instance -- will have run its course by the end of his term. So that will take a chunk out of the budget deficit. It won't really do anything for the federal debt, but that's another matter. Regardless, the point of your question is something we're all thinking: can this really happen?

10:50

[Comment From bfd]
i inferred from your comments - particularly your choice of the word "devastating" - that you were suggesting that huge spending reductions would be a bad thing. not necessarily. devastating to whom, devastating on what? our tax burden is devastating. if holding the line on spending is what it takes to send a message to sacramento then that is what taxpaying individuals and businesses are going to do.

10:52

michael smolens - My point was really that, like big tax increases, big spending cuts have consequences. That's all.

10:52

[Comment From Jodi]
Obama will have no other way to make an impact in the deficit other then the raise taxes and reinstate the estate tax.

10:52

[Comment From Jodi]
What is your view of the newspaper industry and how can we save it

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