America's IOU to California: one political overhaul



Is California too big to fail? With taxpayers on the hook for the bailout of spectacular failures such as the insurance giant AIG and car maker General Motors, why shouldn't Washington save the Golden State? Politicians from California's state capital in Sacramento have already been to Washington, hat in hand. In June, a delegation of them persuaded top federal officials, starting with Timothy Geithner, the US Treasury secretary, to consider a rescue plan should the state go belly up.

Well, this California native would thank the feds to keep their dole to themselves. In a country that insists on co-mingling "values" with policy, it is time to restore accountability and restraint as the core of democratic capitalism. California, the late, great frontier of libertarian virtue, is an appropriate place for it. The stakes could not be higher. California's GDP, at US$1.7 trillion (Dh6.24tn), not only accounts for 12 per cent of the US national output, it ranks as the eighth-largest worldwide. Yet for all its vast resources - the state leads the nation, if not the world, in agriculture, defence contracting, computer software, media and tourism - California has accumulated a $24 billion deficit that its gridlocked legislature has failed to reconcile.

Last week, Arnold Schwarzenegger, the governor, announced the state would be forced to issue IOUs to cover outstanding debts that could swell to $4.8bn by August if politicians cannot reach a budget agreement by then. California, which has the worst credit rating of any state in the country and has already accumulated nearly $60bn worth of municipal bonds, refuses to cover revenue gaps by taking on more debt. Such restraint is encouraging, but it comes late in the process and means little without significant spending cuts. Martin Weiss, an analyst at Weiss Research - best known for having forecast the demise of Bear Stearns and Lehman Brothers last year - said last month the prospect of a default was "unavoidable".

This is not the first time Sacramento has found itself on the brink of insolvency, however. The economy was hit hard by the collapse of the dot-com bubble and the defence sector's post-Cold War contraction, only to revive itself. Any state that can coexist with frequent onslaughts of fires, mudslides, earthquakes and religious cults can survive its current financial reckoning, assuming politicians are willing to roll up their sleeves and reform one of the most dysfunctional political regimes in the free world.

California, to paraphrase Rick Blaine in Casablanca, is just like the rest of America, only more so. It is gluttonous; in the past five years alone, its budget has expanded by nearly 50 per cent, to $145bn. Its politics are more partisan, owing to a district representation system that entrenches incumbents and dissuades them from working with ideological rivals. Republicans and Democrats, as a result, habitually vote in opposition to one another on tax and spending bills. To make matters worse, California requires a two-thirds majority to pass its annual budget, one of only three US states to do so.

Another burden on Sacramento is its chaotic "ballot box budgeting" system, which allows voters to support single interest programmes, from stem cell research to health and education issues, without identifying how they will be funded. The most notorious of these measures - Proposition 17, which became law in 1978 - gutted the state's revenue base by slashing property taxes, a move some analysts blame for much of the state's chronic funding gaps.

Unlike its bush fires and floods, California's legislative process is a man-made disaster that can be corrected given the proper incentive - namely, the fear that Washington will refuse to come to its rescue. To do otherwise would hasten the final chapter of a state that once embodied that antique American quality of rugged individualism. Beginning in the 19th century, California became an El Dorado of the human spirit, a destination for innovators unafraid to fail. It lured moguls, thinkers, scoundrels and adventurers from everywhere. Levi Strauss created a clothing empire out of the state's legendary gold rush of 1849. William Randolph Hearst, the publisher, migrated from New York to San Francisco, where for a generation he dangled the fortunes of politicians, industrialists and warlords over the bonfire of his ambition. Amadeo Giannini, an Italian immigrant, built what would become the Bank of America by accepting handshakes as security against loans he wrote for victims of the 1906 San Francisco earthquake.

Like all visionaries, men such as Strauss, Hearst and Giannini wanted the government out of their affairs when business was good - and they accepted their fate when things went south. So where do young entrepreneurs go today if they are willing to work without a net? Certainly not the US, where it appears no act of commercial malpractice is so severe it cannot be preserved with a drip feed of public funds. Hong Kong? Zagreb? The overweening dole has left us with few markets where it is OK to fail.

sglain@thenational.ae

UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
Milestones on the road to union

1970

October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar. 

December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.

1971

March 1:  Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.

July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.

July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.

August 6:  The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.

August 15: Bahrain becomes independent.

September 3: Qatar becomes independent.

November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.

November 29:  At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.

November 30: Despite  a power sharing agreement, Tehran takes full control of Abu Musa. 

November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties

December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.

December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.

December 9: UAE joins the United Nations.

How do Sim card scams work?

Sim swap frauds are a form of identity theft.

They involve criminals conning mobile phone operators into issuing them with replacement Sim cards by claiming to be the victim, often pretending their phone has been lost or stolen in order to secure a new Sim.

They use the victim's personal details - obtained through criminal methods - to convince such companies of their identity.

The criminal can then access any online service that requires security codes to be sent to a user's mobile phone, such as banking services.

Dengue fever symptoms
  • High fever
  • Intense pain behind your eyes
  • Severe headache
  • Muscle and joint pains
  • Nausea
  • Vomiting
  • Swollen glands
  • Rash

If symptoms occur, they usually last for two-seven days

Essentials

The flights
Emirates, Etihad and Malaysia Airlines all fly direct from the UAE to Kuala Lumpur and on to Penang from about Dh2,300 return, including taxes. 
 

Where to stay
In Kuala Lumpur, Element is a recently opened, futuristic hotel high up in a Norman Foster-designed skyscraper. Rooms cost from Dh400 per night, including taxes. Hotel Stripes, also in KL, is a great value design hotel, with an infinity rooftop pool. Rooms cost from Dh310, including taxes. 


In Penang, Ren i Tang is a boutique b&b in what was once an ancient Chinese Medicine Hall in the centre of Little India. Rooms cost from Dh220, including taxes.
23 Love Lane in Penang is a luxury boutique heritage hotel in a converted mansion, with private tropical gardens. Rooms cost from Dh400, including taxes. 
In Langkawi, Temple Tree is a unique architectural villa hotel consisting of antique houses from all across Malaysia. Rooms cost from Dh350, including taxes.

COMPANY PROFILE

Company name: Klipit

Started: 2022

Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant

Based: Dubai, UAE

Industry: Digital receipts, finance, blockchain

Funding: $4 million

Investors: Privately/self-funded

The bio

Date of Birth: April 25, 1993
Place of Birth: Dubai, UAE
Marital Status: Single
School: Al Sufouh in Jumeirah, Dubai
University: Emirates Airline National Cadet Programme and Hamdan University
Job Title: Pilot, First Officer
Number of hours flying in a Boeing 777: 1,200
Number of flights: Approximately 300
Hobbies: Exercising
Nicest destination: Milan, New Zealand, Seattle for shopping
Least nice destination: Kabul, but someone has to do it. It’s not scary but at least you can tick the box that you’ve been
Favourite place to visit: Dubai, there’s no place like home

WORLD RECORD FEES FOR GOALKEEPERS

1) Kepa Arrizabalaga, Athletic Bilbao to Chelsea (£72m)

2) Alisson, Roma to Liverpool (£67m)

3) Ederson, Benfica to Manchester City (£35m)

4) Gianluigi Buffon, Parma to Juventus (£33m)

5) Angelo Peruzzi, Inter Milan to Lazio (£15.7m

MATCH INFO

Uefa Champions League semi-finals, first leg
Liverpool v Roma

When: April 24, 10.45pm kick-off (UAE)
Where: Anfield, Liverpool
Live: BeIN Sports HD
Second leg: May 2, Stadio Olimpico, Rome

Company Profile

Name: HyveGeo
Started: 2023
Founders: Abdulaziz bin Redha, Dr Samsurin Welch, Eva Morales and Dr Harjit Singh
Based: Cambridge and Dubai
Number of employees: 8
Industry: Sustainability & Environment
Funding: $200,000 plus undisclosed grant
Investors: Venture capital and government

A QUIET PLACE

Starring: Lupita Nyong'o, Joseph Quinn, Djimon Hounsou

Director: Michael Sarnoski

Rating: 4/5

Kill

Director: Nikhil Nagesh Bhat

Starring: Lakshya, Tanya Maniktala, Ashish Vidyarthi, Harsh Chhaya, Raghav Juyal

Rating: 4.5/5

MATCH INFO

Jersey 147 (20 overs) 

UAE 112 (19.2 overs)

Jersey win by 35 runs

The specs

Engine: Single front-axle electric motor
Power: 218hp
Torque: 330Nm
Transmission: Single-speed automatic
Max touring range: 402km (claimed)
Price: From Dh215,000 (estimate)
On sale: September

COMPANY PROFILE

Company name: Revibe
Started: 2022
Founders: Hamza Iraqui and Abdessamad Ben Zakour
Based: UAE
Industry: Refurbished electronics
Funds raised so far: $10m
Investors: Flat6Labs, Resonance and various others

Result

Tottenhan Hotspur 2 Roma 3
Tottenham: Winks 87', Janssen 90+1'

Roma 3
D Perotti 13' (pen), C Under 70', M Tumminello 90+2"

Graduated from the American University of Sharjah

She is the eldest of three brothers and two sisters

Has helped solve 15 cases of electric shocks

Enjoys travelling, reading and horse riding

 

Profile box

Company name: baraka
Started: July 2020
Founders: Feras Jalbout and Kunal Taneja
Based: Dubai and Bahrain
Sector: FinTech
Initial investment: $150,000
Current staff: 12
Stage: Pre-seed capital raising of $1 million
Investors: Class 5 Global, FJ Labs, IMO Ventures, The Community Fund, VentureSouq, Fox Ventures, Dr Abdulla Elyas (private investment)

The specs: 2024 Mercedes E200

Engine: 2.0-litre four-cyl turbo + mild hybrid
Power: 204hp at 5,800rpm +23hp hybrid boost
Torque: 320Nm at 1,800rpm +205Nm hybrid boost
Transmission: 9-speed auto
Fuel consumption: 7.3L/100km
On sale: November/December
Price: From Dh205,000 (estimate)

Brief scoreline:

Al Wahda 2

Al Menhali 27', Tagliabue 79'

Al Nassr 3

Hamdallah 41', Giuliano 45+1', 62'

The Library: A Catalogue of Wonders
Stuart Kells, Counterpoint Press

Results

1. Lewis Hamilton (Mercedes) 1hr 32mins 03.897sec

2. Max Verstappen (Red Bull-Honda) at 0.745s

3. Valtteri Bottas (Mercedes) 37.383s

4. Lando Norris (McLaren) 46.466s

5.Sergio Perez (Red Bull-Honda) 52.047s

6. Charles Leclerc (Ferrari) 59.090s

7. Daniel Ricciardo (McLaren) 1:06.004

8. Carlos Sainz Jr (Ferrari) 1:07.100

9. Yuki Tsunoda (AlphaTauri-Honda) 1:25.692

10. Lance Stroll (Aston Martin-Mercedes) 1:26.713,