Endless Obama deficits threaten dollar’s power

The bad news is that President Barack Obama is keeping his campaign promises to raise taxes on upper-income families, borrow and spend, bail out car firms and take control of healthcare.

The good news is that President Obama is not keeping all his campaign promises. There has been no precipitous withdrawal from Iraq, Guantanamo is likely to remain the home of terrorists for some time, the promised “trans- parency” is not so all-encompassing as to include pictures of the treatment accorded the bad guys we captured, and we have not lurched into protectionism.

By Irwin Stelzer
The Times, London

Recall that during his run for the White House, Obama opposed the trade agreements with South Korea and Colombia, accused the Bush administration of failing to deal with China’s “manipulation” of its currency and threatened to use “the hammer of a potential opt-out” to force Mexico and Canada to renegotiate the North American Free Trade Agreement (Nafta).

Campaigning is one thing; governing is another. “Obama is subject to the same geopolitical imperatives as was President Bush,” said Rod Hunter, who served as Bush’s senior director of the National Security Council and is now a colleague of mine at the Hudson Institute, a Washington think tank. It is one thing to throw raw meat to the trade-union lions during a campaign but quite another to antagonise Canada, which has troops in Afghanistan alongside our own; Mexico, an ally in the war on drugs and potential source of oil; South Korea, important to our efforts to contain its northern neighbour; and other countries.
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So we have the new Obama. Nafta stays as it is; Treasury secretary Tim Geithner has retreated from his charge that China manipulates its currency; and the president has announced “a plan of action” to obtain congressional approval for pending free-trade agreements with Panama and South Korea, and is in discussions with Colombia’s Alvaro Uribe about getting the agreement with his country through a reluctant Congress. Obama has found he also favours “a strong market-opening agreement for agriculture, industrial goods and services through the Doha round \ and through other negotiations”.

Add to that the repeated statements by the president’s US trade representative Ron Kirk, who has been telling relieved business audiences that trade plays “an important role . . . in creating and sustaining better-paying jobs here at home”. Specifically, Kirk wants to expand trade with the Asia-Pacific region because “there is an extraordinary upside to us” in doing so.

“It is reassuring that Obama’s trade agenda appears to be aligning with those of presidents Bush and Clinton — and to their nine predecessors — rather than to the protectionist positions he took on the campaign trail,” commented Theodore Kassinger, former deputy commerce secretary and now a lawyer with O’Melveny & Myers in Washington.

But before awarding the president the Adam Smith Award For Combating Protectionism, consider this. Obama’s first priority is his domestic agenda: “reform” healthcare, restructure the energy industries, involve the federal government more deeply in education, fight the recession, save the carmakers, control bankers’ bonuses, revise the rules that govern the financial sector, and win what is now his war in Afghanistan. Trade is lower down on the list.

Worse still, there are signs that the president is willing to allow the state politicians in charge of disbursing stimulus funds to adopt “buy American” practices, even though his stimulus bill restricts such practices to those that do not violate our trade agreements or World Trade Organisation (WTO) rules. Local politicians know that WTO bureaucrats don’t vote in their states.

There are also subtle indications that the president will not fight to prevent protectionist measures from creeping into unrelated legislation. Banks receiving bailout money are chafing under rules that prevent them from hiring talented foreign workers. Jamie Dimon, chief executive of JP Morgan Chase, used the company’s annual meeting to denounce these restrictions as a “complete and utter disgrace” that will inevitably invite retaliation against Americans hoping to work abroad.

And Toyota and other foreign firms that make cars here — American jobs for American workers — are in effect discriminated against by the government’s decision to keep GM and Chrysler from meeting the fate to which a free market would consign them.

Nothing Obama will do on trade, either to free up the flow of goods and services, or to tip the scales in favour of American firms, will in the end matter as much as his reckless fiscal policy.

His budgets project deficits close to $10 trillion by 2019 — and that assumes his healthcare plan will cost only the $635 billion “down-payment” he has put in his budget, rather than the $1.2 trillion experts predict, and that he will succeed in almost freezing defence spending.

That means the US Treasury will be peddling billions of IOUs to investors such as China that already have trillions of this paper in their vaults. So far, so good: the recession-induced flight from risk has led overseas investors to seek a haven in dollar assets. But as the printing presses keep running, and the recession eases, investors will find the risk of being paid in dollars that have shrivelled in value too much to bear.

Which is why the dollar hit its lowest level of the year last week and why for a while it cost less to buy insurance against a default by hamburger-seller McDonald’s than against a default by the world’s only superpower. More important, it is why China and Brazil are trying to cobble together a trade deal that will allow them to bypass the dollar completely and pay in their own currencies. This might well be the first step in China’s announced intention to develop a currency to compete with the dollar as the world’s reserve currency.

So, only two cheers for Obama, less of a protectionist than expected, but nevertheless a serious threat to the dominance of the dollar in world trade.

Obama Wants Supreme Court Nominee to Have “Common Touch” Like Joe Biden, Nancy Pelosi….

Never mind that a “common touch” could have 300 million differing definitions from our 300 million Americans.

President Barack Obama has decided he wants a “common touch” in his appointee for the Supreme Court.

Talk about non-sense news.

What if the president had said he wanted “a fine legal mind.”  Check.  A ” fair minded litigator.”  Check.  In fact, there is everything about a “common touch” and nothing at all.

Your Granny would say about a “common touch,” “Oh  you know what we mean.”

Which means it is meaningless, really.  A figment of someone’s imagination.

Many would say Joe Biden has a “common touch.”  In fact, that’s exactly what the Washington Examiner says about him this Sunday.

How about “he says stupid stuff but he has a common touch.”  Check.

Or “he has been a United States Senator virtually all his entire adult life except for when he became Vice President but he has a common touch.”  Check.

How “common” is that?

We’ve heard people say that Nancy Pelosi has “a common touch.”  We’ve often thought maybe she’s just a little touched in the head, which has a lot more specific meaning than “common touch.”

“Common touch,” like “empathy,” is kind of a non-descriptive descriptor from the President honored for his eloquence.

As Senator Jon Kyle (R-AZ) said on Fox News Sunday, “I don’t want a Supreme Court judge that makes decisions on emotion or preconceived ideas.  If the law is on the side of the little guy, the little guy wins.  If the law is on the side of the big guy, the big guy wins.”

That we can all understand…

Kyle

CNN on Obama’s “Common Touch”
http://www.cnn.com/2009/POLITICS/0
5/23/supreme.court.obama/index.h
tml?section=cnn_latest
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By Bob Kemper
The Washington Examiner

For Joe Biden, gab is no gift. America’s garrulous vice president has a long record of verbal gaffes and a knack for saying exactly the wrong thing at the wrong time. Indeed, his flapping tongue has cost him dearly.

Biden sank his own bid for the presidency in 1988 with a series of inflated claims about his academic credentials and a partially plagiarized speech. Twenty years later, on the day he joined the 2008 presidential race, he eclipsed the news of his own candidacy and reinforced the notion that he represented the political past by describing a black challenger named Barack Obama as “clean.”

Read the rest:
http://www.washingtonexaminer.com/po
litics/Joe-Biden-The-Mouth-That-Roar
s-45776782.html

http://hotair.com/archives/2009
/05/23/quote-of-the-day-503/

More federal funding for ACORN despite indictments

Under the guise of due process concerns, congressional Democrats have opened the way for organizations with criminal histories to gain greater access to taxpayer funds. Exhibit A here is the Association of Community Organizers for Reform Now (ACORN), now under investigation in at least 14 states for voter registration fraud.

Earlier this month, House Financial Services Committee Chairman Rep. Barney Frank, D-MA, sponsored an amendment to the $140 million Mortgage Reform and Anti-Predatory Lending Act. The Frank measure allowed organizations being investigated by state or federal authorities on corruption charges to receive federal funds as long as they avoid conviction. Frank argued that his amendment, which was approved by the House, protected the presumption of innocence in federal spending.

But federal ethics rules have long stipulated that either an actual or apparent conflict of interest can put a government employee at risk of prosecution for ethics violations.  So, if the Frank amendment becomes law, the federal government will have a double standard, ignoring the presumption of innocence for its employees with apparent conflicts of interest, but extending the presumption to its funding recipients.

ACORN claims to be non-partisan, but it and its many affiliates have ardently supported Democratic incumbents and candidates at all levels of government.

Read the rest from the Washington Examiner:
http://www.washingtonexaminer.com/opin
ion/More-ACORN-funding-despite-indictm
ents-45954362.html

California budget crisis could bring lasting economic harm

The short-term pain of budget cuts could pale next to a long-term loss of companies and academic talent.

By Martin Zimmerman, Marc Lifsher and Andrea Chang
Los Angeles Times
May 23, 2009

As bad as California’s budget crisis is for the state’s $1.8-trillion economy, just wait. It could get worse.

The spectacle that played out in the national media this week of a state unable to get its fiscal act together is reinforcing the notion that the Golden State is a rotten place to do business, experts say.
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Corporate leaders and Wall Street investors, watching the daily festival of seeming incompetence, political partisanship and governmental dysfunction, could be persuaded to limit or eliminate their investments here.

“We lose competitive advantage by being the state that can’t solve its problems,” economist Stephen Levy said. “Regardless of what we think the solution is, the fact is we can’t find a solution.”

The budget crisis threatens to further weaken the state’s job market, which lost 63,700 more jobs last month, according to figures released Friday. The state’s overall unemployment rate actually fell slightly, to 11% from 11.2%. But new job losses could prolong the vicious cycle in which the California economy is now trapped, with rising joblessness reducing consumer spending and delaying a housing rebound, thus leading to more layoffs.

Read the rest:
http://www.latimes.com/business/la-f
i-cal-econ23-2009may23,0,1242793.story

Statism the only thing being stimulated

We’re spending trillions we don’t have to create government programs to spend even more trillions we don’t have.

By Mark Steyn
OC Register

was in Vermont the other day and made the mistake of picking up the local paper. Impressively, it contained a quarter-page ad, a rare sight these days. The rest of the page was made up by in-house promotions for the advertising department’s special offer on yard-sale announcements, etc. But the one real advertisement was from something called SEVCA. SEVCA is a “nonprofit agency,” just like The New York Times, General Motors and the state of California. And it stands for “South-Eastern Vermont Community Action.”

Why, they’re “community organizers,” just like the president! The designated “anti-poverty agency” is taking out quarter-page ads in every local paper because they’re “seeking applicants for several positions funded in full or part by the American Recovery & Reinvestment Act (ARRA)” – that’s the “stimulus” to you and me. Isn’t it great to see those bazillions of stimulus dollars already out there stimulating the economy? Creating lots of new jobs at SEVCA, in order to fulfill the president’s promise to “create or keep” 2.5 million jobs. At SEVCA, he’s not just keeping all the existing ones, but creating new ones, too. Of the eight new positions advertised, the first is:

“ARRA Projects Coordinator.”

Gotcha. So the first new job created by the stimulus is a job “coordinating” other programs funded by the stimulus. What’s next?

“Grantwriter.”

That’s how they spell it. Like in “Star Wars” – Luke Grantwriter waving his hope saber as instructed by his mentor Obi-Bam Baracki (“May the Funds be with you!”). The Grantwriter will be responsible for writing grant applications “to augment ARRA funds.” So the second new job created by stimulus funding funds someone to petition for additional funding for projects funded by the stimulus.

The third job is a “Marketing Specialist” to increase “public awareness of ARRA-funded services.” Rural Vermont’s economy is set for a serious big-time boom: The critical stimulus-promotion industry, stimulus-coordination industry and stimulus-supplementary-funding industry are growing at an unprecedented rate. The way things are going we’ll soon need a Stimulus-Coordination Industry Task Force and Impact Study Group. By the way, these jobs aren’t for everyone. “Knowledge of ARRA” is required. So if, say, you’re the average United States senator who voted for ARRA without bothering to read it you’re not qualified for a job as an ARRA Grantwriter.

I don’t want to give the impression that every job funded by the stimulus is a job coordinating the public awareness of programs for grant applications to coordinate the funding of public awareness coordination programs funded by the stimulus. SEVCA is also advertising for a “Job Readiness Program Coordinator.” This is a job coordinating the program that gets people ready to get a job. For example, it occurred to me, after reading the ad, that I might like to be a “Job Readiness Program Coordinator.” But am I ready for it? Increasing numbers of us are hopelessly unready for jobs. Ever since last November, many Americans have been ready for free health care, free day care, free college, free mortgages – and, once you get a taste for that, it’s hardly surprising you’re not ready for gainful employment. I only hope there are enough qualified “Job Readiness Program Coordinators” out there, and that they don’t have to initiate a Job Readiness Program Coordinator Readiness Program. As the old novelty song once wondered, “Who Takes Care Of The Caretaker’s Daughter While The Caretaker’s Busy Taking Care?” Who coordinates programs for the Job Readiness Program Coordinator while the Job Readiness Program Coordinator’s busy readying for his job? If you hum it, I’ll put in for the stimulus funding.

Read the rest:
http://www.ocregister.com/articles/job-p
rogram-stimulus-2425198-arra-readiness

Obama Says “Were Out of Money”

In a sobering holiday interview with C-SPAN, President Obama boldly told Americans: “We are out of money.”

C-SPAN host Steve Scully broke from a meek Washington press corps with probing questions for the new president.

SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we’ve made on health care so far. This is a consequence of the crisis that we’ve seen and in fact our failure to make some good decisions on health care over the last several decades.

So we’ve got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it’s putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don’t reduce long-term health care inflation substantially, we can’t get control of the deficit.

So, one option is just to do nothing. We say, well, it’s too expensive for us to make some short-term investments in health care. We can’t afford it. We’ve got this big deficit. Let’s just keep the health care system that we’ve got now.

Along that trajectory, we will see health care cost as an overall share of our federal spending grow and grow and grow and grow until essentially it consumes everything…

SCULLY: When you see GM though as “Government Motors,” you’re reaction?

OBAMA: Well, you know – look we are trying to help an auto industry that is going through a combination of bad decision making over many years and an unprecedented crisis or at least a crisis we haven’t seen since the 1930’s. And you know the economy is going to bounce back and we want to get out of the business of helping auto companies as quickly as we can. I have got more enough to do without that. In the same way that I want to get out of the business of helping banks, but we have to make some strategic decisions about strategic industries…

SCULLY: States like California in desperate financial situation, will you be forced to bail out the states?

OBAMA: No. I think that what you’re seeing in states is that anytime you got a severe recession like this, as I said before, their demands on services are higher. So, they are sending more money out. At the same time, they’re bringing less tax revenue in. And that’s a painful adjustment, what we’re going end up seeing is lot of states making very difficult choices there…

SCULLY: William Howard Taft served on the court after his presidency, would you have any interest in being on the Supreme Court?

OBAMA: You know, I am not sure that I could get through Senate confirmation…

From the Drudge Report

Dollar hits new multimonth low vs euro, pound, yen; U.S., Brit long-term credit rating cuts loom?

The dollar kept falling Friday, notching fresh multimonth lows against the euro, pound and yen as a warning that Britain’s debt level may result in its credit rating being cut ricocheted into worries about the massive U.S. deficit.

The 16-nation euro rose to $1.4015 in morning trading from $1.3889 in New York late Thursday—its first time above $1.40 since Jan. 2.

The British pound rose to $1.5916 from $1.5890, peaking at $1.5945 earlier in the session, its highest point since Nov. 6.

Read the rest from the Associated Press:
http://www.breitbart.com/article.php?i
d=D98BCFJO0&show_article=1

Related:
U.S., Britain Both face Lower Debt Credit Ratings

What California, Pelosi, Waxman, Feinstein and Schwarzenegger Can’t Ignore: Except They’ve Already Proven Stupidity

How could California’s politicians turn the land of milk and honey into a candidate for bankruptcy or bailout?

By ignoring industry and wealth creation — just like Barack Obama is now doing on the national level.

So bad decision making jumps to mind.

The only growing “industry” in California is government; followed by health care.  And maybe health care is numero uno, to use the Californian language.

Since he became Governor, Arnold Schwarzenegger’s California has added 50,000 new state employees.  These are highly paid people with full medical care.  It’s kind of a welfare for the white collar.  And what wealth do they add to the state?  You do the math: no products produced, no industry of reality.  But they do tax, collect fees and make laws which contributes to a hemorrhage of wealth producing businesses to Nevada and other locales.
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Sen. Dianne Feinstein said development of solar and wind facilities in California’s Mojave Desert would violate the spirit of what conservationists had intended when they donated much of the land to the public.

My Vietnamese born wife and I drove through the Mojave not long ago and she said, “Worthless burnt rock.”

And that is what it will reamain if Feinstein gets her way.

California’s Congressman Henry Waxman, primary sponsor of the radical cap&trade/national eco-tax bill in the House, like Feinsten and a lot of other Californians, is willing to destroy real wealth producing industry with cap and trade while ignoring something literally beneath California’s feet: oil.

Related:
Wind, Solar Produce only 1% of Electric Needs; Need “Comprehensive Energy Plan”

Last September the San Franciso Chronicle reported this gem:

“Pelosi is holding firm to her view that more drilling won’t have any short-term impact on gas prices and would only lower prices by pennies a gallon 10 years from now, citing government figures. She’s plotting a vote on a bill to rein in speculators in energy markets when Congress returns next month.  Pelosi and other top Democrats see little reason to compromise. They expect to pick up seats in the House and Senate in November – and perhaps the White House, too – which would allow them to craft a more environmentally friendly energy policy next year. In the meantime, they plan to use their fundraising advantage to bash GOP candidates with ads linking them to oil companies.”

So for the short term, gas prices are fine so why drill — that’s what Pelosi said.  And besides, according the Pelosi’s logic, she could get more Democrats elected and obtain a more environmentally friendly energy policy.The problem now is short term and it may become long term (certainly it has already on the national level).  The problem is debt, borrowing, and no creating of wealth.

So screw wealth producing.

You can’t pay health care workers and government workers without someone creating wealth.

California has a shortage of people who create wealth: Hollywood just can’t keep up.

Yesterday, Nancy Pelosi, who has never said anything rediculously stupid, called climate change “the greatest challenge of our day.”  She said climate change is a national security, economic, environmental health and moral issue.

Here’s a national security challenge: China owns most of the American debt and will just watch us spend ourselves out of the superpower seat.  But we’ll be greener than China!  Congratulations.

Related:
China says rich nations must cut emissions by 40%; offers no Chinese cuts

California  has a pack of politicians that are thinking green and thinking us into more debt.  They had better think green like green money soon or they’ll be out of both.

They are currently working on how to slash expenses and con the Federal Government out of a bailout.  Nowhere have we heard about planning to create more wealth.

Green, gay and gutless.  We could pray for more wealth producing businesses but the state has chased them off — and prayer is frowned upon.

http://michellemalkin.com/2009/05/21/
waxman-clueless-about-his-captrade-bi
ll-youre-asking-me/

Related:

Obama Hasn’t Noticed People Leaving California and New York?

Obama, Pelosi, Waxman, Feinstein and Schwarzenegger: demonize wealth, oil, big business and prayer.  But love green, big government, government health care and debt spending.  Can this work?

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Brilliant Michael Moore Attacks Those that Produce Wealth

LOS ANGELES (Reuters) – Firebrand filmmaker Michael Moore, who targeted the Bush administration in “Fahrenheit 9/11” and the healthcare industry in “Sicko,” is now focusing on the global economic meltdown.

The Oscar-winning director will release his as-yet-untitled documentary across North America on October 2, co-financiers Overture Films and Paramount Vantage said on Thursday.

“The wealthy, at some point, decided they didn’t have enough wealth,” the statement quoted Moore as saying.

“They wanted more — a lot more. So they systematically set about to fleece the American people out of their hard-earned money. Now, why would they do this? That is what I seek to discover in this movie.”

Overture said Moore was still working on the film, and was keeping plot details close to his vest in typical fashion.

Liberty Media Corp-owned Overture will handle the film’s domestic release both in theaters and ancillary outlets, while Viacom Inc-owned Paramount Vantage will handle international sales.

Read the rest:
http://www.reuters.com/article/entertainmentNews/idUST
RE54K68I20090521?feedType=RSS&feedName=enter
tainmentNews&rpc=22&sp=true

Pelosi Calls Global Warming “Greatest Challenge”
http://www.washingtonpost.com/wp-dyn/co
ntent/article/2009/05/21/AR20090521040
52.html?wprss=rss_metro

Congressional Budget Office: Unemployment 10.5 Next Year

The Congressional Budget Office chief told Congress Thursday that rising unemployment likely will continue into next year.
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By Mosheh Oinounou
FOXNews.com

While the economy will begin growing again by the end of 2009, the unemployment rate will continue to expand into next year, the Congressional Budget Office reported Thursday.

The CBO projects Americans will continues to lose jobs through mid-2010, with the umemployment rate peaking at 10.5 percent next year, CBO Director Doug Elmendorf said in testimony before the House Budget Committee.

The CBO’s March assessment initially predicted unemployment would peak at 9.5 percent.

“We think it will be a slow, a painfully slow recovery,” Elmendorf told the committee, citing the ongoing crises in the housing and credit markets.

He added that the financial system is still in a “weakened state” even though it “has crawled back from the edge of the abyss.”

“All of those factors will lead to a tepid recovery, somewhat more tepid than we thought and assessed the conditions a few months ago,” Elmendorf noted.

He said employment numbers are often a lagging indicator of economic recovery, noting a number of positive trends including stabilizing manufacturing output, signs of life when it comes to consumer spending and confidence and that the decline in housing construction may be close to bottoming out.

The current unemployment rate is 8.9 percent. The Labor Department on Thursday reported 631,000 new jobless claims last week. 

The Federal Reserve said Wednesday that the unemployment rate could rise to 9.6 percent this year and remain elevated until 2011. Some private economists told The Associated Press they expect the rate to reach 10 percent by the end of this year.

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May 21 (Bloomberg) — More Americans than forecast filed claims for unemployment insurance last week, and the total number of workers receiving benefits rose to a record, signs the job market continues to weaken even as the economic slump eases.

Initial jobless claims fell by 12,000 to 631,000 in the week ended May 16, from a revised 643,000 the prior week that was higher than initially estimated, the Labor Department said today in Washington. The total number of people collecting benefits rose to 6.66 million, a record reading for a 16th straight week, and a sign companies are still not hiring.

Job losses are likely to continue after Chrysler LLC filed for bankruptcy and General Motors Corp. may follow suit and terminate 1,100 U.S. dealers. The auto slump threatens to slow any recovery from the deepest recession in half a century and keep pushing unemployment higher.

“We expect upward pressure on claims stemming from auto- related layoffs,” said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, who acurately forecast the initial claims number. “The labor market will remain weak, with gradual improvement on the horizon.”

Stock index futures were lower and Treasuries were little changed after the report. The contract on the Standard & Poor’s 500 Index fell 0.7 percent to 893.2 as of 8:38 a.m. in New York. The benchmark 10-year note yielded 3.18 percent, down 1 basis point from yesterday.

Economists surveyed by Bloomberg had forecast claims would drop to 625,000 from the 637,000 initially reported for the prior week, according to median of 42 estimates. Projections ranged from 585,000 to 675,000.

The four-week moving average of initial claims, a less volatile measure, decreased to 628,500 from 632,000.

Joblessness Climbs

Today’s Labor report showed the unemployment rate among people eligible for benefits, which tends to track the jobless rate, climbed to 5 percent in the week ended May 9, the highest level since December 1982, from 4.9 percent. These data are reported with a one-week lag.

Thirty-four states and territories reported an increase in new claims for the week ended May 9, while 19 reported a decrease.

The ‘majority’ of last week’s decrease in claims was in states that reported a jump in auto-related filings the prior week, a spokesman for the Labor Department said.

Read the rest:
http://www.bloomberg.com/apps/news?pi
d=20601087&sid=a56LXUHX28Ig&refer=home

California Idea to Borrow Like Obama would only shift trouble to the future and set a “dangerous precedent” budget analysts says

The governor’s proposal for $5.5 billion in short-term borrowing would only shift trouble to the future and set a “dangerous precedent,” a top budget analysts said today.

Governor Arnold Schwarzenegger’s plan to sell $6 billion in revenue anticipation warrants to raise cash for the state government as it faces a $21.3 billion budget gap, the state’s budget watchdog office said on Thursday.

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From The L.A. Times

Declaring that California faces thorny choices to avoid insolvency, the state Legislative Analyst said that Gov. Arnold Schwarzenegger’s plan to borrow and sell off key assets to help overcome a $21.3-billion deficit won’t work.

Updated at 11:38 a.m.: New estimates of revenue suggest the budget deficit may be as much as $3 billion larger than the governor estimated.

In a 28-page report released this morning, Legislative Analyst Mac Taylor said the governor’s proposal for $5.5 billion in short-term borrowing would only shift trouble to the future and set a “dangerous precedent.”

Taylor’s report also expresses doubts about the proposed $1-billion sale of a state-owned workers’ compensation insurance program and a plan to save $750 million on the state’s costly Medi-Cal program by potentially cutting healthcare reimbursements or slashing the number of eligible participants.

But the report says several of the governor’s budget proposal “merit serious consideration,” including eliminating some state boards, selling property and changing retirement health benefits for future state employees.

Taylor also emphasized a need for the Legislature to “make the difficult decisions” and act quickly, which would “likely boost the confidence of the public and investors in the budget process” as well as prevent an anticipated cash crush in early July.

— Eric Bailey in Sacramento