Money & Politics | Daily Report

California entered 2010 burdened with a dismal unemployment rate (12 percent) and facing a discouragingly large state budget deficit ($19.9 billion).

FDR Memorial, Washington DC

We’re still in the worst recession to hit the West Coast since the Great Depression. It’s hard to imagine how the economic news could be worse.

But the independent California Budget Project, in a report issued yesterday, says matters would be worse indeed but for the estimated $85 billion that the federal government has pumped into California’s economy via the stimulus program.

Undoubtedly there has been waste, abuse and what state Inspector General Laura Chick calls “stupid spending.”

Nevertheless, the budget project’s analysis says that when it came to California, the federal spending spree “buffered the impact of the recession” in important ways.

It saved jobs. Perhaps 250,000 more Californians would be out of work without the stimulus, the project reports, citing both government and private estimates.

It helped bring the soaring state budget closer to earth orbit. Lawmakers reeled in the budget with huge spending cuts. But they also were able to use $8.5 billion in stimulus funds to cover the costs of important programs that otherwise also would have been slashed, the analysis says.

It protected our schools, partially making up for deep cuts imposed by the Legislature and the governor. Calfiornia’s K-12 schools are on track to receive $6 billion in stimulus aid, and public universities are getting $1.4 billion more.

Attached to the project’s report is a 20-page chart pricing the benefit to California of a long list of stimulus initiatives. Billion dollar items include: aid to highway construction ($2.5 billion); federal income tax relief ($12.4 billion); increased unemployment benefits ($3.2 billion); and subsidies for health insurance for people thrown out of work ($2.5 billion).

The bad news is that the federal government cannot sustain this level of spending. But if the stimulus program ends in 2010, the shutoff of federal aid would “create a serious drag on the economy at just the wrong time,” the report says, quoting the testimony of Moody’s economist Mark Zandi before a Congressional committee.

And that, the report says, would “further weaken the state’s economy and potentially undermine the national recovery.”