Melt Down
California is having a moment. Due to political extremes (Democrats refuse to budge on program cuts, Republicans taxes) the state has a budget deficit of $26.3 billion on revenues of $113 billion. Its total outstanding obligations: $59 billion in general debt, $8 billion in bonds linked to securitised revenues and $2 billion in commerical paper. While all this sounds like a heck uv a lot of money, Brownie, the deficit (the important figure since California, like most states, has a balanced budget rule) is 1.5% of state GDP. This compares to Federal Governments deficit of 14-15% to US GDP (for context, the federal deficit greater than the entire California economy which is the fifth largest in the world at over $1.8T). So, the budget must be balanced somehow. And worse for Californians, the state pain piled on top of its contribution to correcting the Federal public finances. It's kinda like going to the dentist for a cavity and getting a root canal. So we watch the train light in the black tunnel.. closer and closer it comes. Choo choo! As an interium measure, Sacramento has issued IOUs which, for now, accepted by banks but when this ends, and it will, everything will .. stop. Teachers will won't teach; cops will be off the beat; fire fighters won't fight fires; garbage collectors won't take the garbabe and so on and so forth.
So what will happen? It is my great hope that Washington D.C. preparing to take over the state. Seriously. In return for bailing out California, Californians will no longer have control over their destiny until they get their house in order. This is what we do to Third World countries who approach us or the UNDP with their bowl facing up. Why should the Golden State be different? A further condition is to remove the stupidity of "propositions" or single-issue referenda on anything including budgertary matters. This alone has made the state ungovernable even with a popular muscle man like Schwarzenegger. California, and our country too, has acted like a teen-ager with too many credit cards and no parental control. This will correct somehow, of this we can be sure, and so we must ask ourselves yet again: will it be a soft landing or something far worse?
