Jul

31

Up and down the California central valley, you can watch the cities filing bankruptcy. They don't have the money to do anything else. Some might say that "it's California. That's what happens when you eat lotuses." Perhaps. But here's the thing. There is no way to get the US functioning again without having California operating smoothly. It's not like Wyoming, where no one might notice for a spell. With 12 percent of the nation's population and a higher percentage of its economy, California still sets the trend. Even in foreclosures!

Seriously, though, the fiscal cliff at the end of the year isn't necessarily the biggest challenge facing this country economically. I think California is.


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4 Comments so far

  1. steve on July 31, 2012 10:21 am

    You hit it spot on. years of unfunded pension accounts union thuggery corruption by Gray Davis and Arnold, mismanagement over taxation nanny state mentality massive entitlements in the form of unemployment, food stamps, are all leading this once great state to Armageddon.

    The experiments are over. The time when the insane ran the institutions must end. California is where this Administration is leading the country. Businesses are leaving and not to return. The tax base is eroding and it is the classic case of overspending and waste and corruption. Now another liberal is supposed to fix the problem and he is part of the problem. Stockton Ca. is part of the beginning.

    It is not the beginning of the end in California it is the end of the beginning. The tragedy of California is that the Democrats could put a monkey on the ticket put a D after its name and it would win the electoral votes. That is how sick this state really is.

  2. Greg Rehmke on August 1, 2012 1:32 am

    Though many cities will declare bankruptcy, especially cities on the edges of LA and the Bay Area, will that harm or disrupt dynamic companies and entrepreneurs in California cities? There will be turmoil for bondholders and for retired state workers with often excessive pensions.

    If California state universities have to cut spending more, and public schools cut spending more, that may not have much material influence on educational effectiveness, thanks to Khan Academy and other innovative education firms.

  3. steve on August 1, 2012 1:18 pm

    Look at Scranton Pa. They are raising the property taxes 33% for the next 3 years They wanted to raise it to 75% and cut some spending in salaries in the public sector. They did this to allow them to get state aid or some such.

    Stockton Ca. http://en.wikipedia.org/wiki/Stockton,_California is the 13th largest city in the State. This will be the largest bankruptcy of a city in the history of the US. THIS IS A BIG DEAL. They had to do it for pension liability issues. This issue is not going away. This is an onion being peeled.

    The Governor just does not get it. Already he is talking about raising taxes on top of the excessive taxes that are already imposed to the residents.

    As for vibrant businesses, look at GE and what they are doing to Wausau Wisconsin. They are boxing everything up and moving to China. This is what vibrant companies do if they can. Or they move to more tax favorable states such as Texas.

    Look at the problems that New York and New Jersey are having. They have a real problem with exoduses of businesses that can afford to move. These big companies cut sweetheart deals with other cities and states and countries and split like the Baltimore Colts in the middle of the night.

    There is an old saying “You can shear a sheep many times but you can skin it only once.” Once you kill the fatted calf it gives no more milk.. I may have messed up my metaphors but you get the point.

    Now these states have to balance their budgets. They do not have the luxury of the Fed Govt to print its own money. So here is the paradox. With no new jobs creation and losing jobs to international countries such as China a reduction in unemployment seems almost unfathomable. I am not smart enough to give answers but I will say this if they could have fixed the problem they would have already done it. I suspect the problem is so massive that now all politicians want to do is CYA.

  4. steve on August 1, 2012 8:37 pm

    I will very briefly mention this. California left to its own would have the 9th largest economy in the world if it were a country. It used to be the 5th. One question I have is what happened to cause it to decline to number 9.

    A more interesting question is this:

    Look at Europe and see which economies California is ahead of in terms of GDP.

    I am sure they are ahead of Greece, Portugal and Spain. Probably ahead of every member of the EU with the possible exception of Germany.

    My point ist this. If California has such massive problems as suggested, correlate this concept to the effect that much smaller countries are having on the Eu. Then think about the gigantic problem that the Social state of California will do as an anchor to the US economy going forward.

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