Skip to comments.California budget crisis could bring lasting economic harm
Posted on 05/23/2009 10:26:12 AM PDT by NormsRevenge
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.
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.
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.
The long-term effects of Sacramento's financial woes, meanwhile, could far outweigh the near-term effects. In particular, the expected deep cuts in education spending could thin the state's human capital, potentially forcing California companies to look elsewhere for skilled workers as well as new plants or even headquarters.
It's the equivalent of "eating the seed corn," said Levy, chief economist at the Center for the Continuing Study of the California Economy in Palo Alto.
Of course, there would still be plenty of short-term pain to go around. How much won't be known for a while. But eliminating as much as $24 billion from the proposed $95.5-billion general-fund portion of the 2009-10 state budget would further corrode an economy already creaking under the weight of a national recession.
(Excerpt) Read more at latimes.com ...
—as California goes, so goes the nation—
exactly, wait untill california, and the rest of the nation too, lose their income from closed Chrysler dealers...buildings sitting empty, soon we will look like Detroit.. cities, counties, states, will be affected....Thanks to Obamamobile... taking over the car business... plus all the unemployment the state will have to pay out..The feds just extended it to over a longer period of time now..
and Viola Surplus budget
“The feds just extended it to over a longer period of time now..”
No, they did not. All the state had to do was refuse the money.
Typical liberals. They spend more $ per capita on education than they ever have yet more students drop out or are barely literate when they graduate. Perhaps that curriculum might have something to do with it? Why not replace "Harvey Milk Day" with "Math Day" and actually teach the students something useful for a change?
Put the quill down and back away from any additional regulatory legislation such as shutting down and prohibiting all suction dredge mining in the entire state of California. Also Cap and Trade.
Put the quill down and back away from any additional entitlement and social benefit legislation such as universal health care.
Rescind much of the global warming, extreme water quality and endangered species permitting legislation that regulates family owned natural resources businesses to death and diverts the local use of resources from people to critters. (Like the Central Valley water issue that is causing 40% unemployment.)
Lower taxes on businesses to increase investment, employment and revenues to the state. Offer incentives such as Enterprise Zones in depressed areas. Increase the economic development department of the state. Engage in a major campaign to become more business-friendly.
California must serve the Nation by providing a real life example of the consequences of ignoring the ‘seven fat years, seven lean years’ lesson. So a government is expected to spend more when the larger economy is suffering? Too bad they spend everything they had and more on non-critical (and largely politically correct) nonsense during the great Reagan period of wealth creation.
are you kidding me? the problem is that you’re not paying enough taxes!
“as California goes, so goes the nation”
Of course, “bailing out” the state and keeping it on artificial life support would only extend the agony. No one is going to move to or invest in a state that won’t balance it’s books and preys on it’s own.
It’s as simple as that.
Well if you little people would just give us all your stuff, we wouldn’t have to take it from you...
-the American Left
I bet America will become awful conservative awful quick. Liberalism is the luxury of the pampered. Our days of pampering are quickly coming to an end.
And how about the excessive pensions and benefits—royalty
in CA exists. I am still waiting for elimination of some of the many agencies which are useless. Some don’t even answer phones. Many overlap....or really just have employees who do very little. I know, I called some to inquire! Why don’t they just put all retirees —no matter if govt or private—on SS? They could still have a smaller pension.
But eliminating as much as $24 billion from the proposed $95.5-billion general-fund portion of the 2009-10 state budget would further corrode an economy already creaking under the weight of a national recession.
and actually teach the students something useful for a change?
Why don’t they just raise the property and income taxes and institute a lottery?