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 ...
They already raised income taxes (and sales taxes and vehicle taxes). And we already have a lottery.
The problem is not that the state doesn't have enough revenue. It is that they spend too much. Give them more money, they will just spend 110% of it and create another deficit. It's an addiction. The only way to cure it is to cut them off.
Wow. They always threaten that — without education spending, we (the economy) will all collapse!
Hey, give us School Vouchers, Teachers Unions, and we will see how “bad” the economy will be. We have a 50% drop-out rate for LA public (government)schools. Can vouchers & school competition be worse than that? No, that’s not what the data shows.
Competition among schools helps IMPROVE educational outcomes, forces public schools to improve performance to retain revenues.
It also means better quality at a LOWER COST to taxpayers.
Apple today is looking to build a server farm in North Carolina. Even the uber-liberal’s are fleeing. I love their products, hate their politics.