So, what happened? California used to be the promised land, the place everyone else seemingly wanted to move to, especially during the Rose Bowl Parade when it was freezing back East and sunny in SoCal. You could almost hear families saying, ‘let’s move where it’s warm and the economy is booming.’ But that was yesterday. Those in North Dakota watching the Rose Bowl this January may wish it was warmer there, but can be consoled by knowing their state is solvent, unemployment is low, and their economy is humming along. They don’t really have a recession there. Apparently, they didn’t get the memo telling them to go mad with greed on real estate, plus they have a state-owned bank, which almost certainly helped moderate potential excesses.
If that was only the case in California, but it’s not. Instead, the financial wheels are coming off as endless stonewalling and recalcitrance by both parties has, for years, blocked any effective solutions. Democrats want more revenue and few spending cuts, while Republicans vow no new taxes and big spending cuts. But it’s clear to all but the most obtuse that taxes will have to be raised and spending will also need to be cut. The political ideologues on both sides will squeal, but there is no alternative. And California may still default on its debt anyway.
Incoming governor Jerry Brown is sounding remarkably down to earth as he faces the stark reality.
“We’ve been living in fantasy land. It is much worse than I thought. I’m shocked” he says, adding “This is really a huge challenge, unprecedented in my lifetime.”
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