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Ear to the Ground

Economic Crisis Goes to California

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Posted on Oct 3, 2008
Schwarzenegger Economy
California Governor's Office

California, which has the world’s seventh-largest economy, may join the U.S., which has the world’s largest economy, in requiring billions of federal dollars to resuscitate its failing credit market.

Tight credit has put California’s state budget into a bit of a pickle, with funding for the government’s day-to-day operations drying up faster than Sarah Palin’s popularity. A sign of trouble is a letter—leaked Friday—from Gov. Arnold Schwarzenegger to U.S. Treasury Secretary Henry Paulson that warned of a potential emergency request for a $7-billion loan within the coming weeks.

The L.A. Times:

California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.

The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.

The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.

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By restaurants puyallup, May 8, 2011 at 10:55 pm Link to this comment
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I think that serious problem lies the solution from the hands of the Governor.

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By Fantine, April 27, 2011 at 12:52 am Link to this comment
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In awe of that asnwer! Really cool!

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By Payday Loans, July 11, 2010 at 9:01 pm Link to this comment

It is two years since this article was posted; and the issues remain in the US although not as feverish as in 2008, however the country is still drowning in debt and in fact the debt has increased to a level where generations will be carrying this cost.

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By PatrickHenry, October 4, 2008 at 7:10 am Link to this comment

By cyrena, October 3 at 6:32 pm #

By outside talent I mean private industry and academia.

The smartest, most talented and gifted people do not reside in government.  We need outside minds to sort out the mess California is in and many will say close the loopholes.

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By cyrena, October 3, 2008 at 7:32 pm Link to this comment

By PatrickHenry, October 3 at 4:05 pm #

California has enough well to do folks and outside talent to resolve these shortfalls.


Patrick Henry,

That may indeed ‘seem’ to be the case, (though I’m not sure what you mean about ‘outside talent’) because there are certainly enough well-to-do folks here. The problem is that THEY don’t contribute to the tax base. In fact, the FEDERAL loopholes, as well as the California ones, allow them to avoid paying ANY taxes when they have their yachts situated just far enough out to be in ‘international waters’. Or, they just cruise the world, (or say that you are) and avoid paying any taxes…anywhere. Since there’s really no way to check, these people only need to own boats/yachts, and claim them as primary residences, and avoid paying any taxes. And, that’s only ONE of the many loopholes they use.

The only reason I’m even aware of this now, (not being a yacht owner myself) is because it was one of the super contentious points in the argument over the budget. The legislature was trying to force Arnold to make them pay taxes and close those loopholes, and he’s not been willing to do that.

But, GA Anderson is right. It’s become far too costly to live here, and so we’ll all be leaving in droves, and that will decimate the tax base. The wealthy will have the place to themselves, and my own guess is that was the plan all along. Not just for California, but for the entire nation. If they could do this to hundreds of thousands of Native Americans 300 hundred plus years ago, the same can certainly be accomplished now.

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By Li, October 3, 2008 at 6:03 pm Link to this comment
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Yellowbird, you forgot the most important difference between the US and most of the rest of the world.  In other countries, they have a multi-party system, not just two juggernauts full of greedy scumbags like our GOP and Democratic parties.  Goverment and legislation actually REQUIRES compromise and cooperation among parties, instead of stalemate.  We need to revamp our bipartisan system and stop letting these parties trade our country to the highest corporate bidders.

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By PatrickHenry, October 3, 2008 at 5:05 pm Link to this comment

California has enough well to do folks and outside talent to resolve these shortfalls.

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By KDelphi, October 3, 2008 at 1:15 pm Link to this comment

GW—sorry. I have family in Denamrk and Norway. I havent talked to them about it but, I’m sure that they dont want this mess.

I wish I was in Norway….hooray! hooray!

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By G.Anderson, October 3, 2008 at 12:22 pm Link to this comment

California will probably be the first state to have to declare bankrupcy. This is not really a surprise… We send so much of our money to that sinkhole in Washington D.C., and we get very little back from the Feds.

The only way out of this mess is for California to leave the Union. If we were a country we would be able to do great things.

But instead in the next few years you will see California become unlivable, as the decay of our infrastructure increases in speed, and crime sky rockets.

The middle class will leave this state in droves, taking the tax base with them. All the legislature will do is fight over give-aways.

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By GW=MCHammered, October 3, 2008 at 12:13 pm Link to this comment
(Unregistered commenter)

So now California needs a $7 billion bailout. More to come, no doubt.

Know how science groups ask computer users to download a small program to aid in computing cures for cancer, predicting climate change, finding ET’s signal, etc? Why can’t the fed’s offer a program so we all can print US Dollars at home? I’m certain their printers are over-strained as evidenced by rapidly rising retail prices. That way corporations don’t have to pay wages and wouldn’t that give business the edge? Workers just come home and print whatever they need or want for wages. And when local government spend far more than thier tax base can afford, we@home can help them keep up printing truck loads of bucks.

C’mon, jump on board the ever-expanding (like a deadly virus) Bush Doctrine (Sarah Palin)!

And re: yellowbird2525, October 3 at 10:02 am

Agreed. It’s time to outsource our pathetic excuse of government. Write-in Norway’s government come November. Let’s oust all our criminals at once.

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By KDelphi, October 3, 2008 at 11:53 am Link to this comment

yellowbird—I agree completly.

I do think that most of the Scandanavian countries pay higher personal income tax, but I’m not sure of which ones. All the studies done, show that the majority of people in all these countries would NOT go back to “privitize” any of that stuff. They care about each other, though.

I think that their businesses actually pay a little less, but, they tax other things more—like capital gains, stock trades. etc. WE SHOULD!

If could be wrong abou this. (My Uncle in Denamrk said that that was true).

But, that only backs up your point. I’ve been waiting 25 yrs for the US to enact some of the basic protections that they enjoy in the rest of the “free world”. I am afraid that, if, after W, they wont try anything more socialistic, taht they never will. I hope i am wrong.

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By troublesum, October 3, 2008 at 11:12 am Link to this comment

California and how many other states?  Then there’s Ford and GM.  How is IBM doing?  GE?

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By yellowbird2525, October 3, 2008 at 11:02 am Link to this comment

folks: THINK for a moment: Why do folks in Iceland live longer, live better? and same in Norway, Sweden, Denmark etc: most nations: they may pay even LESS TAX some pay none at all: YET every single one of them has far better schools, have medical coverage, have cars that for years have had 70MPG: the model T just had it’s 100th year anniversary; built to last 100 years; it ran on grain alchol (which our Gov later changed to oil) even tho the alcohol had no pollution factors at all. ABSORB the previous statement. Other countries do NOT use chemicals; most that are readily available in every store: are banned from janitorial places: problems to workers health. ALL have far better enriched lives: as many freedoms or more than EVER here in USA; even the HEALTH LIVES are far better. THEY have countries that do NOT allow the Corps to run the Gov; THEIR Gov’s from Fed, to St, to County, to City: are run without the pollution of graft & corruption. And everyone there lives longer, lives far better. NOW you have a clue: as to WHAT nation needs to get better. REMOVE politicians: get citizens back in. Amazing how all these even county commissioners got HUGE salary increases & bonuses on the side: for the “rebuild & renew” America but the PEOPLE once again are set up along with the planet: to be screwed.

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