A California State of Emergency

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California, the golden state, home of Silicon Valley, Napa Valley, and the San Fernando Valley…

Is now on the verge of being known for a different valley…

A new valley…

Created by the imminent possibility of complete financial meltdown…

Ok, perhaps I’ve used the wrong imagery...

It’s more of a deep chasm…

Or even a bottomless abyss of financial ruin, from which there is no solution in sight…

And into which California is rapidly reaching the point of no return.

But hey, if you live in Texas, or Iowa, or New Hampshire, who cares, right?

Let those freaky, Left Coast, chardonnay swilling, sun-worshipping, Hollyweird-fawning slackers choke on their own smugness…

What do we care?

Well, actually, we ought to care…and plenty.

Why?

The California Affect

Because as much as the rest of the country resents California…

It also happens to be the 8^th largest economy in the world…

And makes up 1/8th of the US economy.

You’ve heard of the phrase, “As goes California, so goes the nation?”

Well, it’s pretty darn close to the truth…

Because California’s economy is larger than all but a handful of nations in the world…

And because it hosts eight of the nation's fifty most populated cities, California’s fortunes…

Or misfortunes, will affect the rest of the nation.

Really?

Yeah, really.

Its technology, agricultures and entertainment industries lead the country.

In fact, California is the world's 5th largest supplier of food and agricultural goods.

And for those of you in farming states, chew on this…

In any given year, California will export more agricultural products by air than 23 other states will do by all modes of transport combined…

California’s agricultural economy is more than two times the size of any other state’s agriculture industry.

And don’t forget about those cows…

California is the nation’s leading dairy state…

In fact, milk is the state’s number one farm commodity…

Its dairy industry generates about $50 billion annually and employs over 400,000 people.

So whether you care to admit it or not…

Whatever happens in California, it matters.

The Disaster State

And what’s happening there is none other than a disaster…

It has the 2^nd highest foreclosure rate in the country…

But with over 10% of the population, that impact is magnified…

And its official unemployment rate is 12.1%...

That is 33% higher than the national average…

Or about 2,175,000 people unemployed in just one state…

The total unemployed in the US stands at about 14 million people nationwide.

So 15.5% of all unemployed are located in…California.

So what’s the biggest problem?

Well, there are many ways to slice that question, but the bottom line is that California is not only running out of money, but is seeing its revenue sources drying up…

Unfunded liabilities are a big problem with many states and municipalities nationwide…

Let’s look at California’s pensions for a moment…

Stock market exposure of California’s state pension money has grown from only 23% in 1980…

Up to 60% by 2008.

The result?

With the financial crisis and meltdown…

As well as skyrocketing salaries of public employees and pension promises…

And a tax base that is falling through the floor…

Due to high unemployment and many of surviving businesses leaving the state…

The prospect for meeting those public pension obligations is…dim.

And therefore…

Look for Wisconsin-style confrontations to occur in California.

Illegal Immigration Migraine

But another, very real and growing problem for California is the crushing financial and social burden of illegal immigration.

Not only is the burden of providing housing, education, health care and incarceration…

Of the state’s high population of illegal immigrants growing…

But current annual costs are an estimated $20 billion!

At the local level, hospitals close because of the costs of treating illegal aliens,

Schools are becoming underfunded…

And illegal labor is not taxed…

And keeps the wage rate low…

Adding to the problem of falling wages and tax revenue shortfalls.

But, in California, like much of the country, there is no political will to correct this problem.

In fact, California just passed its version of the Dream Act...

So that illegal aliens will now qualify for state loans and grants...

It should be apparent that all of these costs and financial hits are unsustainable.

So what are the prospects for improvement in the formerly golden state?

Well…

Not surprisingly, tax hikes are viewed as the simplest answer…

Which will only succeed in driving away more businesses…

And prevent employers from hiring…

Except for public employers with union political pull…

Those jobs, with their above market rate salaries and pensions…

Will not bear much of the burden in budget cuts.

Which really means that the state is in a self-perpetuating cycle of economic decline.

What does that mean for the rest of the country?

It means that if California goes belly up, the effects won’t just be felt there, but all over.

It will affect the entire US economy, as well as companies and investors around the world.

And if you think that this can’t happen…

Well, you’re just California Dreaming…

And those are…The Gorrie Details.

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One Comment

1. 

   Anonymous

   October 12, 2011 at 6:43 pm

   Truly disgusting. 20 billion a year for illegals??? Where is the governor's head? I won't answer that. Why are they all, from Washington down, so determined to destroy our country? Sad, really sad. Glad I'm too old to learn Chinese, Arabic, or Russian, and don't want to learn Spanish.

   Reply