Sunday, October 5, 2008

California Flat Broke

Grim economic news from the West coast:

LOS ANGELES — California, the nation’s most populous state and the world’s sixth-biggest economy, has warned the Treasury Department that it may need a $7 billion emergency loan from the federal government because it is running out of cash and has not been able to borrow more.

State officials said they hoped that the $700 billion federal bailout of the financial system approved by the House of Representatives on Friday would help open credit markets that have balked at providing the kind of short-term financing California and other states and local governments routinely rely on to keep operating.

But Gov. Arnold Schwarzenegger, a Republican, said at a news conference on Friday that the state “is not out of the woods yet” and in a few weeks could run out of cash to pay for basic services.

Apparently California is just one of many states feeling the credit crunch right now but worry not, our fearless leader has sent a letter to Treasury Secretary Paulson asking for some of that sweet federal bailout cash. I've always considered myself somewhat of a novice when it comes to economic matters but recent events have convinced me otherwise: just ask the government for more money, right? Hell, I could have thought of that.


Intrepid Californio said...

The way that I understand it is that California has to take a loan out at the begging of every fiscal year(technically when the budget is approved). It takes a little time each year for the flow of money from state taxes to catch up with the demand of its financial obligations. So this is nothing new as of late.

JBW said...

My understanding of the article was as you described with the exception that we now lack the ability to get that loan because of the credit collapse, and that ain't good.

Intrepid Californio said...

yeah no doubt. Obviously the problem in Cali is internal. There are illegal immigrants that work with you and I whom do not pay California State income tax. Let's make them legal so they have to pay taxes or get someone else.Plus let's get some of those outsourced tech jobs back from India. These two cases would probably greatly help to move our state towards financial independence from the Federal Government. Just my thoughts.

Anonymous said...

I don't know a lot about the differences between California and Texas as it relates to cash, but Texas has the same immigrant and tech job problems that Cali does, yet Texas has supposedly had a nice surplus in recent years. I'm told it's a combination of the lack of a state income tax and other assorted incentives for businesses to operate from here.

Doug"e" said...

I s'pose that makes Arnold one of those "economic girlie men" he so fatuously decried in his stump speech at the 2004 Republican convention.( the video is avaiable at americanrhetoric.com to refresh your memory)