California: Schwarzenegger’s $14-billion Deficit

When California sneezes, does the rest of the Union get a cold? That is the question tonight, with the largest state in the U.S. now firmly projecting a $14-billion budget deficit for the coming year (more than double what was proffered a few months ago), and with the state saying it will cut that deficit dramatically via big spending cuts during this weakening economy. The upshot: A recipe for a nasty economic  cocktail in 2008/9.

To his credit, Governor Arnold didn’t pretend there were any easy answers tonight during his "state of the state" speech. Because there aren’t any. Much of California’s budget is pre-allocated, leaving precious little to play with, even if he wanted to. And automatic spending increases of 7% and more make the problem worse, with the state marching in law-ordained lockstep into an increasingly ugly financial future.

About the only interesting part? Schwarzenegger didn’t blame housing and/or the economy for his problems. Good of him to pretend they aren’t playing a role, but they are playing a big one — which is why the rest of the country should be worried about what he’ll do.


  1. Morgan Buffet says:

    I can never understand why, in a state that has the 5th largest GDP in the world, people are concered about things like a 13 Billion dollar budget. Isn’t this a classic example of innumeracy? Tell me, what do you think is the budget deficit of the whole USA, Germany, Japan, France. 1% of GDP? 2% of GDP? I don’t know, but whatever it is, California’s budget deficit is going to be miniscule by comparison.
    I think there are two real questions to ask. First, what should California be investing in, and second, why the hell can’t Boxer and Feinstein get us back more than 45 cents of every dollar California pays to Washington. I think the real problem is that California is getting ripped off by the federal government, thanks in large to our inept political representatives there.

  2. I know this blog tends to avoid politics but the fault for the deficit lies entirely with Arnold himself. He was elected because of the deficits and what did he do when elected? He cut taxes (DMV reg fees) and issued bonds, the very thing he criticized Gray Davis for.
    He’s refused even the most modest of tax increases. It’s these fiscal games that got him reelected by passing the debt on through bonds. The guy will use every trick in the book to avoid raising taxes.

  3. Sam Rainey says:

    You guys in Calif. are chumps. Prop. 13 means that people living barnacle-like in the same home for >30 yrs. pay next to no property taxes, despite a massive increase in housing values. Duhhh! No wonder so many native born Americans are fleeing your state like a bad case of syphilis.

  4. JUST STOP BE ULTRA LIBERAL and kennedy tell arnold what to do …TO MANY FEEDING ILLEGAL ALIEN AND ARNOLD WANT OPEN BORDER …all the money go to mexico now…cuz this country to many bleeding heart liberal sucker idiot.
    look all the school in CA rank 47 in US to many illegal alien kids no speak english treat publics school like babysister child care and we pay for just waste the money…

  5. “He’s refused even the most modest of tax increases. It’s these fiscal games that got him reelected by passing the debt on through bonds. The guy will use every trick in the book to avoid raising taxes.”
    A new study detailed that half of California’s $18 billion dollar deficit is due to that state’s merchant class leaving California for tax havens such as Arizona and Texas.
    No successful person is going to hang around and pay extra taxes just to make the person who is taxing them look good.
    Liberals, if you want all those wonderful “free” programs, you’re going to have to kiss the behinds of those you intend to pay for it all.

  6. My wife and I lived in California until 2007. We are both engineers and make above average income. However, the taxes and cost of living has become oppressive. We moved to Texas in January 2007. We exchanged a $1000/month income tax bill for a $0/month bill (Texas has no income tax). We exchanged a $1750/month two bedroom apartment for a 3000 square foot nice house for $1400/month.
    My only regret is that I did not move to Texas earlier. For the middle to upper middle class, California is a financial disaster. I really don’t want to pay for California’s ills and don’t have to.

  7. My story is similar to the comment above. I was born and raised in Huntington Beach. I have 5 brothers. All but one has moved out (priced out) of state, and now can afford to more than “get by” on our above average wages. The one brother who stayed; he is a doctor, his wife is a doctor, they “afforded” a coastal community townhouse in 2004 (oops) and are comfortable with the fact that they will likely never pay it off. They make the most money of us brothers (their combined income), yet will likely never earn a paycheck. They have been in deep debt since college, they are in deep debt for life by design. The rest of us have no debt other than the homes we’ll pay off well before retirement.
    Hasta La Vista Kalifornia, enjoy your weather, you paid for it (and nothing else)