Tuesday, December 2, 2008

California's Budget Problems Getting Worse: Schwarzenegger Declares Emergency

The largest state economy in the nation has declared a state of emergency due to budgetary shortfalls. The governor, Arnold Schwarzenegger, seems desperate at this point in his request for aid from Washington. Tim Iacono from The Mess That Greenspan Made comments on this in his blog post below.

Things are deteriorating rapidly in the Golden State and the band-aid budget solutions of just a few months ago are quickly revealing themselves to be wholly inadequate in dealing with what is now a major hemorrhaging in California's fiscal condition.

As reported in the LA Times, the gubernator went public yesterday, declaring a "fiscal emergency" and ordering legislators back to work in order to find a solution to the current cash-flow situation that would have the state running out of money in just a couple months.

The budget shortfall is now somewhere between $11 billion and $28 billion, depending upon how it is calculated, and, given the current trajectory of the state's housing market and economy, things are likely to get much worse before they get better.

Of course, they really have only one practical choice here - a bailout from Washington.

According to this Washington Post story, those wheels have already been set in motion with almost $200 billion of the upcoming Obama Administration stimulus package being requested by the states to help square their books.

This once again prompts the question, "Who's going to bail out Washington?"

This article has been reposted from The Mess That Greenspan Made. The full post can also be viewed on The Mess That Greenspan Made.

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