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March 20th, 2009
12:25 PM ET

The West Coast Swing: Dancing with disaster

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/03/19/art.elopez0319.cnn.jpg caption="At a town hall in California on Thursday, third grader Ethan Lopez tells the president of budget cuts at his school."]

Tom Foreman | Bio
AC360° Correspondent

I know this is not something that East Coasters like to talk about in mixed company, but we need to have a serious discussion about our cousin out west. Yes, I’m talking about that distant land where the sun sets on America. No, not Ohio. Farther than that. I’m talking the land of the Golden Gate, Hollywood, you know, Governor Terminator territory.

California.

Our fellow Americans out there are in a world of hurt right now and that means we’re all in trouble, even if our own particular town, neighborhood, or street is doing fine. There is just no other way to put it. You know how many Californians there are? About 37 million. So many that they could single-handedly annex Canada armed with nothing but plastic spoons.

Accordingly, California is a juggernaut of economic power. Fashions, consumer products, trends, waves of entertainment and economic turmoil roll east from this powerhouse on the Pacific to touch us all every day. And I say again, California is hurting.

Slammed by job losses in construction, retail sales, tech, and exporting to name a few, their unemployment is above 10 percent. Only Michigan and Rhode Island have it worse. And to be honest, the Rhode Island effect, while important, is comparatively localized. California is so large that its economy doesn’t even compare particularly well with other states. To give it perspective, you have to hold it up to the economic dealings of other nations. Now, that’s an economy.

Housing foreclosures in California are shaking the ground like earthquakes. President Obama went to Los Angeles County where one out of every 209 houses is in foreclosure, but inland he could have seen a real horror show. In Riverside County one out of every 77 houses is in that shape according to Realtytrak. New York’s foreclosure poster child, Suffolk County, by comparison is living large: only one house in every 800 or so.

Economists are warning about state budget gaps all over the country because those problems are expected to linger long after the national situation starts improving. And here too, California is king. The National Conference of State Legislatures says Governor Arnold Schwarzenegger is facing a projected 15 billion dollar budget shortfall this year. That’s almost enough to pay off the AIG guys. The next nearest contender is Arizona, at about one and a half billion.

Californians are an unusual bunch, and proud to be that way as best I can tell. But for all their kale munching, eye rolling, too-cool-to-move charm, they are also harbingers of America’s future. And we better hope better days come their way before worse days come ours.


Filed under: 360° Radar • Economy • Housing Market • Tom Foreman
soundoff (8 Responses)
  1. Sharon, LA, CA

    Sometimes it's ironic how things appear. Yes, we have a huge deficit that will take additional cuts and taxes to fix. Governor Schwarzenegger, for whom I have enormous respect, has tried to make some changes over the years to increase the states income and reduce the risk. But Sacramento is much like DC in that it all comes down to political posturing. Everyone wants to take while few are willing to give. Every time a moderate cut is attempted we find the protesters in the streets. I often feel that protesting is the full time job of some of these individuals. There are so many things that have contributed to the existing conditions and the illegal alien situation doesn't help. The irony is that we may very well be paying for the homes, like the health care, of many who should never have gotten the mortgages in the first place. So those of us who chose not to take the risk with an illogical mortgage get to pay for the homes of others – while at the same time watching our retirements disappear.

    But I love this place and given everything choose to stay where I am. This is a very optimistic state and we will pull through – with much finger pointing and complaining – but we will pull through. It's just going to take a while.

    March 20, 2009 at 4:24 pm |
  2. Justine

    @ kristen: That was not funny.

    As a student at the University of California, San Diego, I've had to deal with printing out my own worksheets instead of my classes providing them for me. I really can't afford it but now I have to pay more for printing paper and ink because one of the departments in charge of one of my classes can no longer afford to mass produce worksheets for everyone.

    A friend of mine who graduated from the UC system years earlier told me about the price hikes in tuition fees ever since Schwarzenegger became governor. I'm forced to start relying on bank loans (in this economy, of all things) that I will be paying back for probably my entire life. I respect the Governator's stances on the environment and social issues, but he's completely screwed over our economy and now my generation has to pay.

    It really sucks. And I can't even begin to imagine what it's going to be like once I graduate.

    March 20, 2009 at 3:24 pm |
  3. kristen

    Happy Friday, everyone!

    I live in the land of bright lights and thick smog. I must say I’m a bit disconnected from my fellow Californians who are sinking in the mud. Only a few people I know have been laid off, two to be exact, both in advertising. No one I know has had to foreclose on their home. Fortunate, I do feel. But I wonder, how long will it last? I wish my confidence in our local politicians was as bloated as our state’s deficit. I have more hope in Obama than I do in Schwarzenegger. Obama might need to create an outside committee (no CA politicians, please) just to fix the mess this state is in. Or sell the state off to China at a big discount.

    March 20, 2009 at 1:49 pm |
  4. GF, Los Angeles

    I neglected to add over 50% of our taxes go to education. Is it going to useless administrators instead of teachers and classrooms? Why won't anybody investigate that? Why have a child like Ethan Lopez give us a sob story of budget cuts to teachers instead of asking the real question – where is the money going?

    March 20, 2009 at 1:33 pm |
  5. GF, Los Angeles

    The housing prices in CA were on average over half a million. Who can afford to make $2,000-$3,000 a month payments on a mortgage? Not too many people but the loans existed for them anyway. I'm glad to see houses foreclosing because it gives the rest of us who were smart not to buy a house we couldn't afford. Prices have dropped down into the $200k's. This collapse is what was needed to bring the market back.

    We're currently $8 billion in the hole even though Schwarzenneger approved a budget to raise taxes in an effort to overcome the $42 billion hole we're projected to be in. Whatever stimulus Obama had Schwarzeneger efficiently canceled out. If aid to illegals (social services, medical care, education) were cut, this state could instantly save $14 billion a year. Of course no one has the courage to do that which baffles me to no end. Citizens will get double taxed yet illegals don't have to give up their aid. How is that right?

    March 20, 2009 at 1:30 pm |
  6. Mari

    Loved that little guy, Ethan Lopez. So smart.

    March 20, 2009 at 1:27 pm |
  7. Michael "C" Lorton, Virginia

    California is not the only state "dancing with disaters,"-–we all are in a dancing marathon--and each state is dancing to their different tunes---let's hope that the music will eventually stop!

    March 20, 2009 at 1:14 pm |
  8. Laura W

    kale munching?

    March 20, 2009 at 12:37 pm |