OK! So I first thought there would only be 3 parts to this series. However, things keep getting worse on a daily basis. Who knows? There might even be a Part 5 and 6! Let's see how things develop.
In any case, California's deterioration continues. According to a very recent article in the L.A. Times, Bill Watkins, who heads the Center for Economic Research and Forecasting at Califonia Lutheran University, released a recent report. He urges that the State begin emergency discussions with both the Obama administration and the Federal Reserve in the increasingly likely event of a state default. Had he read "Marko's Take" he would have realized that these discussions are already taking place!
Watkins believes that the odds now FAVOR a default. California Treasurer Bill Lockyear sharply took exception with Mr. Watkins' assessment, accusing him of "irresponsible fear-mongering". It makes one wonder whether Mr. Lockyear has spoken to Governor Schwarzenegger who has been saying the same thing!
The crux of the problem is centered in the budget. Republicans are adamant in their refusal to increase taxes, while Democrats are equally determined in THEIR refusal of further budget cuts.
The only reason that California is NOT in default is that some banks still honor the IOUs already issued on 4 separate occasions. If they should refuse to honor those IOUs AND the Obama Administration refuses to provide emergency bailout funds, then the State will have no choice.
As I've mentioned previously in the "California Crisis Deepens" series, the State is SO important, not only to the United States, but the world. I believe the Obama admistration will have NO choice but to provide emergency bailout funds. Therefore, I disagree with Mr. Watkins' conclusions entirely.
California has come up with a rather interesting partial solution to the budget stalemate which will appear on the 2010 ballot: the legalization of growing marijuana! In so doing, the pot industry, the largest agricultural sector in the Golden State, will be subject to taxation at a variety of levels and should be able to raise revenues substantially. Recent polls show this initiative is very likely to pass.
I hope the new initiative has left this troubling piece on a "high" note!
So, why don't you give me your "Take" in the comments section below?