California economic failure leads to collapse of the US economy

California economic failure leads to collapse of the US economy

(Juliet, “California's Ailing Economy Could Prolong US Recession,” http://www.huffingtonpost.com/2009/06/29/californias-ailing-econom_n_222616.html, June 29^th 2009)

California makes the US economically sound

Coker 90 [“The Myth of the Peace Dividend” Christopher Coker : Christopher Coker is Professor of International Relations at the London School of Economics and Head of Department. He is also Adjunct Professor at the Norwegian Staff College. He was a NATO Fellow in 1981, and served two terms on the Council of the Royal United Services Institute. He is a serving member of the Washington Strategy Seminar; the Institute for Foreign Policy Analysis (Cambridge, Mass); the Black Sea University Foundation; the Moscow School of Politics and the IDEAS Advisory Board. He is a member of the Academic Board of the Czech Diplomatic Academy. He was a Visiting Fellow of Goodenough College in 2003-4. He is a member of the Executive Council for the Belgrade University International Summer School for Democracy and also President of the Centre for Media and Communications of a Democratic Romania. He is a former editor of The Atlantic Quarterly and The European Security Analyst. The World Today , Vol. 46, No. 7 (Jul., 1990), pp. 136-138 Published by: Royal Institute of International Affairs : http://www.jstor.org/stable/40396217]

Of all the states that have been successful in increasing mili- tary outlays since the Second World War, California last year had $90bn in defence-related spending. Contracts for the Cold War's fighter planes and missiles, ships and spy satellites helped make the state the economic superpower it is today, the world's sixth largest economy. The Los Angeles area alone still has more than 400,000 aerospace workers, as well as 12 out of every 100 defence-related jobs in the country. Individual plants and work- ers may be hit hard if the defence spending boom inaugurated by Reagan were to wind down as rapidly as some Congressmen think it should. The impact could be as great as that which California felt following the Vietnam war in the early 1970s when 100,000 jobs vanished in Southern California alone. But even with significant defence losses, California would maintain buoyant growth, equal at least to the national average in the mid- 1990s. Needless to say, if the arms race were to keep up, growth would be ahead of the rest of the country. Other areas of the nation, however, would be more imperilled by the onset of peace. This is particularly true of New England where a slowdown in high technology and defence research has already contributed to a regional recession. Direct and indirect Pentagon spending, including in-state spending by defence per- sonnel and contractors in Connecticut alone, was an estimated $12.6bn last year. The Pentagon spent $3,500 for every resident of the state; for every tax dollar Connecticut sent to Washington, it received back $1.29 in direct defence spending. Although there is peril in crystal ball-gazing into the first post-Cold War decade, the United States may be in for a series of rolling regional reces- sions, even conceivably a national one
Key to the US Economy

California econ critical to the US- spending is risky

Hirsh and Mitchell 03 [“Three: Making California's State Budget More User-Friendly and Transparent: Further Thoughts” Hirsch, Werner Z : Professor-Emeritus Werner Z. Hirsch, an eminent scholar of public finance, governmental operations, and the interrelation of law and economics, died on July 10, 2009. He joined the UCLA Economics Department faculty in 1963 and retired in 1990, although he continued to teach and publish after his retirement. Early in his UCLA career, Prof. Hirsch was the founder of the UCLA Institute of Government and Public Affairs Mitchell, Daniel J.B. : DANIEL J.B. MITCHELL is professor-emeritus at UCLA Anderson School of Management and the School of Public Affairs, U.C.L.A. Within the latter school, he chaired the Department of Policy Studies (now the Department of Public Policy) during 1996-97. Prof. Mitchell was formerly director of the U.C.L.A. Institute for Research on Labor and Employment (1979-90) and continues to serve on the Institute's advisory committee 01-01-2003: California Policy Options: California Policy Options, UCLA School of Public Affairs, UC Los Angeles : http://escholarship.org/uc/item/06p6c3n3 ]
Limits to California’s Discretion in Fiscal Affairs The federal government - as a sovereign entity that issues a major world currency - has a great deal of fiscal discretion. As the governor of Alabama recently noted, “Members of Congress... create programs like they’re governors. But they don’t have the responsibility of making the financial ends meet that the governors have.”18 And, indeed, the experience of the 1970s and 1980s amply demonstrates that the federal government can run large deficits without encountering difficulties in the financial markets. U.S. Treasury securities are regarded as carrying virtually no risk of default. The Treasury borrows in U.S. dollars and the federal government can issue dollars. Hence, in principle, the promise represented by federal securities can always be honored. But not all countries have this privileged position. Small countries with histories of high inflation, currency depreciation, and financial instability end up borrowing in respected currencies of other countries such as the U.S. dollar. As Argentina and Mexico - among others - have discovered in recent years, financial markets may become nervous about the ability to pay of a borrowing country, the result being local currency depreciations and banking crises. California boosters like to point to the fact that California, if it were a country, would be perhaps the fifth largest economy in the world. But the fact is that states such as California are potentially what one columnist termed “Our Banana Republics.”19 Of course, since California has no currency of its own, it cannot have a currency crisis. And its banking system operates largely under federal auspices and regulation and therefore is protected from an Argentine-style meltdown. However, the state’s credit standing can be degraded by excessive debt burdens, ultimately leading to higher interest payments and even difficulty in obtaining credit and providing services to Californians. Three major financial reporting services rate California’s General Obligation and other securities. Standard and Poor’s downgraded the state’s general obligation bonds to from AA to A+ with negative implications in April 2001. That same month, Fitch added a negative outlook watch 30 to its AA rating for such securities. And Moody’s dropped its rating from Aa3 to A1 in November 2001.20 It is unlikely that these ratings will be upgraded until structural problems related to the state budget are seen as being addressed. But further downgrades from current levels remain possible. It is widely thought that the California constitution mandates that the state’s annual budget be balanced. In fact, the constitution simply says that early in each calendar year, the governor should submit a budget and, if proposed revenues fall short of expenditures, there should be an explanation of where the additional revenues will be obtained. This obligation is itself fuzzy since the additional “revenues” could be obtained by running down reserves or by borrowing. There is no language requiring that the Legislature pass a “balanced” budget, whatever that term might mean. The constitution requires that a prudent reserve fund be established, but leaves it to the Legislature to determine what such a level might be.21
Key to the US Economy

Directory: files
files -> Answer True False 2 points Question 2
files -> Integer programming and game theory
files -> 4 Integer Programming
files -> Bpa vehicle Window Repair Scenario #1 task: Procure vehicle window relacement. Objective
files -> Pop Warner History
files -> North Carolina Inclusion Initiative Mapping Where Children with ieps are Being Served Purpose
files -> Fall 2013 Spring 2014 Program Data: Standard 1 Exhibit 4d
files -> Hanban – asia society confucius classrooms network 2010 request for proposal
files -> Northern England’s set-jetting locations

Download 0.94 Mb.

Share with your friends: