Since Governor Schwarzenegger took office in October of 2003, he rode in promising no tax hikes and sent a very unpopular vehicle fee out the door along with Gray Davis. He has faced issues with budget delays but nothing like the current short fall. The Governor announced plans for declaring a fiscal emergency in January since the state’s budget deficit has grown from $10 billion to $14 billion:
“SACRAMENTO, Calif. – Gov. Arnold Schwarzenegger said Friday he will declare a “fiscal emergency” in January to reduce an anticipated $14 billion budget deficit, pressuring lawmakers to fast-track spending cuts and other solutions.
The Republican governor has signaled that he wants to cut spending across the board in state programs, while Democratic leaders have said that both spending reductions and tax increases need to be considered.
It will mark the first time the Republican governor has used the “fiscal emergency” authority that he asked voters to approve in a 2004 ballot measure.”
The deficit is deep enough to cause serious cutbacks and potentially a reneging on his promise of no tax hikes. During the past four years, the
Yet there are ominous signs now showing through the states economy. The financial and political wizards tried their best to build a fortified wall against the toxic credit pool, but it appears that the damn has now broken and is spilling all over the lands of this country.
In this article, we will examine the pillars of the
The current contraction in construction and financial services has hit the golden state particularly hard. Unemployment in the state has increased almost 1 percent since last year going from a low of 4.7% in November of 2006 to our current 5.6% in October of 2007. During this same timeframe, the
Clearly the impact is being faced disproportionately here in the state because of the heavy reliance on the housing and mortgage industries. This will also have an impact on the state’s bottom line since someone that isn’t working will not be paying any state income tax. They will also hold back from purchasing homes.
Building permits are a good leading indicator because before you build any future homes, you first need approval. The current permit numbers are abysmal in
Keep in mind the last time we had numbers like this we were at the end of a bursting housing bubble in
Foreign Trade through
There was a time in the not too distant past when imports and exports to the state were relatively even. We’ve been running trade imbalances since the 1970s but never has the percentage been so drastic. Take a look at data from 1993-2006:
What these numbers show in a very direct way is what every member of the state already knows. That is, we are spending a lot more than we are producing. Take 1993 for example. In 1993 we were importing 52% more than what we were exporting. In 2006, the imbalance leaped to an astounding 133%. This cannot go on forever and the insatiable consumer appetite will affect our foreign trade partners. For all the talk that a lower dollar will make our goods more lucrative, it doesn’t hold much water since we don’t have that many goods to export and their own growth is very dependent on our spending.
Auto registrations are a good way to keep track of new automobile sales. I think this will be another casualty of the credit debacle. After all, car dealers wouldn’t survive without financing and financing wouldn’t survive without easy credit. Now that easy credit is slowly going away auto sales are starting to feel the pinch here in the state. Take a look at the trend for auto registrations:
Couple of things to notice. First, you’ll notice the amazing jump starting in 1997. Coinciding with the real estate bubble it appears that we also had an auto bubble. The numbers hold steady from 2000 all the way to 2006. The only difference this year is that the numbers did not have their spring and summer jumps and we are entering the slower selling seasons of fall and winter. What happened to real estate in
“The slumping housing sector continued to weigh on the national and
That is succinct and to the point Governor.
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