If this continues…we may as well rename the country “The Bankrupt States of America”.
Californians don’t see much evidence that the worst economic contraction since the Great Depression is coming to an end.
Unemployment was 12.4 percent in May, 2.7 percentage points higher than the national rate. Lawmakers gridlocked over how to close a $19 billion budget gap are weighing the termination of the main welfare program for 1.3 million poor families or borrowing more than $9 billion in the bond market. California, tied with Illinois for the lowest credit rating of any state, is diverting a rising portion of tax revenue to service debt, Bloomberg Markets magazine reports in its August issue.
Far from rebounding, the Golden State, with a $1.8 trillion economy that’s larger than Russia’s, is sinking deeper into its financial funk. And it’s not alone.
Even as the U.S. appears to be on the mend — gross domestic product has climbed three straight quarters — finances in Arizona, Illinois, New Jersey, New York and other states show few signs of improvement. Forty-six states face budget shortfalls that add up to $112 billion for the fiscal year ending next June, according to the Center on Budget and Policy Priorities, a Washington research institution. State spending is 12 percent of U.S. GDP.
The lesson from Greece (which a 5 year old can understand) is that spending more than you make will bring you to financial ruin.
Governments can increase taxes, but eventually taxes are paid by people who need jobs to pay taxes. Or by businesses that make money… governments do not create jobs – they tax you and take part of your paycheck and call it theirs.
High taxes cripple businesses and drive up cost of doing business. That doesn’t help the economy – example; Hollywood films and TV series are now moving to places that offer lower labor costs, no unions, lower taxes and more tax credits. “The Blind Side” was moved to Georgia, “Green Lantern” (set for next year release) went to film in Louisiana. Canada (and British Columbia in particular), Ireland and New Zealand, among others, have been aggressively luring film companies in part by drawing production away from Hollywood – like Avatar, Spartacus: Blood and Sand, The Last Airbender (went to film in Pennsylvania and Greenland).