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Too many issues to shake a stick at! The State of California is a truly shocking example of mixed up priorities when it comes to government spending. California, as its own state, ranks 8th in World GDP. It sits in the epicenter of an economic fault line. The entire cycle of economic collapse is shaking its communities to the core. Mortgage and credit default couples with radically reduced property values. A housing surplus kills off new construction. Both impact property taxes. Add a drought that has effectively cut off water from major farming communities like Mendota where unemployment is as high as 41%. California's revised its budget twice in the past year to try to accommodate the economy, and still came up with a $24 Billion budget shortfall.

Mendota! California's budgeting priorities are misguided to the extreme, focusing on state spending vs. economic preservation. You will find the Mendota high school and public library, very modern facilities, near the end of the this video clip. It is one thing to have nice schools when you can afford them. However, because of subordinate water rights, towns like Mendota are essentially being cut off from water. That impacts jobs. Recently, the Central Valley lost 29,000 jobs in one month - mostly from agriculture and construction. Fresno County was the #1 agricultural producing country in 2007, and surrounding areas are also high producers. So, for water issues to hit farming will play out with higher prices throughout the United States. And, while eyes focus on California's drought, the east coast is being hit with blight of the same variety of the Irish Potatoe Famine. Too much to look at, too much to consider - but it all needs to be looked at because it effects you and your neighbor.

But, the federal government completed building the Medota Federal Correctional Institution in 2008 to house another 1,300 inmates while employing about 300 staff. So, perhaps we should cheer? If there is no water in the area, there will be no jobs, and the town will cease to exist as people move away. Those public buildings are very nice, but they are a waste. While this zooms in on one specific community, the issues are pervasive throughout California - applying to varying degrees but all headed in the same basic direction.

Unemployment: The official U-3 Unemployment Rate presently is 11.2%; up from 7.2% in 2008, and 5.4% in 2007. The U-3 number does not include discouraged workers, marginally affected workers and those who are wanting full-time work but are forced to take part-time jobs for economic reasons. The U-6 number in California, according to some people, could be approaching 20%. We can add to this California state workers being required to take 3 days of unpaid leave from work each month. For as bad as all of this sounds, it is necessary to look at the velocity or rate at which California's unemployment is increasing. Trends are not indicating that it is leveling off. If unemployment has increased from about 8% to 11.2% in just 7 months, that sort of indicates that U-3 indicators could increase to 14% before 2010.

Crime: Total Violent Crime and Murders in California maintained between 2004 and 2007, dipping slightly in 2007:

Total Violent Crime/Murder 2004: 189,175 / 2,392 2005: 190,178 / 2,503 2006: 194,120 / 2,485 2007: 191,025 / 2,260

However, 2008 statistics have not been released to the public, so it will be interesting to see how California's crime correlates to the economic decline. As with the rest of the nation, firearms are the primary weapons used in homicides - 72.4% in 2007 according to the Youth Gang Violence and Guns: Data Collection in California" (opens in new window, 1.2 Mb PDF) produced by the Violence Policy Center. Handguns account for 85.2% of all firearm related homicides in California for 2007. To put this in perspective, since our invasion of Iraq in 2003, the United States military has had 4,316 service members killed over the course of six years (as of June 24, 2009). In a sense that is like comparing apples and oranges, but considering California is not technically a zone of conflict, it is still unsettling.

The Long-Term: While the California Legistlature and Governor Schwartzenegger have finally reached a budget deal, its problems are not solved. The point of fact is that this is the third time in less than a year where efforts to address declining state revenue has exceeded budget corrections. There are no signs of improvement, jobs are still being lost, foreclosures are continuing, state revenue will continue to decline. It is engaging in a reactive, not a proactive manner, to the crisis. The consequences of that are not only to effectively cut down benefits, state employee salaries, and let somewhere in the area of 27,000 more prisoners onto the streets, but impacts credibility of the government on its finances. If we consider that the the economic factors that have led the way to 11.2% unemployment continues to 14%, we will be watching California hashing all of this out again by February of 2010.

We like to look at profits in exponential terms, and feel that losses should stay relatively incremental over time. Eight percent unemployment is not that much worse than seven percent; 11% not much worse than 10%. However, there is only so much stress that you can apply to a system before it begins to bend and break. That's the point we go from incremental losses to exponential losses. It's dark and dismal to look or even contemplate the United States economy in this way. The possibility to see worse case scenarios is increasing steadily, and it is worth it to consider preparing for these possibilities.


Stories in the News:

  • California school closed after pipe bomb attack - SAN MATEO, Calif. – A teacher being hailed as a hero said Tuesday he had no time to think when he encountered a 17-year-old boy who detonated two pipe bombs at a Northern California high school while armed with a chain saw, sword and explosives. By Jason Dearen, Associated Press, August 26, 2009

  • Killings defy LB crime trend - Homicides in Long Beach rise over a year ago. Official calls the spike unusual. Tracy Manzer, Press Telegram, Long Beach, CA, March 7, 2009

  • Mexico drug gang killings double - Making news all the way down in Australia - A record 943 people were killed in the month of November alone, most in the northern border states of Chihuahua and Baja California - key trafficking routes into the United States - and in the northwestern historically drug-producing state of Sinaloa, Medina Mora said. The Australian, December 9, 2008

  • FBI: Burgeoning gangs behind up to 80% of U.S. crime - Criminal gangs in the USA have swelled to an estimated 1 million members responsible for up to 80% of crimes in communities across the nation, according to a gang threat assessment compiled by federal officials. Kevin Johnson, USA Today, January 29, 2009

  • Gang Warfare - Criminals have found a new way to hone their combat skills: joining the U.S. military. According to the FBI, “Members of nearly every major street gang … have been documented on military installations both domestically and internationally. - The American Conservative, May 5, 2008

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