Monday, November 24, 2008

A review of the Californian Economy Nov: 08

The current economic climate is bleak; in fact, for most, it is down right terrifying. While I celebrated (and continue to) the victory of Obama I have not fooled myself into believing that this will immediately solve any of our economic crisis'. America's current unemployment rate is at 6.5% and California's is at a whopping 8.2% making it the 3rd highest in the country. Since most analyst seem to think this is only the beginning things are going to get worse and not just on the job front (if you look at the previous article, they are estimating unemployment rates at at least 9.9% in 2010).

This is going to put a huge burden on the already draining unemployment insurance funds. According to the associated press, California's Unemployment Fund is “expected to have a deficit of $1.6 billion at the end of 2009” now, if we link that to what we saw above something terrible and terrifying comes out. Unemployment Insurance is paid for by from taxes taken out of people's paychecks. The fewer people out there with jobs, the less is paid into the fund. If, at the same time we have record highs of people who are applying for these funds, California will have to consistently borrow from the federal government. This is in addition to the record high deficit expected for the State of California. It is estimated that in 2010 there will be a deficit of $28 Billion dollars.

This deficit comes in the face of demands for social services, higher education funding and the aforementioned job loss rates.

All signs point to 2010 being a horrible horrible year for California if solutions aren't generated.

California's Leadership has already started to take actions to try and curb the oncoming crisis. Senate Pro-Tem Elect Darrel Steinberg, Assembly Speaker Karen Bass and former Pro-Tem Don Perata wrote a joint letter to Governor Schwarzenegger in October requesting that the Governor work with Congress in trying to bolster the economy of California and Karen Bass has been rather vocal in her requests.

It is estimated that the stimulus package will mainly fall to infrastructure; the creation and repairing of roads and rails. Many municipalities need such help seeing as many roads are being left unpaved because of increasing prices of materials. This was as a result of oil prices and demand from China. This stimulus package will create jobs and give a little bolt to the economy but it is still a band aid on a broken bone.

Until some form of a real solution is found, I am still going to be nervous, as I assume most others will be as well. Until then.

-Andrew Kornblatt

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