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California suffering from internal injuries

By   /   Friday, December 19th, 2008  /   Comments Off on California suffering from internal injuries

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Just as the 1990s ended with global problems looking smaller and smaller, the first decade of the 21st century is ending with mega-problems looming everywhere.

These are big things that really demand more than Band-Aids and quick fixes.
Here is a closer look at four of them:

• California’s budget mess. All of the parties involved in creating the budget mess have to give and give and give. State employees need to make a lot less, taxes and user fees need to go up and perhaps the entire budget approval process needs a major makeover. But as long as California runs $10 billion to $14 billion in the red year after year after year, the state simply cannot fulfill its mission to protect its citizens and provide services. Gov. Arnold Schwarzenegger has been adept at papering over problems but he has not driven a stake into the heart of the standing deficit.

• The auto meltdown. Nothing has been more frustrating than the off-again, on-again dance taking place in Washington while Detroit’s future hangs in the balance. A bankruptcy or quasi-bankruptcy now seems the likely outcome for these troubled companies. What has been missed in all of this is that Toyota, Honda and others are a lot farther ahead than GM, Chrysler and perhaps Ford in liberating their car business from the oil industry. The separation of Detroit from OPEC is the only acceptable outcome of a massive government investment in the car business.

• The housing mess. Like Detroit and the California budget, there are seemingly intractable problems on the housing front. It’s not possible to write down mortgages without financial people all around the world taking those mysterious “haircuts.” Extremely hard work and, yes, some very tough decisions will have to be made to unravel the excesses of housing. It will not be fair and it will be ugly at times, but the key is to get housing markets to reset, even if at much lower prices temporarily, so that capable buyers can take over.

• The Hollywood contract. The region’s economy is more dependent than people think on what happens in Hollywood. That’s partly because the entire economy of Southern California is dependent on the movie industry. And partly because our region is the home to plenty of people working in Hollywood, including technical and production types as well as mega-stars and big name producers. A strike by the Screen Actor’s Guild would be extremely damaging to the region’s economy and, in particular, the sale of luxury goods and luxury homes.

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