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Although there is no formal definition, most economists agree a depression is a prolonged slump with a 10% or more decline in real GDP.

By that definition, California is entering a depression, a locomotive engine plunging off a missing bridge, pulling 49 hapless states behind it.

Our incompetent national media makes it sound like it's just another wacky California problem, more silliness from the land of fruits and nuts. We've got an Austrian action hero as Governator, a dysfunctional legislature with an absurd 2/3 requirement to pass a budget or a tax increase, and an electorate that keeps voting for stuff like bullet trains and stem cell research, while pushing through tax cuts. Sell California to the Scientoligists. Ha Ha.

What nobody is noticing is how much worse the downturn is in California than elsewhere, and how it's going to get far worse. The green shoots that you might see in Texas aren't happening in cities like Soledad or Gonalez where the unemployment rate is 21.5%, or for a neighborhood in San Bernardino, where home prices have dropped 84% from the peak.

On a statewide basis, year-to-date sales tax collections were down 11.8% while income taxes are down 20.7% from last year's totals through May. If the definition of depression is down 10%, then we're past that mark.  

New housing starts are down 84%. The state has lost 26% of its construction jobs, compared to 16% nationally, and 7% of its retail jobs, compared to 4% nationally.

The draconian cuts to California's state budget being pushed by the Worst Governor Ever and his minority Yacht Party members threaten to send another devastating wave of job cuts through the economy.

Nobody's done the math on the fiscal effects of the twenty billion in spending cuts proposed by the Governor, but let's take some guesses.

Including money lost in federal matching funds, and the multiplier effect, let's say the total lost economic activity is somewhere around 35 billion. That's 2.3% of the state's 1.5 trillion gross product gone, 3.5 billion in state and local taxes gone, 400,000 more unemployed, an unemployment rate jumping another 2% (and it's already at 11%), thousands of people forced into nursing homes because their home health care coverage disappeared, higher medical insurance rates for those with coverage, another billion dollar hit to our unfunded debt for unemployment insurance, thousands of additional failed small businesses, tens of thousands of additional homeless people, tens of thousands of additional homeowners pushed into default and foreclosure.

Not only does Schwarzenegger want to eliminate all welfare and eliminate the SCHIP program in California, but we know that his other cuts involve primary job losses for tens of thousands of teachers, tens of thousands of other state and local government employees, and tens of thousands of health care jobs. As the job cuts ripple through the economy, every sector is affected.

California finances had been pillaged and plundered before the recession hit, with seven billion in absolutely irresponsible tax cuts under Schwarzenegger even before the latest round of corporate tax cuts. (bizarrely, many tax cuts are shown as increased expenditures). The Governator borrowed recklessly, and his actions accelerated problems which include a barbaric and insane prison system and a completely unfair property tax system.

This diary isn't prescriptive, but rather a message to the passengers in the forty-nine cars that will follow California into the abyss. California is in a depression, and we're big enough to pull the rest of you down with us. Obama may have won the national election, but Republican ideologues will still manage to bring Shock Doctrine tactics to California because of the gains made by conservatives going back to the last Depression, when the 2/3 budget rule was instituted.

Progressives need to pay attention to what is happening in California, and we need national intervention from President Obama. Without his voice, and his ability to command media attention, progressives who understand the structural change have no voice in the corporate media.

Originally posted to Aeolus on Thu Jun 11, 2009 at 11:09 AM PDT.

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