CA is in sort of a lose-lose-lose position here.
Without previous federal help, they would have already had to default. Tax raises will merely postpone things for a while, but when you see that CA already printed a 50% drop (yes 50% - it sounds ridiculous, but it's the real number) in sales tax revenue in April YoY, you have to wonder how long things can be postponed.
As an aside, this is an example of why the "recovery is happening" theory is presently a load of crock. Government can screw around with a lot of numbers, other numbers can be overhyped by certain folks wanting to hype (the "less bad" news = "good" news game), but sales tax numbers are an example of numbers very hard to play around with. They are what they are. When there are actually "good" numbers instead of "less bad" numbers and a lot of the numbers that are hard to play around with don't say "disaster is coming", I'll start believing in a recovery.
Anyway, cutting spending is not going to happen with the Sacramento lawmakers. I guess they could still raise more debt - investors are still heading for the high-risk debt instruments and I still think there's a few more months of this play to continue before it rolls over.
Yes, CA is ****ed. Long-term, short-term, whatever. This vote is merely a speed-bump or a foot on the gas pedal
The real estate market in California the last month has turned a bit Sam outside the toxic zones (down market exurbs and the overbuilt desert). I think the odds of your interesting economic scenarios coming to pass are declining Sam, primarily because the economic paranoia out there, is well, getting less paranoid. In economic, paranoia is real, which is why that is one field it needs to be carefully studied and monitored. One just can't take a pill.
