Will California's Economy get Terminated?

The irony of what has happened to California is almost enough to put Arnold back to work as the one thing that could put the state out of its misery.  John Judis takes a long, hard look at California to wonder: Is this the end of the dream? Or will something else come along, a la Silicon Valley or biotech, to divert the state from its unsustainable course?  CA unemployment just hit 12.2% last month a 70 year high. To be or not to be -- terminated.

(tnr.com - J. Judis) California is a mess, but I love it all the same--especially the Bay Area, where I lived for 15 years. I went to Berkeley in 1962--a refugee from Amherst College, which at that time was dominated by frat boys with high SAT scores. I didn't go to Berkeley to go to school, but to be a bus ride away from North Beach and the Jazz Workshop. In a broader sense, I went to California for the same reason that other émigrés had been going since the 1840s. I was knocking on the Golden Door.

Immigrants from Europe had come to America seeking happiness and a break with their unhappy pasts. But many Americans--from the '49ers of the Gold Rush to Mark Twain to a young Ronald Reagan--had gone to California to find renewal. California was part of the American frontier, but, as Carey McWilliams points out in California: The Great Exception, it developed outside the framework of the American frontier. It was not an extension of the East or Midwest, but became a state in 1850 before other Western states. It was an island in the sun without Pilgrim winters or windswept prairies. It nourished its own dream of wealth and well-being. It was the American dream all over again, but dreamt within America.

California has fulfilled many of those dreams. It has extended and enhanced the promise of America--from the discovery of gold to the introduction of the movies and television, the aerospace industry, Silicon Valley, and the Central Valley's giant farms that supply a quarter of America's food. It has also been a political and cultural vanguard--from John C. Fremont, the first presidential candidate of the anti-slavery Republican Party, to Progressive Governor Hiram Johnson, Socialist Upton Sinclair, old-age-pension agitator Francis Townsend, and down to Richard Nixon, Earl Warren, and Reagan. The New Left staged its first mass protests in Berkeley. Gay rights came out of Los Angeles and San Francisco. And the New Right was spurred by California's tax revolt and by the backlash against illegal immigration.

I was drawn to California by Jack Kerouac's On the Road, but, by the time I arrived, the era of the beatniks was over. The Caffé Trieste had become a tourist hangout. Still, within a few years, I was trekking to the Fillmore to hear the Grateful Dead, living in sin, smoking pot, and marching against racial discrimination and the Vietnam war. That heady period, marked by the Free Speech Movement and Haight-Ashbury, faded by the early 1970s, but it helped inspire the rise of Apple, the personal computer, the movement for open-source software, and, later, the virtual community of the Internet and the dot-coms. (This is not some oddball observation of mine: It's documented in Steven Levy's book Hackers and in John Markoff's What the Dormouse Said: How the 60s Counterculture Shaped the Personal Computer.)

But could California's days as a politico-cultural vanguard and economic bellwether be coming to an end? The state has endured swings and has come back better than ever. Writing in 1949, with unemployment at 14 percent, McWilliams questioned whether California exceptionalism had finally come to an end, but, with the onset of the cold war, Southern California benefited from an aerospace boom. Again, in the early 1990s, California seemed to be falling into a black hole: Cutbacks in military spending decimated the state's defense industries, and, by the end of 1992, unemployment was 9.9 percent, 2.5 points higher than the national rate; that year, Kemper Securities rated California's economy fifty-first in investment prospects among the 50 states and the District of Columbia. But the growth of dot-coms, a global entertainment industry, and biotech led its rebound.

Last month, California's unemployment rate hit 12.2 percent, a 70-year high. Its bond rating is the lowest of the 50 states. Earlier, the state government had to issue IOUs. Its political system--once the envy of other states--has become dysfunctional. And its educational system, which former University of California president Clark Kerr described as "bait to be dangled in front of industry," is riven by conflict and reeling from budget cuts. Is this déjà vu all over again, or has the California dream finally become a nightmare? There are troubling signs.

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SOURCE: http://www.tnr.com/article/politics/end-state