California Meltdown

Unlike the US federal government, which has unlimited borrowing power, plus the ability to print money as it needs, states are pretty much screwed when they face a budget deficit.

Such is the case in California, which is facing a $24B deficit, and has access to only $10B in loans, if that.

There were several ballot measures last week which would have increased taxes in order to make up for the deficit, but these were defeated.  Governor Schwarzenegger has said that there will be drastic cuts in service.  Everything from cutting healthcare to children (which is bad) to paroling non-violent prisoners (which is good).  

It will be interesting to see how this plays out.