California will go bankrupt

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You can see this coming.  It is looming and has been for some  time.  Remember that California is the biggest loser in the housing crash and it has one of the highest unemployment rates in the United States.  I have been warning that this would be  a problem since last Fall when it was evident that revenue was going to come up short (see my post “Is the State of California bankrupt?)”.  The Wall Street Journal discusses the potential for bankruptcy in the video below.

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I have said that Obama would step in here.  This is an option discussed in the video.  It will not be an easy politically for Schwarzenegger or Obama.

You should also note that tax revenue is a lagging indicator. The Journal’s blog Real Time Economics did a good job of pointing this out and putting some statistics together on state tax revenue.

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