Berkeley – While the new Obama administration is commanding global attention, America’s future may be written – as so many times before – in and by its largest state. Once the lodestar for American optimism and achievement, California now illustrates the difficulties confronting the United States – and how much more can still go wrong domestically.
The most populous and wealthiest of America’s 50 states, California has long been a beacon of opportunity for talented and enterprising people from all over the world. One in every four California residents was born in a foreign country. California’s two most famous industries, Silicon Valley and Hollywood, depend on infusions of talent from abroad. Its robust agricultural sector is a massive exporter of food, benefiting from the growing appetites of consumers in developing countries.
Yet California’s technological and entrepreneurial might – standing alone, the state would be the world’s eighth largest economy – coexists with a dysfunctional political system that has brought it to the edge of fiscal bankruptcy. On May 19, the state’s voters, in a special election, rejected an array of tax increases and spending cuts required to balance its budget. Now, California faces either an embarrassing federal bailout or a prolonged period of rule by judges, who under California law have the power to vacate labor agreements, abrogate contracts, and generally restructure the state’s financial commitments.