California’s Economy

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What is economy? Little do most people know it is the backbone of everything we depend on, such as electricity, stores, schools, and hospitals. Our economy is made up of taxes, jobs, imports, exports, energy production and use, and goods and service production. These all depend on each over. Like a line of dominos, if one falls they will all fall. Our present economic situation is severe and in desperate need of repair. Every single person in California depends on the economy in one way or another. If it fails, we all suffer. A good example of where we are headed is The Great Depression, one of the worst economical eras ever. California spends more than it makes, has a huge deficit to other countries, and has the worst economy compared to all the other states in the U.S. The plans to correct these problems need to be more carefully planned out since previous attempts to fix it have done nothing but made the situation worse.


The economy is supposed to be a working team, instead, in California; it is a struggle to survive. The state spends more than it makes. California imports cost $1.0 billion dollars in January, 0. The export profit was only $81. billion. This means that there is a deficit of $41.1 billion in trade in just one month (BEA news 1). The huge debt there shows just how much money this state loses. Last spring, California had $8 billion surplus dollars, now it has dropped $.6 billion dollars in deficit in total profits. This is one of the biggest drops in history (Wright 1).


We depend on other countries to help us survive as well. Japan was the best buyer of American goods, but due to its recent deflation it has been having troubles. “The Nikkei stock average, which hit a fifty-two week high of 0,8.1 last April has since lost forty-one percent of its value, closing yesterday at 1,.8” (Calbreath ). California spends an excessive amount more than it makes. Our Governor Gray Davis is going to use the budget to buy a $0 million dollar expansion to the death row prison system (Martin 1). This state is in debt and is spending money it doesn’t have on non-profit sections of the state, such as this prison system. We should be trying to make money, not spend more to get deeper into debt.


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Due to the huge debt California will need to cut more programs, which means they will lay off workers, contractors will get less money, and less benefits payments will be given (Lav 1). “The entertainment industry lost 10,000 jobs in the past three years” says Charles B. Slocum. He is concerned about this since he is in the entertainment business. He points out that this is happening because big corporations are eliminating small businesses because they can’t compete with them. This is bad for the economy because the big studio corporations will only use the minimal needed people to do the job, which eliminates many jobs (1).


Even kindergarten classes will lose one to two billion dollars more. They were already receiving only half of the budget they should have been getting (Wright 1). With less money we will have to have more children in every classroom because there won’t be enough money to run all the classes. Colleges are suffering as well; in fact UC’s budget is receiving 00 million less dollars than it would be getting if the state would have gave normal payment increases (Atkinson 1). Every time the economy struggles, they cut education funds. The education budgets going down will only cause worse education, which will lead to less and less educated people. This will lead to the average intelligence level dropping. The congested highways will only get worse since plans for building public transportation will be delayed. People will have to pay higher health care prices because of less state funding. The unemployment rate will rise because of lay offs (). We depend on all these people to do their jobs for us, and if they get laid off, who is going to do the work to keep up with the demands of this state?


California demands much more than we can keep up with. For example, the states expected energy consumption for the next 0 years is exponential. Its demands will be hard to meet by power companies and it is possible to have more rolling blackouts. No power will lead to a halt in production since factories depend on the power plants. In fact experts have predicted that California will use thirty percent more electricity and sixty percent more natural gas than it uses now in the year 00. The state cannot keep up with the demands of power for the future. Experts predict that within the next twenty years, electricity will become limited and very expensive, much like gasoline is now (Brown 1). Our hospitals and health care will be affected as well. Gov. Gray Davis is going to cut Medical Benefits fifteen percent, which will put as many as 700 nursing homes in trouble (Medical 1). If the medical care drops, there will be more and more sick people, and more diseases spreading.


California’s deficit is so bad that it is one third of the total deficit of all fifty states. For the fiscal year of 00 the budget deficit will be $6.1 billion dollars, while the other states together will total to $11.4 billion. Many agree that it is Gov. Gray Davis to blame for this. Dorota Pekala, a teacher in Sacramento, believes we should recall Gov. Gray Davis and reduce the government administration funds (Interview 1). In a recent ballot only thirty-three percent voted they agreed with what Davis is doing (Davis survey 1). Maybe impeaching Davis would help this crisis, since his decisions have only made our economy worse.


This predicament in the California economy is said to be “The most dramatic plunge in revenue since World War II”(Kleffman 1). Our import and export profits have dropped as well. The revenue is much more dependant on personal income tax. In fact, forty years ago personal income tax only accounted for eighteen percent of the general revenue, now it is forty-eight percent (1). The State government has noticed the dilemma of the current economic situation. They have made many attempts to fix the economy. Most don’t turn out too successful. Even with most of his or her mistakes, no one has improved the strategy. A recent one from President Bush is a good example of this. The plan was supposed to cut taxes, encourage job openings, and help unemployed workers find jobs. It would also have excluded tax income from corporate dividends (Lav 1). This means that people with shares in the stock market would not have to pay taxes for their stock. This tax cut is predicted to lose California four billion dollars a year. The tax cut would also eliminate income taxes for small business investment (1). This is not as significant but will still lose the state $00 million dollars. Because the state must cut programs to balance its budget more jobs are getting eliminated, which leads to more unemployment. This is supposed to be encouraging job openings, not closing them.


We should take action to stop our economy from sinking more. We should repair our deficit quickly, and also create more jobs to increase our revenue instead of cutting programs and reducing the workforce. A few steps would help to improve the present economy, such as getting rid of Gov. Davis, stop spending money we do not have, and working on selling more goods to other countries, instead of depending on personal income taxes and cutting funds from needed places. Whatever needs to be done, it needs to be done fast, as our economy is important to each and every person.


Work Cited


Atkinson, Richard C., Present Challenges of a Research University, Berkeley, March 17, 17, http//www.ucop.edu/pres/comments/challenge.html


Brown, Stephen P. A. (001), A Wake-Up Call in California, Federal Reserve Bank of Dallas Expand Your Insight, March 1, http//www.dallasfed.org/eyi/usecon/010elec.html


Calbreath, Dean, Japan Facing up to Its Bad News; Its Ours, Too, San Diego Union-Tribune, March 17, 001,


http//www-irps.ucsd.edu/irps/innews/sdut-01701.html


Christy, Jack, “Proposed Medi-Cal Benefits Reduction Would Worsen Financial Situations for Nursing Homes, Study Finds,” California Healthline, May 14, 00,


http//www.aging.org/i4a/pages/index.cfm?pageid=5


Foss Brad, “Airlines Ask Labor Cost Cuts,” Washingtonpost.com, 0-04-0,


http//www.commandcollege.com/futures_files/abstracts/0000000.htm American


Gray Davis Survey 00 PPIC Statewide Survey December 00,


Public Policy Institute of California


in collaboration with the


University of California, Irvine


http//data.lib.uci.edu/ocs/00/report/0approvalratgov.html


Kleffman, Sandy, “FACES OF THE CALIFORNIA BUDGET CRISIS,”


CONTRA COSTA TIMES, Mar. 05, 00 http//www.bayarea.com/mld/cctimes/news/state/508.htm


Lav, Iris J., “BUSH “GROWTH PLAN” WOULD WORSEN STATE BUDGET CRISES,” Center on Budget and Policy Priorities, January 0, 00,


http//www.cbpp.org/1-8-0sfp.htm


Martin, Mark, “Demo opposition rises on Davis plan for new Death Row,”


February 0, 00,


http//www.cjcj.org/press/davis_plan.html


Pekala, Dorota, Interview, 5-1-0, Phone


Slocum, Charles B., “WGAw to Sacramento Pols Size Does Matter!,” WGA News, /1/0,


http//www.wga.org/pr/00/slocum.html


Wright, David, “Budget Blues,” ABC News Online, May 14, 00


http//abcnews.go.com/sections/wnt/DailyNews/state_budget00514.html


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