California budget crisis could bring lasting economic harm

The short-term pain of budget cuts could pale next to a long-term loss of companies and academic talent.
By Martin Zimmerman, Marc Lifsher and Andrea Chang
Los Angeles Times
May 23, 2009

As bad as California’s budget crisis is for the state’s $1.8-trillion economy, just wait. It could get worse.

The spectacle that played out in the national media this week of a state unable to get its fiscal act together is reinforcing the notion that the Golden State is a rotten place to do business, experts say.
.
Corporate leaders and Wall Street investors, watching the daily festival of seeming incompetence, political partisanship and governmental dysfunction, could be persuaded to limit or eliminate their investments here.

“We lose competitive advantage by being the state that can’t solve its problems,” economist Stephen Levy said. “Regardless of what we think the solution is, the fact is we can’t find a solution.”

The budget crisis threatens to further weaken the state’s job market, which lost 63,700 more jobs last month, according to figures released Friday. The state’s overall unemployment rate actually fell slightly, to 11% from 11.2%. But new job losses could prolong the vicious cycle in which the California economy is now trapped, with rising joblessness reducing consumer spending and delaying a housing rebound, thus leading to more layoffs.

Read the rest:
http://www.latimes.com/business/la-f
i-cal-econ23-2009may23,0,1242793.story

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