July 28, 2007 (LPAC) - The real problem for California is not with the 2007-08 budget -- which appears to be hopelessly stalemated -- but with the accelerating collapse of the state's economy, spearheaded by the popping of the huge real estate bubble, which had been responsible for higher-than-forecast revenues for the last four years. These revenues are drying up. It is now expected that California will have at least a $5 billion deficit for the next fiscal year. Instead of addressing the underlying cause of this deficit - the collapse of the physical economy, which is gaining momentum - the Governor is pretending he is addressing it with this year's budget cuts, while lunatic Republicans are demanding more cuts now, in anticipation of even more massive triage next year.

The latest economic reports, despite efforts at massaging by federal agencies in Washington, give some indication of the problem. Only 400 jobs were created in the state in June, with the housing slump largely responsible. Stephen Levy, senior economist for the Center for Continuing Study of the California Economy, said that the housing slowdown is "finally having an effect on the job numbers." In June, jobs were lost in the financial sector - mortgage brokers, real estate agents, finance and credit professionals - as well as in construction, manufacturing and transportation. One prominent economist told EIR that there are "much more serious problems coming," as the credit crunch is "just beginning to hit." The only jobs being created are low-wage, in tourism and the service sector. "California has been living a charmed life. Those days are now over," he added.

Meanwhile, the Governator has been busy hob-nobbing with Tony Blair, Nikolas Sarkozy and other world leaders, discussing how he will make California the model Green government in the world. He has been relying on the Democratic Party leaders in the Assembly and the Senate to push through his budget, which is draconian -- though not enough for the Republicans -- by promising them he will promote stronger "climate change" policies in the future. One leading Democrat, who has been following closely the LaRouche-led mobilization to get rid of VP Cheney, compared the lack of guts of Democratic elected officials in the state, who are doing Schwarzenegger's dirty work, to those in the U.S. Congress, who are refusing to take on Pelosi to impeach Cheney. He called it a "spectacular epidemic of negative testicular fortitude."