December 22, 2007 (LPAC)--California Governor Arnold Schwarzenegger dumped a huge lump of coal into the Christmas stockings of Californians yesterday, when he announced that he would declare a "fiscal emergency" on January 10, and that his administration is preparing "deep cuts" in the state budget. The unfolding of this crisis has forced Schwarzenegger to drop his usual optimistic persona, as he told reporters that the situation is "very bleak." With the estimated budget deficit now at $14.5 billion for fiscal year 2008-09, and a shortfall for the remainder of 2007-08 now at over $3.3 billion, department heads of all state agencies are putting together a plan which starts with at least 10% across-the-board cuts.

Those areas bracing for the worst cuts include education, health care, social services, and the penal system. Leaks have been made to prepare people for these cuts, with a figure being floated of $1.4 billion taken out of the education budget, and a proposal to release 22,000 nonviolent prisoners with less than 20 months remaining to their sentence, drawing fire from Republicans.

The most obvious problem in the discussions thus far is that there is no one addressing the real problem, which is the accelerating disintegration of the global financial system. The dramatic collapse of revenue to the state has resulted from this disintegration, as the once-powerful agricultural-industrial economy of California has been dismantled, with hundreds of thousand of jobs lost in manufacturing in the last twenty years, replaced by low-wage jobs in services, tourism, and entertainment. With legislators caught up in the phony debate of more cuts versus more taxes, there is little prospect for a solution emerging, unless the courage is found to break the control, by George Shultz and Felix Rohatyn, over the political debate.