By: Dr. Mike Campbell
With a political standoff blocking the passage of a budget for more than a month and the funding to run the state drying up, the leader of the world’s eighth largest economy declared a fiscal emergency in a move to force passage of the budget.
The leader is seen around the world as a man of action and enjoys a loyal fan base –unusual for somebody in elected political office – and he is not even a native son of the state that he governs. He is none other than former body builder, strongman turned actor Arnold Schwarzenegger (a native son of Graz in Austria). To my surprise (at least), the State of California is indeed the eighth largest economy in the world and it has some very large financial headaches to deal with.
California has a budget deficit of $19 billion and, unless the budget is passed by the State’s legislature, faces running out of cash in October. It is already in such dire straits that Schwarzenegger ordered that 200,000 State workers should just be paid the State minimum wage rather than their usual salaries this month.
Another measure the Governor was forced to take was to order many public employees to take three days of unpaid leave each month. It is a move oddly in keeping with Schwarzenegger’s tough guy image from his movie days and provides a new twist on his Terminator moniker. If a workable budget is passed, much of the Golden State will breathe a sigh of relief. It is unlikely that the woes of the world’s 8th largest economy will cause a run on their currency, however.