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California, a Case Study in Willful Economic Destruction

Although the eighth largest economy in the world, the state of California today is no longer capable of sustaining its over 35 million population. With a deficit of $20 billion and growing, California has the lowest credit rating of all U.S. states and is on the verge of ungouvernability. In that, Governor Arnold Schwarzenegger has well carried out the mission that those who put into power assigned to him.

Indeed, it was in September 2002, that he was invited to the estate of financial kingpin Lord Jacob Rothschild, together with his two American mentors, financier Warren Buffet (who supported and advised candidate Barack Obama) and George Shultz, and others, to discuss the controlled disintegration of the world monetary system. There it was that Austrian-born Schwarzenegger got the blessing of the Lord Rothschild and others to go into politics with their agenda.

One year later, he announced he was running for governor of California as a Republican, and he won – largely because of the Enron ripoff and its consequences under the previous government. For the past seven years, he has bullied his way through one short-term legislative budget compromise after another, each one worse than the last. He has achieved balanced budgets by cutting key components of the state's social welfare system, with health care for the poor, sick and elderly targeted most viciously, but also with major cuts in law enforcement and public safety, infrastructure, the state work force, and, especially, education. In the last sessions, he has taken funds from municipal and county governments, imposed onerous fees, , and floated bonds, mostly to pay debt on previous borrowing.

In the meantime, the state economy has crashed, with record levels of home foreclosures, and near-record levels of unemployment, as most of the state's basic industry and construction have been shut down, and farm income has collapsed. After the dot.com crash, Silicon Valley presents a picture of empty office buildings and foreclosed homes, with now unemployed computer programmers struggling to get by.

In the last two years, Schwarzenegger has presided over four special sessions of the legislature, to cut over $60 billion from the budget, but the state still has a $20 billion shortfall. While the Governator blames the lack of money on a dysfunctional legislature which he says spends too much and over-protected and pampered trade unions, in reality, the crisis is due to a drop in tax revenues, due to the depression, with revenues collected by the state falling over 27% this year, compared to last – which was already catastrophic!

The only proposals on the table now, besides selling off government property, provide for further cuts in state employee rolls, and gouging more from seniors, children's health care, and education. This has sparked statewide demonstrations on campuses, where tuition costs in the state university system have gone up between 25% and 40% in the past years, and student loans have become more costly.

There is no way out of the crisis by cutting essential expenses for the population, it only makes it worse. What the LaRouche movement is proposing on the federal level is a reorganization of the entire banking system, under the criteria of the Glass-Steagall law, in order to separate the worthless financial waste from legitimate debt and expenses, and a relaunch of the real economy in order for the states and the country to produce their way out of the crisis, in the tradition of the original American system of political economy.

But President Obama, who is so generous with the banks, has refused to help the states (except for some political handouts, in exchange for decisive votes in Congress).

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