CALIFORNIA, HERE I COME...WELL, NOT NOW - AT 8:41 A.M. ET:  The California mess - it's our largest state, after all, with a population similar in size to Canada's - is going to be felt around the country.  Kevin Hassett, at Bloomberg, believes it may kill off Obamanomics itself:

July 6 (Bloomberg) -- Last week, we discovered that the state of California will gladly pay you Tuesday for a hamburger today.

With California mired in a budget crisis, largely the result of a political impasse that makes spending cuts and tax increases impossible, Controller John Chiang said the state planned to issue $3.3 billion in IOU’s in July alone. Instead of cash, those who do business with California will get slips of paper.

The California morass has Democrats in Washington trembling. The reason is simple. If Obama’s health-care plan passes, then we may well end up paying for it with federal slips of paper worth less than California’s. Obama has bet everything on passing health care this year. The publicity surrounding the California debt fiasco almost assures his resounding defeat.

COMMENT:  I don't think most Americans, and maybe even most journalists, recognize how deep the economic decline has been.  California's troubles have been chronicled.  Other states are also in serious trouble, and so are large cities.  Unemployment continues to rise.  We're assured by the usual suspects that it isn't rising as fast as before, and so we should smile a bit.  That's like saying the Titanic isn't sinking as fast as it was sinking an hour ago. 

There is a new load of foreclosures coming.  And this time they're coming in the prime real-estate market.  And other countries are showing reluctance to back our debt.  We'll get through the summer doldrums, but it will be an exciting fall.

July 6, 2009