The state of California is close to fiscal collapse. A story in the New York Times describes the huge budget shortfall, massive layoffs, tanking bond rating and legislative gridlock that has the nation's most-populous state on the brink of bankruptcy.
Gov. Arnold Schwarzenegger seems powerless as his Republican colleagues in the state legislature refuse to vote for some sort of financial remedy. California has a deficit of some $41 billion.
Is this a harbinger of things to come all across America? We know that Massachusetts, like many other states, has a budget shortfall, and the Times also has a brief story on Kansas's state government running out of cash. There is money for the states in the stimulus package that President Obama will sign tomorrow, but not enough to completely bail them out.
In his Times column yesterday, Paul Krugman said that the US is in "deeper trouble, I think, than most people realize." There will apparently be much more pain and much more government spending before we are even treading water again.