[THS] Will California become America's first failed state?

[Peter Webster]

http://www.guardian.co.uk/world/2009/oct/04/california-failing-state-debt

Will California become America's first failed state?

Los Angeles, 2009: California may be the eighth largest economy in the world, but its
state staff are being paid in IOUs, unemployment is at its highest in 70 years, and
teachers are on hunger strike. So what has gone so catastrophically wrong?

          o Paul Harris
          o The Observer, Sunday 4 October 2009

Patients without medical insurance wait for treatment in the Forum, a music arena in
Inglewood, Los Angeles. The 1,500 free places were filled by 4am. Photograph: John
Moore/Getty Images

California has a special place in the American psyche. It is the Golden State: a
playground of the rich and famous with perfect weather. It symbolises a lifestyle of
sunshine, swimming pools and the Hollywood dream factory.

But the state that was once held up as the epitome of the boundless opportunities of
America has collapsed. From its politics to its economy to its environment and way of
life, California is like a patient on life support. At the start of summer the state
government was so deeply in debt that it began to issue IOUs instead of wages. Its
unemployment rate has soared to more than 12%, the highest figure in 70 years.
Desperate to pay off a crippling budget deficit, California is slashing spending in
education and healthcare, laying off vast numbers of workers and forcing others to
take unpaid leave. In a state made up of sprawling suburbs the collapse of the
housing bubble has impoverished millions and kicked tens of thousands of families
out of their homes. Its political system is locked in paralysis and the two-term rule of
former movie star Arnold Schwarzenegger is seen as a disaster – his approval ratings
having sunk to levels that would make George W Bush blush. The crisis is so deep
that Professor Kenneth Starr, who has written an acclaimed history of the state,
recently declared: "California is on the verge of becoming the first failed state in
America."

Outside the Forum in Inglewood, near downtown Los Angeles, California has already
failed. The scene is reminiscent of the fallout from Hurricane Katrina, as crowds of
impoverished citizens stand or lie aimlessly on the hot tarmac of the centre's car park.
It is 10am, and most have already been here for hours. They have come for free
healthcare: a travelling medical and dental clinic has set up shop in the Forum
(which usually hosts rock concerts) and thousands of the poor, the uninsured and
the down-on-their-luck have driven for miles to be here.

The queue began forming at 1am. By 4am, the 1,500 spaces were already full and
people were being turned away. On the floor of the Forum, root-canal surgeries are
taking place. People are ferried in on cushions, hauled out of decrepit cars. Sitting
propped up against a lamp post, waiting for her number to be called, is Debbie
Tuua, 33. It is her birthday, but she has taken a day off work to bring her elderly
parents to the Forum, and they have driven through the night to get here. They wait
in a car as the heat of the day begins to rise. "It is awful for them, but what choice
do we have?" Tuua says. "I have no other way to get care to them."

Yet California is currently cutting healthcare, slashing the "Healthy Families"
programme that helped an estimated one million of its poorest children. Los Angeles
now has a poverty rate of 20%. Other cities across the state, such as Fresno and
Modesto, have jobless rates that rival Detroit's. In order to pass its state budget,
California's government has had to agree to a deal that cuts billions of dollars from
education and sacks 60,000 state employees. Some teachers have launched a hunger
strike in protest. California's education system has become so poor so quickly that it is
now effectively failing its future workforce. The percentage of 19-year-olds at college
in the state dropped from 43% to 30% between 1996 and 2004, one of the highest
falls ever recorded for any developed world economy. California's schools are ranked
47th out of 50 in the nation. Its government-issued bonds have been ranked just
above "junk".

Some of the state's leading intellectuals believe this collapse is a disaster that will
harm Californians for years to come. "It will take a while for this self-destructive
behaviour to do its worst damage," says Robert Hass, a professor at Berkeley and a
former US poet laureate, whose work has often been suffused with the imagery of
the Californian way of life.

Now, incredibly, California, which has been a natural target for immigration
throughout its history, is losing people. Between 2004 and 2008, half a million
residents upped sticks and headed elsewhere. By 2010, California could lose a
congressman because its population will have fallen so much – an astonishing
prospect for a state that is currently the biggest single political entity in America.
Neighbouring Nevada has launched a mocking campaign to entice businesses away,
portraying Californian politicians as monkeys, and with a tag-line jingle that runs:
"Kiss your assets goodbye!" You know you have a problem when Nevada – famed for
nothing more than Las Vegas, casinos and desert – is laughing at you.

This matters, too. Much has been made globally of the problems of Ireland and
Iceland. Yet California dwarfs both. It is the eighth largest economy in the world,
with a population of 37 million. If it was an independent country it would be in the
G8. And if it were a company, it would likely be declared bankrupt. That prospect
might surprise many, but it does not come as news to Tuua, as she glances nervously
into the warming sky, hoping her parents will not have to wait in the car through the
heat of the day just to see a doctor. "It is so depressing. They both worked hard all
their lives in this state and this is where they have ended up. It should not have to be
this way," she says.

It is impossible not to be impressed by the physical presence of Arnold
Schwarzenegger when he walks into a room. He may appear slightly smaller than
you imagine, but he's just as powerful. This is, after all, the man who, before he was
California's governor, was the Terminator and Conan the Barbarian.

But even Schwarzenegger is humbled by the scale of the crisis. At a press conference
in Sacramento to announce the final passing of a state budget, which would include
billions of dollars of cuts, the governor speaks in uncharacteristically pensive terms.
"It is clear that we do not know yet what the future holds. We are still in troubled
waters," he says quietly. He looks subdued, despite his sharp grey suit and bright
pink tie.

Later, during a grilling by reporters, Schwarzenegger is asked an unusual question.
As a gaggle of journalists begins to shout, one man's voice quickly silences the
others. "Do you ever feel like you're watching the end of the California dream?" asks
the reporter. It is clearly a personal matter for Schwarzenegger. After all, his life story
has embodied it. He arrived virtually penniless from Austria, barely speaking English.
He ended up a movie star, rich beyond his dreams, and finally governor, hanging
Conan's prop sword in his office. Schwarzenegger answers thoughtfully and at
length. He hails his own experience and ends with a passionate rallying call in his still
thickly accented voice.

"There is people that sometimes suggest that the American dream, or the Californian
dream, is evaporating. I think it's absolutely wrong. I think the Californian dream is as
strong as ever," he says, mangling the grammar but not the sentiment.

Looking back, it is easy to see where Schwarzenegger's optimism sprung from.
California has always been a special place, with its own idea of what could be
achieved in life. There is no such thing as a British dream. Even within America, there
is no Kansas dream or New Jersey dream. But for California the concept is natural. It
has always been a place apart. It is of the American West, the destination point in a
nation whose history has been marked by restless pioneers. It is the home of
Hollywood, the nation's very own fantasy land. Getting on a bus or a train or a plane
and heading out for California has been a regular trope in hundreds of books,
movies, plays, and in the popular imagination. It has been writ large in the national
psyche as free from the racial divisions of the American South and the traditions and
reserve of New England. It was America's own America.

Michael Pollan, author of The Omnivore's Dilemma and now an adopted Californian,
remembers arriving here from his native New England. "In New England you would
have to know people for 10 years before they let you in their home," he says. "Here,
when I took my son to his first play date, the mother invited me to a hot tub."

Michael Levine is a Hollywood mover and shaker, shaping PR for a stable of A-list
clients that once included Michael Jackson. Levine arrived in California 32 years ago.
"The concept of the Californian dream was a certain quality of life," he says. "It was
experimentalism and creativity. California was a utopia."

Levine arrived at the end of the state's golden age, at a time when the dream
seemed to have been transformed into reality. The 1950s and 60s had been boom-
time in the American economy; jobs had been plentiful and development rapid.
Unburdened by environmental concerns, Californian developers built vast suburbs
beneath perpetually blue skies. Entire cities sprang from the desert, and orchards
were paved over into playgrounds and shopping malls.

"They came here, they educated their kids, they had a pool and a house. That was
the opportunity for a pretty broad section of society," says Joel Kotkin, an urbanist at
Chapman University, in Orange County. This was what attracted immigrants in their
millions, flocking to industries – especially defence and aviation – that seemed to
promise jobs for life. But the newcomers were mistaken. Levine, among millions of
others, does not think California is a utopia now. "California is going to take decades
to fix," he says.

So where did it all wrong?

Few places embody the collapse of California as graphically as the city of Riverside.
Dubbed "The Inland Empire", it is an area in the southern part of the state where
the desert has been conquered by mile upon mile of housing developments, strip
malls and four-lane freeways. The tidal wave of foreclosures and repossessions that
burst the state's vastly inflated property bubble first washed ashore here. "We've
been hit hard by foreclosures. You can see it everywhere," says political scientist
Shaun Bowler, who has lived in California for 20 years after moving here from his
native England. The impact of the crisis ranges from boarded-up homes to
abandoned swimming pools that have become a breeding ground for mosquitoes.
Bowler's sister, visiting from England, was recently taken to hospital suffering from an
infected insect bite from such a pool. "You could say she was a victim of the
foreclosure crisis, too," he jokes.

But it is no laughing matter. One in four American mortgages that are "under water",
meaning they are worth more than the home itself, are in California. In the Central
Valley town of Merced, house prices have crashed by 70%. Two Democrat politicians
have asked for their districts to be declared disaster zones, because of the poor
economic conditions caused by foreclosures. In one city near Riverside, a squatter's
camp of newly homeless labourers sleeping in their vehicles has grown up in a
supermarket car park – the local government has provided toilets and a mobile
shower. In the Los Angeles suburb of Pacoima, one in nine homeowners are now in
default on their mortgage, and the local priest, the Rev John Lasseigne, has
garnered national headlines – swapping saving souls to saving houses, by negotiating
directly with banks on behalf of his parishioners.

For some campaigners and advocates against suburban sprawl and car culture, it has
been a bitter triumph. "Let the gloating begin!" says James Kunstler, author of The
Long Emergency, a warning about the high cost of the suburban lifestyle. Others see
the end of the housing boom as a man-made disaster akin to a mass hysteria, but
with no redemption in sight. "If California was an experiment then it was an
experiment of mass irresponsibility – and that has failed," says Michael Levine.

Nowhere is the economic cost of California's crisis writ larger than in the Central
Valley town of Mendota, smack in the heart of a dusty landscape of flat, endless fields
of fruit and vegetables. The town, which boldly terms itself "the cantaloup capital of
the world", now has an unemployment rate of 38%. That is expected to rise above
50% as the harvest ends and labourers are laid off. City officials hold food giveaways
every two weeks. More than 40% of the town's people live below the poverty level.
Shops have shut, restaurants have closed, drugs and alcohol abuse have become a
problem.

Standing behind the counter of his DVD and grocery store, former Mendota mayor
Joseph Riofrio tells me it breaks his heart to watch the town sink into the mire. His
father had built the store in the 1950s and constructed a solid middle-class life
around it, to raise his family. Now Riofrio has stopped selling booze in a one-man bid
to curb the social problems breaking out all around him.

"It is so bad, but it has now got to the point where we are getting used to it being
like this," he says. Riofrio knows his father's achievements could not be replicated
today. The state that once promised opportunities for working men and their families
now promises only desperation. "He could not do what he did again. That chance
does not exist now," Riofrio says.

Outside, in a shop that Riofrio's grandfather built, groups of unemployed men play
pool for 25 cents a game. Near every one of the town's liquor stores others lie
slumped on the pavements, drinking their sorrows away. Mendota is fighting for
survival against heavy odds. The town of 7,000 souls has seen 2,000 people leave in
the past two years. But amid the crisis there are a few sparks of hope for the future.
California has long been an incubator of fresh ideas, many of which spread across
the country. If America emerges from its crisis a greener, more economically and
politically responsible nation, it is likely that renewal will have begun here. The clues
to California's salvation – and perhaps even the country as a whole – are starting to
emerge.

Take Anthony "Van" Jones, a man now in the vanguard of the movement to build a
future green economy, creating millions of jobs, solving environmental problems and
reducing climate change at a stroke. It is a beguiling vision and one that Jones
conceived in the northern Californian city of Oakland. He began political life as an
anti-poverty campaigner, but gradually combined that with environmentalism,
believing that greening the economy could also revitalise it and lift up the poor. He
founded Green for All as an advocacy group and published a best-selling book, The
Green Collar Economy. Then Obama came to power and Jones got the call from the
White House. In just a few years, his ideas had spread from the streets of Oakland to
White House policy papers. Jones was later ousted from his role, but his ideas
remain. Green jobs are at the forefront of Obama's ideas on both the economy and
the environment.

Jones believes California will once more change itself, and then change the nation.
"California remains a beacon of hope
 This is a new time for a new direction to grow
a new society and a new economy," Jones has said.

It is already happening. California may have sprawling development and awful smog,
but it leads the way in environmental issues. Arnold Schwarzenegger was seen as a
leading light, taking the state far ahead of the federal government on eco-issues. The
number of solar panels in the state has risen from 500 a decade ago to more than
50,000 now. California generates twice as much energy from solar power as all the
other US states combined. Its own government is starting to turn on the reckless
sprawl that has marked the state's development.

California's attorney-general, Jerry Brown, recently sued one county government for
not paying enough attention to global warming when it came to urban planning.
Even those, like Kotkin, who are sceptical about the end of suburbia, think California
will develop a new model for modern living: comfortable, yes, but more modest and
eco-friendly. Kotkin, who is writing an eagerly anticipated book about what America
will look like in 2050, thinks much of it will still resemble the bedrock of the Californian
dream: sturdy, wholesome suburbs for all – just done more responsibly. "We will still
live in suburbs. You work with the society you have got. The question is how we
make them more sustainable," he says.

Even the way America eats is being changed in California. Every freeway may be
lined with fast-food outlets, but California is also the state of Alice Waters, the guru of
the slow-food movement, who inspired Michelle Obama to plant a vegetable garden
in the White House. She thinks the state is changing its values. "The crisis is bringing
us back to our senses. We had adopted a fast and easy way of living, but we are
moving away from that now," she says.

There is hope in politics, too. There is a growing movement to call for a constitutional
convention that could redraw the way the state is governed. It could change how the
state passes budgets and make the political system more open, recreating the lost
middle ground. Recently, the powerful mayor of Los Angeles, Antonio Villaraigosa,
signed on to the idea. Gerrymandering, too, is set to take a hit. Next year
Schwarzenegger will take steps to redraw some districts to make them more
competitive, breaking the stranglehold of party politics. He wants district boundaries
to be drawn up by impartial judges, not politicians. In previous times that would have
been the equivalent of a turkey voting for Christmas. But now the bold move is seen
for what it is: a necessary step to change things. And there is no denying that
innovation is something that California does well.

Even in the most deprived corners of the state there is a sense that things can still
turn around. California has always been able to reinvent itself, and some of its most
hardcore critics still like the idea of it having a "dream".

"I believe in California. It pains me at the moment to see it where it is, but I still
believe in it," said Michael Levine.

Perhaps more surprisingly, a fellow believer is to be found in Mendota in the shape of
Joseph Riofrio. His shop operates as a sort of informal meeting place for the town.
People drop in to chat, to get advice, or to buy a cold soft drink to relieve the
unrelenting heat outside. The people are poor, many of them out of work, often
hiring a bunch of DVDs as a cheap way of passing the time. But Riofrio sees them as
a community, one that he grew up in. He is proud of his town and determined to
stick it out. "This is a good place to live," he says. "I want to be here when it turns
around." He is talking of the stricken town outside. But he could be describing the
whole state.?