Just as California will have to face the looming liability of unfunded pensions, Washington will have to tackle entitlement reform to keep Social Security and Medicare solvent for the next generation.
In California, debt has created a good news/bad news joke. The good news is that California has a better credit rating than Illinois. The bad news is that it has a worse credit rating than the 48 other states.
Decades ago, California could count on population growth to get it through tough economic times. A steady influx of young newcomers from other states translated into flourishing businesses and bulging government coffers. In recent years, however, California has been sending more people to other states than it has been getting from them. Immigration has kept the total population from shrinking, but the boom days are over. After the 2010 census, California gained no seats in the US House of Representatives for the first time since statehood in 1850.
Moreover, the state’s birth rate is plunging. In the near term, this trend will ease some of the pressure on California schools, but in the longer run, it will mean fewer people entering the workforce just as baby boomers are retiring from it.
One could pile on additional data about poverty and unemployment. The key point is that population and economic growth have slowed. And because the state is so large, bad times in California could affect the nation as a whole.