Is California the Canary in the Coal Mine? Risks in a Bellwether State

Ah, California. It’s a polarizing state, depending on where you fall along the political spectrum, but there is no denying it is an economic powerhouse: since 2010, the state has accounted for about one-fifth of total US economic growth.

So if things start going sideways for California, things start going sideways for our national economic numbers in a hurry.

For California and the nation, there is a long list of things that could go wrong.

• A surging budget deficit could stoke higher interest rates.
• If the recent upheaval in stocks signals a longer-term decline, it would hurt California in particular because its budget relies heavily on high earners whose incomes rise and fall with the market.
• President Trump’s moves to upend longstanding trade arrangements could be a setback for the state, home of the country’s biggest port complex.
• And because the growth of the technology industry has played a huge role in California’s recent boom, a drop in company valuations or in venture capital investments would reverberate swiftly through the state’s economy and tax receipts.

ORIGINAL SOURCE: Boom and Gloom: An Economic Warning for California by Conor Dougherty at The New York Times on 2/13/18