California, along with Bay Area cities and counties, appear to be on a rampage, slashing spending and cutting programs. The chief economist at Wells Fargo, John Silvia, warns that more pain is ahead.
Silvia has worked on Capitol Hill as an advisor to Senate committees on the economy and banking. In his current role at Wells Fargo, he keeps his finger on the pulse of the troubled California economy, which currently has a jobless rate over 12 percent, homes in foreclosure, and state government deep in the red. The good times, he says, are over.
"You've had 40 to 50 years of good, solid growth in this state. You have a lot of people who are used to the happiness and the joy and the expansion and very, very good benefits," says Silvia.
It is time, he says for state and local government to live within its means.
"The state has to take a tougher look, the counties and the cities have to take a much closer look at what services they provide, what fees they're charging to these services," says Silvia.
The tough thing Silvia suggests is that sacrifices have to be made among employees, benefits, programs and services.
"You think about the cost of educating a student at university compared to the tuition they're paying. There's a huge subsidy there," says Silvia.
While California continues to have a strong high tech industry, an emerging green tech sector, and busy ports shipping goods overseas, Silvia worries benefits for state workers will need to be examined.
"We're going to have to look at state benefits for pubic workers. We're going to have to look at retiree benefits. How generous are these? Can these benefits be here in the 21st century?" says Silvia.
Are there other ideas that have been overlooked?
"I think if you're seeking the one silver bullet magic idea, it's not going to happen because if it was out there, it would have been done years ago," says Silvia.
Without a silver bullet solution, Silvia maintains that California residents do understand what needs to be done, even if it's painful. Californians should expect the pain to last for several years.
NOTE: We will post the raw interview with John Silvia sometime on Thursday.