California Gov. Arnold Schwarzenegger said on Thursday the state "faces insolvency within weeks" and he will put new policies on hold until there is a deal to close the budget gap, which will top $40 billion over the current and next fiscal year. "It doesn't make any sense to talk about education, infrastructure, water, health care reform and all these things when we have this huge budget deficit," Schwarzenegger said in his annual state of the state speech. The Republican governor and Democrat-led legislature are at adds over how to fill the current year's budget shortfall and are poised for a struggle to balance the budget for the state's next fiscal year, which begins in July. "The reality is that our state is incapacitated until we resolve the budget crisis," Schwarzenegger said. "The truth is that California is in a state of emergency," he added. "Addressing this emergency is the first and greatest thing we must do for the people. The $42 billion deficit is a rock upon our chest and we cannot breathe until we get it off." – Reuters

Dominant Social Theme: Taking care of business …

Free-Market Analysis: We are very interested in the outcome of California's difficulties. They say that what happens in California spreads to the rest of America, and we believe that we are seeing in California a preview of what will happen elsewhere in the United States.

It is especially interesting to see how quickly the state and its leaders are willing to jettison the burning issues that provided until recently a raison d'etre for its existence. "It doesn't make any sense to talk about education, infrastructure, water, health care reform and all these things when we have this huge budget deficit." Thus sayeth Arnold Schhwarzenegger, and he has a point. What he is not saying, nor will other leaders in America, is that the governmental carrying costs are mostly made up of current employees and those who have retired and are drawing huge pensions.

America, we have a special insight into for several reasons. And we are aware that many firemen or police officers, especially on the East or West coast, are able to retire in their 40s and draw a pension that may add up to millions. The average public school teacher gets a similar package, with a slightly later retirement date (but maybe the sting is reduced by having three-months'-a-year of paid vacation). Yet, in America, because of its republican culture and constitutional birthright, it is still difficult to come right out and explain that government, especially at the local level, is intended to provide what baldly approaches sinecures.

Because of the lack of mainstream conversation about the real reason for government, and government's apparent incapacity in many cases to do anything other than a series of "takings," those who believe in bigger government have successfully launched with little resistance a nearly century-old propaganda war to impress government's worth on average citizens. Still today, in many living rooms across America, it is argued that government is basically a provider of last resort and a protector of much that people need to have protected – their health, the environment and, of course, their safety.

The trouble is that government on the whole is not very good at providing such things. Government in all its guises cost hundreds of millions of lives in the 20th century; in fact, its talent seems to lie mostly in takings and genocide. The 21st century doesn't seem to be shaping up much better. But in America anyway, the more worrisome prospect for many may be how to sustain the promises of an increasingly hyper-nanny state when there is no money to pay for it. Stripped away, all you have left is the naked sinecure – millions of citizens across the country making tremendous amounts of money to enforce unnecessary regulations and provide duplicative and not-very-efficient services.

As government services dwindle down, as the big aid packages are seen as increasingly inefficient, as central banks – and indeed the entire monetary system – continues its slow motion collapse, the pillars of what have come to pass for civil society will begin to tremble. The 1930s were pretty bad, but there was no Internet in the 1930s. There has been a big awakening in both America and Europe – and maybe China too – about what constitutes a real civil society, book-ended by the prime ingredients, honest money and human action (personal responsibility). These concepts offer the foundation for a more tenable society. Yes, it may seem gloomy now, but their presence and dissemination will make the 21st century an exciting time indeed. In one living room at a time, inevitable as the information age's influence has and will continue to be on exposing truth, there is bound to be a silent detractor from the mainstream babble or conversation. Then as the detractor's confidence grows in his or her understanding of free-market principles, a more vociferous voice will emerge – one with an opinion based on knowledge not rabid rhetoric. And change will come – one voice at a time. Has your voice been heard yet?