Welcome Back, Gov. Brown! Your Gift? A Fiscal Mess When Jerry Brown retakes the governorship of California in January, he'll be greeted with a ballooning budget deficit and a political system that's come apart at the seams. Two former governors say the national economy can't fully recover until the biggest state gets its house in order.

Welcome Back, Gov. Brown! Your Gift? A Fiscal Mess

Welcome Back, Gov. Brown! Your Gift? A Fiscal Mess

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Jerry Brown will become California's oldest governor in January, 36 years after he became the state's youngest.  Brown, shown here on Nov. 3, the day after he was elected, will face an increasingly dire budget situation. This past week, outgoing Gov. Arnold Schwarzenegger called a special session of the Legislature to address a ballooning $25 billion budget deficit. David Paul Morris/Getty Images hide caption

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David Paul Morris/Getty Images

On the first Monday in January, Jerry Brown will once again become California's governor. But a lot has changed since he left the job in 1983, and not necessarily for the better.

This past week, outgoing Gov. Arnold Schwarzenegger called a special session of the Legislature to deal with a deficit that's ballooned by $6 billion in a little more than a month. The total deficit has topped $25 billion, and 1 of every 7 workers in the state is unemployed, the third-highest rate in the country.

As Schwarzenegger put it last year: "Our wallet is empty. Our bank is closed. Our credit is dried up."

And yet California is arguably the most important state in the union. It accounts for 13 percent of America's gross domestic product, and on its own, the state would be one of the 10 biggest economies in the world. That raises the question: Can America's economy bounce back without a Golden State rebound?

Not So Golden Anymore

The answer to that question is murky, says Joel Kotkin, a California scholar and author of the book The Next Hundred Million: America in 2050.

"You could have a recovery that takes place elsewhere and California sort of brings up the rear, [but] I don't see how California is going to lead the recovery, particularly given the change in Congress," Kotkin tells Weekend All Things Considered host Guy Raz.

With Republicans running the House, he says, it is much less likely that California will get funding for the "green" projects that the Obama administration has promised. High-speed rail and major research initiatives will probably have to be scaled down.

"So California is going to be out of sync with the rest of the country for the next few years, and that's going to be a major challenge," Kotkin says.

Although the state has overcome major recessions before -- from the decline of the defense industry to the tech bubble -- Kotkin warns that it might not be so easy this time.

"California still has enormous assets, and I still think it is the best piece of property in the United States in terms of climate, fertility, the mix of people," Kotkin says. "But I think that we cannot take for granted that California will continue to be a leader in the next 10 to 15 years."

From Slippery Slope To Mudslide

If the past and future Gov. Brown is to prevent California from becoming the next Michigan, he might want to listen to a couple of ex-governors.

Republican Pete Wilson, who served from 1991 to 1999, says it won't be easy getting California's economy unstuck.

"[Legislators] have for a decade now been spending money that they did not have," Wilson says. "And the result has been -- from the standpoint of the fiscal health of the state -- not just a slippery slope but one that has put California in a very dangerous position."

Wilson says the nation almost certainly will recover faster than his state, unless the new governor and the Legislature cut spending and make it more attractive for businesses to locate and hire in California.

"Without jobs, there will not be revenues, and without the revenues you're going to have to face the painful spending cuts," Wilson says.

Both Pete Wilson and his successor, Democrat Gray Davis, serve on a commission working on ways to recalibrate the state. Davis, who served as Brown's chief of staff during his first term as governor, says his former boss simply has to level with the voters.

"First, people have to understand that there is less money to spend, and then I think there has to be a civil dialogue where people are asked, what kind of government do we need ... as opposed to what we want," Davis tells Raz.

Davis says the state government needs to focus on cutting what's unnecessary and bolstering California's core industries: knowledge-based businesses, entertainment and agriculture.

"We have to focus on what it is that sustains our economy, that employs most of the people, and make sure at the very least we're listening to them. We understand what it needs to keep them here in the state. ... This unemployment is not coming down until people feel good about staying in California and growing in California," Davis says.

The very first thing Jerry Brown should do, according to Davis, is listen.

"Just getting the budget done on time, just improving the credit rating will go a long way to tell investors around the country, 'Yeah, maybe we should invest in the eight largest economy in the world.' "