by Jonathan Sadler

Created on: July 14, 2009   Last Updated: July 23, 2009

For a moment, imagine if regular hardworking Americans, stretched thin by the current economic downturn, simply tore off a note page, jotted "IOU" in ink, pushed the note into an envelope and sent it to Bank of America Mortgage(BAC). I can't do it, I can't afford it, I'll pay you when I can, and I expect you to deal with it! I will pay you interest on what I owe you...but I get to decide exactly how much. How long would it take before the wheels came off and everything ground to a halt? Well, that very thing is happening on a much larger scale even today.

California is ground zero for the current economic struggles of our country; its businesses, its citizens, its very well-being hang in the balance. California represents the bomb that blows apart an economy that is tragically held together by a thread as it attempts to turn upward toward recovery. The fuse has been lit, in the form of IOUs issued by the state to contractors and lenders. Those doing business with the state have run for cover, bunched in a corner with their heads tucked down to avoid the shrapnel that is about to tear through businesses throughout the country.

California currently has to poorest credit rating of any S\state in the Union. The state has begun issuing IOUs, or warrants, for only the second time since the Great Depression. The state has a $26 billion budget deficit. Their bond status hovers just above "junk" status.

Consider being a major corporation such as FedEx (FDX) and having provided services to the state of California or one of its agencies. As a business, you pull out all the stops to present a professional business, to service your customers responsibly and to take care of their needs as though they are your own. FedEx likely provides the state of California on-time, reliable service day in and day out. FedEx, and other large corporations, depend on California to reliably pay their bills on time and in full.

A heretofore steady and reliable stream of revenue has now become a shaky irresponsible customer. In a time of great strain for most businesses because of the down economy, government agencies generally represent a silver lining, an income stream as reliable as Old Faithful. Government contracts represent a foundation that many large corporations count on to carry them through lean times while the general public, small and mid-size businesses are struggling to make ends meet, paying late, and defaulting on payments.

Now businesses such as FedEx are held hostage to a political battle that has played out in the public battlefield for many years. The battle is nearing a point of critical mass. The parties at war have lost their vision of serving the public and have decided to battle to the finish with the intent of burying the opposition. Because of this, the state has issued IOUs because it simply no longer has ample cash flow to enable it to pay its bills timely. Shame on the politicians who are harming businesses at a time when businesses can ill afford any more damage.

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