…The Democrats who dominate both houses of the legislature find deep cuts to education and health care unpalatable. The Republicans, who can muster enough votes to block the governor’s budget, refuse to consider tax increases unless they are accompanied by a root-and-branch overhaul of state finances and a mass sell-off of state assets. The divide between the two camps is as wide as Yosemite Valley.

The Democrats have devised a plan to get around this problem, albeit a desperate and legally questionable one. They want to relabel many taxes as “fees” and increase them. Although it takes two-thirds of legislators to pass a tax increase, fees could be increased by a simple majority vote. Republicans, who have more than a third but less than half of the seats in both chambers of the legislature, would be overridden. Mr Schwarzenegger vetoed the Democrats’ proposed budget this week, although he did not reject their ruse in principle. …

The world’s eighth-biggest economy shuffles towards fiscal oblivion