The beaurty of federalism is that states serve as policy laboratories, so that we can observe what works and what doesn't. It think we're clearly look at the latter in the case of California, the leaders of which are sudenly facing a far larger deficit than they'd estimated even a few months ago.
It is a nasty set of circumstances indeed when a household, state or nation gets into a financial condition such that there is no pleasant way to begin to tackle its debt / deficit crisis. Talk about a double bind. In California's desperation, its FHer-controlled legislature - and governor's mansion - are looking at yet higher taxes as part of the mix to begin to address this. And we all know what that will do - drive yet more business out of the state, reducing the pool of revenue from which to get any tax money.
Let's not go there, America.