California is used to be being first in many things - environmental laws, technology trends and crazes of all kinds.
It now also enjoys the dubious distinction of being first to hit the fiscal wall - a problem that could soon threaten the entire United States as it struggles to deal with the hangover from a spending binge and a deep recession.
California is facing a widening gap between its sagging tax revenues and rising expenditures, pushing the state near bankruptcy. Like most states, California is constitutionally bound to balance its budget every year and it cannot run a deficit.
So California is scrambling to slash spending to cope with dramatically lower tax revenues, and it's looking to Washington for help.
And therein lies the dilemma. If the root cause of the global financial crisis was that consumers and financial institutions ran up too much debt, does the United States risk perpetuating the problem by now shifting the debt burden to the public sector?
California may be a harbinger of what's to come.
Private debts and losses are rapidly being shifted onto the balance sheets of governments, warned New York University economist Nouriel Roubini, who was among the few to predict the severity of the financial crisis.
"We are socializing the private losses and putting them on the balance sheet of governments and increasing public debts, thus increasing the overall leverage of the economy," Mr. Roubini argues.
The problem isn't going away, and it isn't sustainable. The United States, and other governments around the world, are sowing the seeds of a possible sovereign debt crisis, according to Mr. Roubini. The trillions of dollars funnelled into the economy - for bailouts, banks and bridge building - is putting an increasingly heavy strain on government debt burdens.
Most experts agree that short-term stimulus was helpful. But it shouldn't be a substitute for reducing the leverage of the entire economy.
The U.S. deficit is expected to hit $1.85-trillion (U.S.) this year, more than triple last year's $455-billion figure. The additional borrowing gets added to a swelling debt. Debt held by the U.S. public is now projected by the Congressional Budget Office to reach 82 per cent of gross domestic product in 10 years, up from 41 per cent in 2008.
History has shown that chronically high debt levels push up interest rates, crowd out private spending, and in a worst-case scenario, lead to default. Bill Gross, who manages Pacific Investment Management Co. (Pimco), the world's largest bond fund, warned last week that the United States could eventually lose its coveted triple-A credit rating, forcing it to pay even higher rates to carry its debt.
Sovereign debt problems are typically a problem for emerging economies. Now they're spreading to advanced economies.
At the same time, central banks in the United States and elsewhere have been busy printing money to try to prop up consumers and businesses - "monetizing the fiscal deficits," as Mr. Roubini puts it.
Coming out the other side of the recession, all that cash in the system risks causing significant inflation, a new round of asset bubbles and eventually, higher long-term interest rates on government bonds and mortgages. Last week, German Chancellor Angela Merkel ominously warned that central banks may be laying the seeds of the next crisis unless they find a way to remove all this easy money.
A hint of what's to come may already be showing up in the recent spike in yields on 10-year U.S. Treasury bills.
Unfortunately, there are no easy answers.
But shifting the debts of California, and other states, onto the U.S. taxpayer is clearly not the answer.
Americans must recognize that they will have to accept higher taxes, fewer services, and probably both in the years ahead.
Mr. Roubini says the private sector must also learn to live within its means. Banks must convert their debts to equity. Households should do the same by reducing the principal on their mortgages and other debts.
Whatever happens, the ways of the past aren't sustainable.