Has the Golden State lost its luster?

"California or Bust" was the defiant slogan of generations of Americans who moved West in the hopes of escaping economic hardship back East. Now, it appears as though hard times have found a home in California as well. Our Cover Story is reported by John Blackstone:

But lately the view west is of foreclosure signs and financial crises . . . and headlines about a state forced to pay its bills with IOU's.

In this economy, even Hollywood's dream factories can't deliver a happy ending.

As an auctioneer sells off one of the biggest collections of movie props in the world, buyers are few and the bids are low.

Harvey Schwartz built up his prop collection over 40 years. You've seen lots of his stuff in the movies: "We got skeletons in antique wheelchairs, anything you could possibly use for a hospital, a morgue, a medical facility - we have it all."

He even has the escape pod-egg from "Austin Powers."

His company, 20th Century Props prospered as movie budgets soared. But now producers are fleeing California for places where it's cheaper to shoot . . . putting Schwartz out of business.

Blackstone asked, "Is the California dream kind of dying?"

"It not dying. It's dead. It is gone," Schwartz said. "Most people that are in the industry or touching the industry have lost their jobs. They have not been working for a long time."

Signs of the disappearing California dream are everywhere. A state unemployment rate nearing 12 percent is more than two points above the national average. Collapsing tax revenues created a $26 billion hole in the state budget. Drastic spending cuts are hitting law enforcement, education, health care, and assistance to the poor.

To save money many government offices are closed three days a month. A hundred state parks are likely to close.

Lawmakers toiled for weeks, all night sometimes, but the government was nearly paralyzed as the legislature and Governor Arnold Schwarzenegger couldn't reach a budget deal.

"People are writing California off," the governor said June 2. "They are talking about the end of the California dream. That don't believe that we in this room have the courage and determination to do what needs to be done or that the state is manageable."

Many argue that California HAS become unmanageable. In the legislature, deep partisan divisions make it almost impossible to get the two-thirds vote needed to pass a budget.

In addition, ballot propositions approved by voters limit how tax money is spent and how taxes can be raised.

"We have chaos now," said author Kevin Starr, "with the voters saying, 'Do this, do this, do this,' but not worrying how it's going to get paid for . . . and then complaining when the bills come due."

But Starr, author of "Golden Dreams" about the history of the state, said over the past 50 years massive public spending helped create the California dream.

"California was a great expression of middle class utopianism," he said. "That middle class could have homes, could have automobiles, could have jobs, could send their children to college. And we did all these things."

And as often happens, California helped inspire the rest of the country to dream big.

"California helped lead us into this mess because intrinsic to California is a certain kind of utopian feeling," Starr said. "A certain sense of the California dream, a certain sense that everything is possible. And, don't forget, the essence of California is that we could have a better life for ordinary Americans."

A hundred and sixty years ago people from around the world rushed to California in search of gold.

Panning for gold is still part of the fun at the Amador County Fair. But even here it's hard to have the kind of optimism that once drew people west.

"Well, let's just hope that the economy doesn't give us another thrill ride," said County Supervisor Ted Novelli, who is trying hard to enjoy the fair but he knows the troubled economy is not far from anyone's thoughts these days.

"Well, I think people are kind of scared because they don't know if they have a job tomorrow," Novelli said.

At the fair Ron Scofield demonstrates how he still builds wagons and stagecoaches the old-fashioned way. It has been a surprisingly good business . . . until a year ago, when the orders stopped.

"Either it makes you or it breaks you," said Scofield. "And I'm of a opinion that with times getting tough, I'll just get a little tougher. You know?

"You have to."

From the county fair to Gino Ricci's barbershop, talk now often turns to economic survival.

"Even in a recession, people still need to get their hair cut," said Blackstone.

"Not as often," replied Ricci.

"True enough," added a customer.

"Every two weeks, now it's every month or two," said Ricci. "It makes the difference."

Ricci's barbershop is on Main Street in the Amador County town of Jackson, a town that grew up in the gold rush. Ricci's father started barbering here in 1913.

"Over 90 years," he said. "There's never been a year go by that a Ricci hasn't been cuttin' hair in Jackson."

Next door, John and Tammy Trevaskis run a laundry and dry cleaning business that has been in the family since the 1930s. But it's getting lonely on Main Street as more and more stores sit empty.

"You worry all the time when you see other businesses on Main Street closing up," said John Trevaskis. "A few have moved, but not in recent times. Most of them have just closed up, and that's always scary."

The worries on Main Street in Jackson are reflected on Main Streets across the country. More than eight in ten Americans say the economy is in bad shape, and most believe the current recession will last another two years.

For many in business, two years is too long.

At Kountry Kasuals, sales have been slipping for almost a year. Angie Trotter opened the clothing store in 1952 when she was just 20 years old.

"After 57 years, had to be a pretty tough time to put that sign up that says 'store closing,'" said Blackstone.

"Yeah, I know, I know," said Trotter. "But it's time. I would love to do it over again, but I can't. It makes me just hurt right here."

Angie had a stroke six years ago. Her daughter Michelle has been helping out since then and says they'd keep the store open if people were still buying.

"How much can we bleed before it really tremendously impacts us?" asked Michelle Trotter-Mansor.

Angie Trotter can look back at 57 years in business and say she has lived the California dream.

For the state's young people though, the dream may become more elusive. One area hit hard by the budget cuts is education. And that, says economist Stephen Levy, could set back a whole generation of Californians.

"We're losing our connection to the future," levy said. "In the Depression, the stories were of families doing everything so their children could go to school, and get a better job. They knew about the future. It was easy for so long, that we've forgotten that you have to invest now, to have a great future."

Lawmakers have cut funds to the University of California by 20 percent the past two years.

"I think it's extraordinarily short-sighted on their part," said UC Berkeley Chancellor Robert Birgeneau, "and I think the state will suffer for it in the long run."

Birgeneau worries about maintaining the tradition of excellence that produced graduates who helped build the California dream.

"These people created Silicon Valley," he said. "These people created the biotech industry on the West Coast. These people created information technology."

It is still possible to find those in California who believe, with work, the dream will survive.

One is San Francisco Mayor Gavin Newsom who is among a crowd of early candidates to become the state's next governor.

"We need to recognize we need to change. The conditions have changed, so we must change with them. And I think we can reignite that spirit again."

California's success, Newsom says, is important to all Americans.

"In many ways as this state goes, so goes the economy of the United States of America. It impacts every single one of us across this country. California is essential. People across this country who are watching should be very concerned about California's fate and future in relationship to their fate and future."

The California Dream may be more elusive than it once was, but if America's economy is to recover fully, the Golden State will have to shine again.

For more info:
• "Golden Dreams: California in an Age of Abundance" by Kevin Starr (Oxford University Press)
• University of California, Berkeley
• Center for the Continuing Study of the California Economy
• Amador County, California
• 20th Century Props