The Golden State, the vanguard of popular culture, has always captured the world’s imagination. The ultimate frontier state is again leading the way – but not, this time, to a Hollywood ending. Tuesday’s defeat of deficit-reducing ballot initiatives portends the difficulties awaiting countries whose finances have been ravaged by the recession.

California’s plight shows where governments such as the US and the UK may be heading. Deficit spending is sensible in a recession, but the state’s enormous fiscal troubles force it to tighten the purse strings, lest markets no longer buy its bonds. Its debt is rated the least creditworthy among all US states.