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'Bankruptcy best for California economy'
[Iran Press TV] Though US law prohibits states from declaring bankruptcy, it could be Caliphornia's best option for getting out from under a USD 25 billion budget deficit, analysts say.
Laficornia can't pay its debt without beggaring the citizens. They'll never pay the debts incurred by the lavish promises to public pensions, entitlements and spending. They can't raise taxes much more if at all, as anyone with both sense and money will simply leave the state. They could cut spending but cut it too much and the inevitable Grecian style protests will cause the state to fly apart. So it's either an ordered bankruptcy or an unordered default. Either way both the bondholding class and the entitlement class are ruined. Sorry.
Recent pressures for a change in the bankruptcy law come as Caliphornia's financial future looks even bleaker than it did the previous year, Press TV correspondent reported on Tuesday.

The state's budget deficit continues to increase and the unemployment rate shows no sign of dropping.

Declaring bankruptcy could be the best path for the state to get out of its crushing debt and move toward recovery.
Assuming Jerry and the legislators would use the space to eliminate the debt for real and put the entitlement class on a short leash.
Economists say other Caliphornia municipalities are already taking advantage of bankruptcy protection. The city of Vallejo and Orange County both filed for bankruptcy and are emerging with an improved financial situation.

But some economists say there is a big difference between a city and a state and Caliphornia already has the lowest credit rating in the US.

Caliphornia Treasurer Bill Lockyer has already dismissed the idea of filing for bankruptcy, saying it would limit the state's ability to create jobs and to secure future investments.
Anyone with any sense isn't going to buy a Laficornia bond anyway, Bill.
However,
The infamous However...
 proponents of the bankruptcy option say it will give Caliphornia leverage when dealing with the public employee unions. The state has a massive unfunded pension liability and the threat of bankruptcy might encourage unions to agree to reduce packages.

But economists say bankruptcy would not address the main reason Caliphornia is in financial turmoil.

Republicans are expected to introduce the bankruptcy legislation within the next 30 days. Experts say even if the bill is passed, it would take at least two years before states would be able to file.
Just before, and not after, the 2012 election, please.

Posted by: Fred 2011-01-26
http://www.rantburg.com/poparticle.php?ID=314664