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Economy
'Bankruptcy best for California economy'
2011-01-26
[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

#19  You seem to start off talking about all the extra time and effort you needed to do to correct a state schools problems. However you seem blind to this being a sign that the state model is NOT correct (perhaps you think you just need to tinker with say banning unions etc).

The most basic fact is this. If you cannot afford children you shouldn't have them, extorting the money for them from people who could afford them is unjust and skews society and also has a dysgenic effect. Taxation merely changes WHO has children rather than the number (OK the wealth reduction caused by tax might reduce the population carrying capacity of the economy).

There's also an iron rule of economics and that's that subsidy lowers quality. Subsidising schools turns them into crèches for lazy parents. The states role should be to ensure that children ARE getting an education, not PROVIDING that education.


I'm not against donation funding, I'm not even against mandatory education (the state is good at forcing people to do things, just not so good at teaching them/healing them/saving for them/inspiring them), I'm against financial pollution (i.e. subsidy) and the state monopoly it tends to generate.

I'd like to see all schools improve to the level of market based ones, and there's only one way to do that. I'd also like to make sure ALL parents are more interested in what their children are learning at school, rather than that they are not at home bothering them (which is what subsidy does).

When parents are involved and interested in their childrens education then the schools results look good, when they don't results are bad. The best way to do this is to treat education like the good it is make all parents pay for their children (because this will be done in a much less wealth/society destroying way than the current system of taxation).
Posted by: Bright Pebbles   2011-01-26 23:05  

#18  Ah the basic, MY subsidy Is more IMPORTANT than your income.

If it were about my subsidy, I'd be demanding health insurance, because for the last decade and for the rest of my life, my health care is going to cost a hell of a lot more than most people's educations. And, as it happens, Mr. Wife and I have donated both a great deal of my time (not worth all that much, I admit) and money taken from other lines in our family budget, in order to enable the trailing daughters' community school to provide more to all the students, most of whom are not mine. Whereas in your country, those with means send their children to fee schools, which you-all call public schools, leaving the tax-supported community schools for the poor and the financially disorganized.

No, Bright Pebbles, it's because the intellectual demands of being a citizen are a lot higher than being a subject. If schooling isn't mandatory, poor people send their children off to work as soon as they are able to follow simple orders -- about age six -- so they can increase the family's income instead of being a drain on it. And then their children never learn to read and write -- which means they can be cheated by their employers, and also that they can never learn the history and logic and science necessary to understand when those who would be their political masters are lying to them. In America schooling was not originally aimed at creating better, more skilled employees, but at creating better citizens. By a generation after our Revolution, America had the highest literacy rate of any country in the world, mostly due to community funded schools. As I recall, your Mr Anthony Trollope remarked upon it in his North America.
Posted by: trailing wife   2011-01-26 20:24  

#17  Ah the basic, MY subsidy Is more IMPORTANT than your income.

Education is paid for (like all government) by making working people poorer. It's EXACTLY like health-care/treatment rationing, if you can't pay for it, why should someone else be able to afford theirs AND yours?
Posted by: Bright Pebbles   2011-01-26 19:39  

#16  "Most importantly, what happens when the popcorn runs out?"

Not gonna happen, Bobby - I've got a couple of extra boxcar-loads in the pipeline. ;-p
Posted by: Barbara Skolaut   2011-01-26 19:18  

#15  then get parents to pay for the education of the children they produce.

That, my dear Bright Pebbles, is a very efficient way to discourage people from becoming parents. The U.S. has viewed educating the next generation as a community investment for the better part of two centuries... and until recently it worked out pretty well.
Posted by: trailing wife   2011-01-26 19:16  

#14  So the State is doomed.

What does that mean?

Any likely scenarios?

Who's next, and can they learn anything from California's crash?

Most importantly, what happens when the popcorn runs out?
Posted by: Bobby   2011-01-26 18:57  

#13  Legislation has been proposed to loosen the power of the public unions. The unions block any legislation/propositions that come from the voters that are deemed anti-union. The public unions really have a stranglehold on California. Brown will not do anything. He is in bed with all these unions--they elected him. Eric Holder ought to be going after the California public unions and not the mafia in the northeast.
Posted by: JohnQC   2011-01-26 17:55  

#12  The first thing to do is end the states monopoly on what they call education.

First vouchers, then get parents to pay for the education of the children they produce.
Posted by: Bright Pebbles   2011-01-26 15:12  

#11  It will be fun to watch that rat moonbeam have to cope with His own results from the last time he was Governor. The irony!
Posted by: newc   2011-01-26 13:53  

#10  "Rein in Decertify the unions now"

FTFY, gorb.
Posted by: Barbara Skolaut   2011-01-26 13:48  

#9  Rein in the unions now so that their members shall live, or they'll all die later.
Posted by: gorb   2011-01-26 12:35  

#8  California is being held hostage by the public employee and teachers unions (that Brown created during his first run at governor)
They must go.
The state employees MUST be de-unionized.
If this does not occur there can be no solution, No out. None zero nada
Then California will be completely and totally doomed.
At one time California was that beacon of light shining on the hill.
Now you can't even recognize the place.
I weep for my once beautiful State
Posted by: Mikey Hunt   2011-01-26 11:56  

#7  #5 - you ought to run for governor of California!
Posted by: Anguper Hupomosing9418   2011-01-26 11:56  

#6  > Either way both the bondholding class and the entitlement class are ruined.

Looking at experience, it seems that poor taxpayers will bail-out their wealthier rent-seekers.
Posted by: Bright Pebbles   2011-01-26 11:45  

#5  AH9418, for giggles had to look that up; going to be generous -kicked it up to $1500/oz- and a bit loose and call it 520 US Tons of gold (in) meteor(s).
Posted by: swksvolFF   2011-01-26 11:20  

#4  What Caliphornia needs is a new electorate. Unfortunately, the trends that have led to the current electorate appear likely to continue until it becomes a banana republic.
Posted by: Nimble Spemble   2011-01-26 11:17  

#3  Let it go bankrupt and revert to a territory. Then reform it as 3 separate states.
Posted by: Water Modem   2011-01-26 09:43  

#2  it will collapse well before that would be an issue, taking the pensions with it. What can't be paid, won't be paid. California state pensions are doomed no matter what else happens, unless something unlikely happens. Maybe CA state land will be showered by solid gold meteorites.
Posted by: Anguper Hupomosing9418   2011-01-26 09:26  

#1  There are several duplicitous alternatives to bankruptcy. For example, CA could "privatize" all its pensions, under an impossible formula by which the State might theoretically fund it, but it will collapse well before that would be an issue, taking the pensions with it.
Posted by: Anonymoose   2011-01-26 09:15  

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