lance sjogren

California's Troubles Are America's

The federal government is headed on the same path as California but can go a little further before it hits the wall because it can print money out of thin air.

The one possible difference is: As the federal government prints money it creates (with some time lag) inflation. In the economic downturn, wages are not going up. Even if we adopt banana republic style union elections (card check) I doubt wages will go up, and certainly unemployment will go up.

So, the standard of living will go down due to Fed-generated inflation.

Note that this is a sort of corrective feedback loop: Our economy, especially government, has been living beyond its means, and inflation will be reducing the standard of living, i.e. reducing our unsustainable overconsumption.

This contrasts with California where there is no self-corrective mechanism since the state cannot create inflation, thus the only solution to California's woes is to wield the budget meatax.


Now, here's a cheery one for Californians: Not only will you be seeing massive budget cuts, but the federal government will be creating inflation which causes those state and local tax dollars to lose a substantial fraction of their value.


Thus, reckless states like California are going to see a double whammy.