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"Washington is bluffing that it will not bail out California, and every other state suffering...

Jul. 14, 2009 12:52 PM ETBy: Eli Hoffmann, SA News Editor7 Comments
"Washington is bluffing that it will not bail out California, and every other state suffering from collapsed revenues and massive job losses," Gregor.us writes. And if the feds think they can "take a pass and wait while the states rebuild their balance sheets and clean up their payrolls," they'll be waiting forever. "None of that is underway."

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Comments (7)

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j_remington profile picture
Obama is ignoring CA. Its amazing how under reported the CA crisis is. Everything is green shoots and recovery from Obama. Expect unemployment to be increasing says Obama.

Stimulus spending did not work. Bailouts of AIG GM C is like a boulder sitting on top of any green shoots.
Sorry to say it but the States must fail and go into Bankruptcy. Their pension and wage costs are completely out of whack and it seems this is the only way they can effect corrective action.

They sure can't bargain their way out of what their labor force sees as a contractual and legitimate debt/ obligation. The UAW paved the way and the bondholders got near to bubkus in the dissolution.

Got to happen again. Back in 1970 I called New York City as a failed ( financially ) organization and said it would have to be come a federal trustee. So that is what they did. It is now past that for the states and muni's they have to go broke and rebuild from the ashes. pensions's and wages are way out of realistic balance. Even here they are being screwed by a perversion ( read planned understatement ) of the CPI index. The retired feds and military as well as evey SS recipient are in the same boat.

Gotcha! too bad and thank Mr. Greenscam for your pain.
It's not that simple. Some states, California included, are net exporters of federal revenue. Others receive far more in federal funds than contributed. I don't think there will be anything like an overt federal bailout of the states, but one sector that has shown some job growth is state and local government, even taking into account layoffs, furloughs, etc. With the exceptions of public safety (cops, firefighters and prison guards) the defined contribution pension benefit of most states is not excessive. States, unlike the fed, can not print money to stimulate growth and revenues, and state and local taxes are perceived as too high, certainly in California's case, tied to volatile revenue bases.
On Jul 14 01:09 PM Don Martin wrote:
> The rest of us need to tell California to eat it.

Exactly, except that this federal government does not represent what most people want. Just look at the polls.
The Geoffster profile picture
"A newly broken relationship between Washington and the states might also quicken the pulse of anti-federalists, who feel we are long overdue for a tip in the balance of power."

This is the key point in the debate. The Federalists cannot wait for the states to fail because it may then be too late to assert non violent control. If several states fail, it will have a domino effect on the remainder. The Feds will step in before that happens in an attempt to control the collapse. If you want to see what anarchy looks like, review the tapes of New Orleans in the days after Katrina.
Don Martin profile picture
If you're going to set a precedent of bailing out states after their revenues collapse and they endure massive job losses, then what state would ever work on rebuilding their balance sheets and cleaning up their payrolls?

The rest of us need to tell California to eat it.
Bailing out states does not consolidate federal power. Wait till they fail then the federal government will step in and take over. No more states and no more state power.
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