http://www.sacbee.com/walters/story/2355706.html?storylink=lingospot_top2
This Sacramento Bee article estimates that the California debt and unfunded liabilities may already have reached half a trillion dollars.
And there has been virtually no progress in reducing state expenses and taking other measures to get the spending under control. They are using the “too-big-to-fail” tactic made famous by the big banks and AIG.
The bigger the debt, the bigger the shock waves when California starts defaulting on its obligations – the same emergency we ran into in the financial sector. So the longer California waits to solve its own problems the higher the probability that they eventually get bailed out. The US Government had an implied guarantee of the debt of Freddie Mac and Fannie Mae the big mortgage consolidators. When it got bad enough with these two companies, the government had to step in and take over the operations and ended up guaranteeing (and taking losses on) much of the debt. And if it gets bad enough, you know the federal government will be forced to assist California.
One option that is not available to states that is available to the private sector as well as cities and counties is bankruptcy. But bankruptcy by a state was never envisioned (until now) and there have been no provisions written into the Federal bankruptcy law.
The states are required to operate on a balanced budget but this is being conveniently ignored.
So what do we do? As much as I hate big government, it is time for the Federal Government to step in now and take over the business of California government. They should then install a provisional government reporting to the Feds, cut all state salaries, reduce the debt by a one-time write down and guarantee the rest. They should sell state lands and use these proceeds to help fund the whole process. Without strong action now, none of the other states facing similar problems will face their problems either.
Perplexing issue! I wish I had a better solution but as I look at our society today and see how much attention and calories are directed at things like Tiger Woods' infidelities (and his success on the golf course) I am convinced that the American Public (and Californians at the lead) have a major case of the ostrich syndrome. Folks simply don't want to face up to real problems so they focus on things that make them feel good or superior and wait for someone else to solve things for them.
ReplyDeleteSounds like Rome in the 5th century A.D., Europe under the Viking heal in the 10th Century and Germany in the 1930's......none of those turned out very well and I fear we are destined for a similar fate which has more to do with citizen apathy than politics.
Unfortunately "I'm mad as hell and I'm not going to take it anymore" is just a line in a movie!
If the Mayans are right it all will not matter in 2012!
AJ
AJ
ReplyDeleteVery well stated. Institutions and societies can come back from the brink a number of times and start thinking they are invincible - until all of a sudden they aren't. I experienced that first hand at Enron, but Lehman Brothers and Bear Stearns also had fought back many times from the brink of failure and had a self perception that they would always come back.
It is hard to get organizations to make the really tough choices until they are on the brink of disaster.
JS