Paging Bill Simon

I am terrified that Obama will feel the need to bail out California.  I can't possibly think of  a worse use of my money, nor a worse precedent for the future.   Does anyone think that, in retrospect, Bill Simon's refusing to bail out New York City was the wrong decision.  NYC is not what I could call financially responsible, but they are paragons of virtue compared to what they were in the 1970's, and would have been had they not been forced to take ownership of their budget problems.

Postscript: My prediciton if Obama intervenes:  bondholders will get 10 cents on the dollar, and the SEIU will be given 55% ownership of California.

  • spiro

    ...and more of those plastic-faced, inattentive-driving, whiny dinks that populate the Golden Gate State will move to my state. Oh joy.

    "Dear Lord*, please bring on that earthquake, SOON!"

    *Gore

  • Link

    If you parse through it, isn't a lot of the Stimulus Bill and Obama's first budget being used to bailout out the states. A lot of the "infrastructure" spending appears to be for things like maintenance of roads and school ... ordinary expenses.

  • Daran

    California defaulting on its debt (and 10 cents on the dollar qualifies as that) would probably have, erhm, interesting consequences.

  • Arnie

    I wouldn't run for state office if you gave me 7 million dollars. The death threats that will accompany what the state legislature is about the have to do wouldn't be worth it.

    Imagine Wal-Mart as an employee-run business: 16 employees in every department, many just standing around, 500 poor people standing at the back receiving free stuff, no greeters at the door checking on theft going out the front door, and a highly paid management team upstairs that has just decided to raise prices to cover the "temporary losses".

    That is California today.

  • K

    Arnie: I agree about not running for office. I have other thoughts about what the legislature will be forced to do, or will do.

    The legislature will not cut spending in any significant way. There will be some meaningless minor cuts to keep up appearances. Maybe even a special election will be called to try other schemes.

    The state will now step up efforts to confiscate what it can, borrow, print scrip, beg in Washington, and sell whatever it owns.

    For the moment the battle will move into the courts. The state, and the unions, and other parties will ask courts to impose higher taxes, alter power relationships, and remove inconvenient obstacles of law.

    And I expect them to win.

    Tossing out or negating voter decisions and initiatives is a well established process in CA courts. Flaws can be detected in almost any wording. Initiatives can be found to violate the state or federal constitution. At worst, a state government has inherent emergency powers which are not and cannot be totally defined. Hence emergency powers can be used to support any argument.

    It isn't hard at all when you want to do it. And the AG, Jerry Brown, will gladly help.

    Sacramento still has plenty of ways to operate without altering its behavior. True, this can't go on forever but recalling Scarlets words "they'll think about it tomorrow."

    Well, we will see....

  • Greg

    If Obama bails out California, that's the end of federalism in the United States. Obama has already demonstrated that he has no hesitation in using bailout money as a justification for assuming control of bailed-out entities (see GM and Chrysler) or for telling them how to operate (see the banks). He has also demonstrated that he's unwilling to allow bailed-out entities to escape federal control by returning the bailout money (see the banks that have unsuccessfully tried to return their TARP money). So it is reasonable to conclude that a federal bailout of California will be followed by federal control over the operation of the California state government, and by a refusal to allow the state to escape that control by returning the bail-out money. Which would transform the California state government into merely an administrative appendage of Washington. And once that's been done to California, it won't be very long before Washington figures out how to extend that control over the other state governments.

    Maybe some people think that this would be a good thing, but seeing as it turns the American constitutional order upside-down, there probably should be some debate about it.

  • http://www.buffalog.blogspot.com Craig

    Obama is becoming aware of the incredible debt he's run up. That's why his teleprompter told him to lecture us about it the other day. His instincts must surely tell him to bail out California, but his real pet project is national health care. Once he sets the precedent, Michigan, New York, New Jersey and 20 others must follow. At some point, even he must make choices.

    There's still a slim chance that California is left on its own.

  • Lark

    The Ds won't cut spending and the Rs won't raise taxes, so Cal is going to go bankrupt.
    O will use his position to reward his supporters with the spoils, so he will find some way for the unions to go from owning the state government to owning the state.
    I think the only politically-feasible way he has left to confiscate enough money to run all his zombies is inflation.

    Speaking of which, I found a site that has been tracking the US Misery Index since 2004:
    http://www.miseryindex.us/
    Interesting times.

  • Link

    California is going broke ... I actually read that one of the options is to speed up delivery of stimulus money to California -- WTF?. That's because stimulus spending is more aimed at 2010 than 2009 ... Obama can't even piss away money well.

    Meanwhile, Tim Geithner made some interesting comments yesterday that got lost in the Gitmo noise. It’s “critically important” to bring down the American deficit, Geithner said. “It’s very important that this Congress and this president put in place policies that will bring those deficits down to a sustainable level over the medium term,” Geithner said in an interview with Bloomberg Television. Medium term is the key concept. We may start seeing weak sales of our debt. The dollar has been relatively strong because it's served as a save haven ... we can't count on that forever.

    Geithner still doesn't have a real staff at Treasury because that's the way Obama & Co want it. Little Timmy could prove an interesting figure over the next year. Will he continue to be Obama's "fire hydrant" -- Obama's words -- not mine -- or will he put up a fight against Obama & Co's profligacy. My bet is on the latter ... Developing.

    California may be Obama's biggest challenge and his downfall. State budgets have been merging with the federal budget as a practical matter because of forced mandates, especially for Medicare. California isn't the only state going broke, so that a consolidated federal-state budget would look even worse than the federal. Does Obama turn on the federal dollar printing press to cover this? If so, the federal deficit balloons even further -- Geithner has no hope of bringing "those deficits down to a sustainable level over the medium term.”

    I used to think that Obama would buy his way through 2010, and that the wheels would fall off later. You could see California's troubles coming -- I thought the deal with Pelosi was to have Obama's spending carry California for at least a year or two. That may not be the case -- a California bankruptcy in 2009 would be an enormous political problem for Obama. You don't need a crystal ball to see where Obama-Pelosi would take us as a nation -- just look at California today.

  • boqueronman

    My personal view of what is happening is that we are seeing the collapse of the "Welfare" or "Nanny" state model of government, and its post-modern underpinnings. The demographics of the G-7 make actual and near term debt and unfunded liabilities unsustainable. Unfortunately, there are lot of powerful stakeholders who support this model so Western-style democratic governance will not be restructured without a fight, or a decisive financial collapse. The good thing about California is that either it serves as the canary in the coal mine to provide the necessary visible warning leading to effective change or it serves as a decisive straw that breaks the USG camel's back. The other option, the slow motion decline into decadence and poverty in a world managed by the BRICs and the Middle Eastern potentates, does not bear thinking about. It might behoove one to keep their eyes on several other simultaneous developments: (1) the tea party and state sovereignty (10th Amendment) movements; (2) Ron Paul's bill in Congress to open up the Federal Reserve for a comprehensive audit, which could be a first step to rein in the Imperial Federal Government; and, (3) the fact that states governance has been so profoundly degraded that the federal system has virtually ceased to exist now that state budgets receive almost 50% of revenues from the USG. Anyway, the unwinding process is only just beginning.