This is a reasonable proposal, despite some of the constitutional issues. It is certainly a far better solution than a federal bail-out or an
outright default by the states.
Just like families, some states are far better run than others and by not allowing them to deal with their debts independently, but rather require
them to seek a federal, thus collective solution whereby the entire nation has to backstop their incompetence is the not right way to go.
The unions in these states have milked them dry. They negotiated/extorted budget busting contracts that were economically impossible to pay for.
The politicians, only in the game for a short time and not caring about the long-term implications and needing union support, agreed with these
contracts. The people of the state voted the politican into office and now it is time for the people who voted them in and the unions who played the
extortion racket to pay the piper.
States like California have been incompently managed for decades. They have a massive safety net, sanctuary cities inviting illegals to come and
take from the social service system (take a look at the new thread where last years cost for medical treatment for illegals alone in CA was $600M).
California has also consistently been rated one worst places to conduct business, yet they continue to push for harsher building codes - not on the
issues that might make sense like earthquake and mudslide issues, but rather on "green construction". The refuse to tap into their oil reserves and
impose high taxes which drives businesses out of the state. California has had a net exodus of people (illegals not included) for over 10 years.
You would be a fool to start a business in California.
There is no way that the citizens of the country should have to pay for this folly. Let these states declare bankrupcy and let them get out from
under the burden of these public sector contracts and actually get in the business of running their state competently.
Eariler this week was the news of Berkeley being set to offer sex changes to city workers. Fine, except that Berkeley is in debt and borrowing money
from the state which is in massive debt. In a federal bail-out scheme, all states will thus be paying for sex change operations of city employees in
Berkeley. How is that a reasonable outcome? You can also toss abortion into the mix.
Its not been real money or fiscal responsibility to these folks for some time. Time to make them stand up and take responsibility for their
As far as the impact to the muni-bond markets, who cares? An investment in a municipal bond is an investment and as such has inherent risks. What
is going on now is a perversion of the marketplace whereby the quality of the bonds are inflated by the notion that the state can not default or
declare bankrupucy and as such there is a federal backstop. Eliminate that backstop and the interest on those bonds will go up. If nobody wants to
buy them too bad. If they get their house in order folks will buy them. I have not held a mutual fund that invests in municipal bonds in years.
Why? Because a State of California muni bond is a crappy investment and a false one at that. The people who complain about the impact on the muni
bond market are the folks who relish in the artifical high quality debt they are selling to foolish clients. You better believe that shops like
Goldman Sachs will be pushing hard against making this happen. They make $billions trading muni bonds and packaging them in to phony securities.
Its about time. If folks want the states to be soverign, let them be soverign and dig themselves out of this jam they created
(visit the link for the full news article)
edit on 21-1-2011 by dolphinfan because: typo