California is broke . . . flat busted broke . . . busted. Nonetheless it is continuing to spend money it doesn't have, going deeper and ever deeper into the hole, and the nation's taxpayers almost certainly are going to end up paying California's bills.
The tipping point appears to have been reached much quicker than the post immediately beneath this one anticipated.
An effort by the golden state to borrow the money needed for its current and ongoing spending is failing. Financial institutions and other private investors are shying away from bonds the impecunious state is trying to peddle. After all, who wants IOUs from a deadbeat?
But as Attila the Hun and Genghis Khan learned and were wont to say: Where there's a whip, there's a way.
The whip and the way in this case is California's use of it political clout to get the federal government to guarantee the bonds. With that guarantee the same investors who previously shied away from purchasing the bonds will buy them as they are secured and backed up by the U.S. Treasury . . . meaning the nation's taxpayers. The federal guarantee is taking shape beneath the public's radar screen, avoiding the attention that would be given a direct federal purchase of the bonds as anticipated by the earlier post on this subject.
In any event though, when California is unable to make the payments called for by the bonds, taxpayers in states that have managed their finances prudently -- and whose taxpayers therefore have done without the goodies that Californians have persisted in bestowing on themselves through their state's now empty coffers -- will end up making those payments through the U.S. Treasury. California and Californians will merrily continue going their way. Meanwhile, New York and Illinois, the other politically powerful and profligate states, already are lining up to share in the largess of the federal government with what it extracts from citizens' purses and wallets.
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