Yes, California is going bankrupt, but no one will spell out why. It is obvious to me. I'll explain: At one point in California's past, the citizens of this state voted to NOT allow benefits to illegals. Illegals were not going to get schooling, medical, etc., because illegals don't and never did pay into the system. They don't pay taxes so they should not get the benefits of the taxes such as schools. But, a judge overturned this vote, and after this, illegals could access everything, and they did. They ran the state into huge debt because the illegals were not paying taxes. It doesn't take a brain surgeon to see that more was going out of the system, than what was being brought in. It was only a matter of time. It is not the citizen's fault. It is not the state gov't's fault. It is this judges fault!!!! Blame him.
That's not the entire cause. The main cause was Proposition 13 that limited taxation ... requiring 2/3 majority to raise taxes. Now the state can't raise taxes and the liberals don't want to cut benefits. What a way to run a government!
Venture to say the REAL problem has rarely been "not enough taxes", and often been "too much spending"..
Once California goes bk the Unions and employees are just another creditor and a judge can reduce their retirement and health benefits. SEIU and State Employees will be screwed and nobody in the state will shed a tear. Once the Unions and state employee salaries and benefits are similar to the private sector California will become a great state again.
This is somewhat of a non-issue. California is required by law to balance the budget. Eventually, once they are no longer able to use smoke and mirrors to pass the deficit to the next fiscal year, they will be forced to make drastic spending cuts. Arnold has done a great job of passing the problem to the next governor. But, eventually, spending will have to be cut. Also, I doubt the federal gov't will set the precedent of bailing out Ca. because they would then be obligated to bail out all other states, too.
Ten years ago, a Massachusetts town, I believe Chelsea, went bankrupt. I think the state took over under receivership. I guess Uncle Sam will take over California if it goes belly-up.
The Feds will give as much money as necessary to ALL states... until the entire house of cards collapses.
Scataphagos - the federal gov't does not have an unlimited supply of $ to throw around. They already need to turn over ~$3T in treasury debt this year just to stay solvent. I think the states are on their own once the states finish wasting the stimulus money the federal gov't gave them.
I remember Mr. Gobalchev said the direct reason the Soviet Union broke up was the central government ran out of money. I think U.S. is different, U.S. dollar is pegged by a lot currencies. U.S. can print to transfer the burden of debt to foreigners if it becomes desperate enough. But I do not think situation is that bad. I just finished reading Market Wizards book (third time), I found some of the Wizards (e.g. Martin Witze) had exact same sentiment after 1987 crash as current doomers.