So what happens if California files Bankruptcy? (sales, income)

[Quatermass]

Originally Posted by Alexus

As California goes, so does the nation. Bush apparently didn't understand this, and greatly hampered the state.

Wow, I didn't know Bush spent 40 years tricking the legislature, the governors, and often the voters of California into gradually spending the state into oblivion. They call the guy dumb, but that kind of far-sighted kneecapping of CA could only be the work of a diabolical genius.

There will be federal bailout to compensate for 8 years of Bush anti-CA practices to make the necessary correction.

A federal bailout of CA will result in the federal government owning the state. We're already broke; we're about to lose our autonomy as well. 38 million welfare cases.

[drshang]

Originally Posted by Kibby

General consensus seems to be opposite to what you are saying. A bailout wouldn't really help anything - California is broken and throwing more money at it is just enabling an addict. As you noted - several states are in the same boat ... and pretty much for the same reasons - bailout even one state and 49 will get in line for their share of the goodies.

Not only are the citizens fed up with the bailouts but the Government is BROKE. California is on their own - don't expect a white horse to come to the rescue.

It's political suicide to save one state that can't control their spending, and ask for all the others to pay for it.

I agree with everything you said and at the same time it doesn't change a thing about what I said.

I think that's what makes this such a difficult issue. Damned if you do, damned if you don't.

All I'm saying is the consequences of not bailing out the states are far greater than the consequences of doing it. The consequences of not doing it involve some really scary macroeconomic things such as global loss of confidence in the United States, the USD and all the organizations the govern it. It will cause the stock market to drop substantially. It will mess up the bond market for a while. This is worth far more than $100 billion or whatever it will cost to bail out half the states. The moral hazard thing was already lost when we bailed out AIG.

Perhaps the biggest issue that Bernanke and Co. have to convince the world is the US hasn't lost control. If they make it seem as if they have lost control it will drive away all the other countries who are financing our deficit. If we let even one state go bankrupt, even Wyoming, it will send a signal to the world that the US has seriously lost it. If we let California or New York go bankrupt, it will send global shock waves.

[ecvMatt]

Originally Posted by dcashley

A state government cannot declare bankruptcy. There is absolulty no provision in law for it.

There may be no provision in law for it, but there is precedent(cities.)

Since it isn't expressly forbidden, I imagine they will go with one of my favorite sayings: "Tis better to ask for forgiveness than permission."

[Quatermass]

Originally Posted by ecvMatt

Since it isn't expressly forbidden, I imagine they will go with one of my favorite sayings: "Tis better to ask for forgiveness than permission."

I could be wrong about this, but I thought the California constitution did expressly forbid the state from declaring bankruptcy, and that this was one of CA's problems: it's cut off from the obvious way to at least begin to climb out of the fiscal trap it's dug itself into (by throwing out the public-employee contracts that have a stranglehold on the state).

On the other hand, bankruptcy (if possible) would deal a major blow to the freedom of California voters to influence our state government. A bankruptcy judge will become the de facto, all-in-one governor and legislature, making the decisions on state spending. In other words, taxes will likely go into (an even higher) orbit, outrageous decisions will be made under the aegis of federal bankruptcy law, and all the ballot props in the state won't allow us a thing to say about it.

The other alternative, a federal bailout, would basically hand California over to the President, and the result would likely be the same. The feds have already nationalized General Motors and the banks, giving them direct control over how these entites conduct their business. Why would the situation be any different after they nationalize California?

That is the most tragic aspect of the California collapse: the end of our status as free citizens of the Golden State.

[northbayeric]

A very eye-opening article by Henry S. Rowen, a senior fellow emeritus of the Hoover Institution, comparing California's dire financial straits to those of New York City in 1975, when it was shut out of the public debt markets and placed in receivership: A New York Solution for Bailing Out California - WSJ.com

This past Monday, Fitch Ratings cut California's state bond rating by two notches (A- to BBB), which is perilously close to junk bond status. Article here: California credit rating takes a hit - UPI.com

You never, ever raise taxes during a recession, and California's current situation, losing $18 billion in revenue from the past year, is proof of this. Trying to run a business here has become a horror compared to most other states.

[chopblock]

Originally Posted by dcashley

A state government cannot declare bankruptcy. There is absolulty no provision in law for it.

And that's what your state gov has always counted on.
Any day now obama will sign the check, after pelosi gets enough of making arnold looking stupid.

[MotleyCrew]

Originally Posted by jram36

i left california and hell i left usa, i live in mexico. i feel sheltered from all that is evil in usa. your laws and taking of constitutional rights that are making the poor suffer. hah i'd rather catch swine flu if it where as serious as said to be wich its not. come to mexico and see. im caucasion californian but not anymore. usa can go to hell. burn devil burn

So looks like you just might get your wish. When the USA is gone, what will become of poor Mexico? the corrupt will rule and the drug lords will be your demise. Who will feed you?

[MotleyCrew]

Originally Posted by drshang

I agree with everything you said and at the same time it doesn't change a thing about what I said.

I think that's what makes this such a difficult issue. Damned if you do, damned if you don't.

All I'm saying is the consequences of not bailing out the states are far greater than the consequences of doing it. The consequences of not doing it involve some really scary macroeconomic things such as global loss of confidence in the United States, the USD and all the organizations the govern it. It will cause the stock market to drop substantially. It will mess up the bond market for a while. This is worth far more than $100 billion or whatever it will cost to bail out half the states. The moral hazard thing was already lost when we bailed out AIG.

Perhaps the biggest issue that Bernanke and Co. have to convince the world is the US hasn't lost control. If they make it seem as if they have lost control it will drive away all the other countries who are financing our deficit. If we let even one state go bankrupt, even Wyoming, it will send a signal to the world that the US has seriously lost it. If we let California or New York go bankrupt, it will send global shock waves.

Get ready for the global shock waves!!!! This administration is become rather transparent in their attempts to be just the opposite, by destroying the USA ecconomy only then can you rebuild the USA the way they feel it should be. So just hang on and wait.

[Winston Smith]

Originally Posted by jram36

i left california and hell i left usa, i live in mexico. i feel sheltered from all that is evil in usa. your laws and taking of constitutional rights that are making the poor suffer. hah i'd rather catch swine flu if it where as serious as said to be wich its not. come to mexico and see. im caucasion californian but not anymore. usa can go to hell. burn devil burn

Congratulate you in your move. I've considered Latin America as an escape myself. Then again, I also consider BC, Canada...

Though I wouldn't state it quite as harshly as you, "burn devil burn," I will say that as a whole, American society and government are unprepared for the coming realities, most acutely, realities tied to oil. As driving gas-guzzlers on 60-mile commutes from over-sized homes in sub-divisions where nothing is within walking distance becomes too expensive, there will be wide-spread pain and a collective "HUH?!?" Illegal immigration TO Mexico will probably increase.

[loveautumn]

I live here and IMO California cannot be fixed. The people will not stand for any more increased taxes...and the politicians will never do what they need to do. Fix the illegal immigration problem, unions, state pensions, etc. There is plenty of money that can be saved, but there is no political stomach for it here. California has 30% of the total US welfare payments. In a few years, when the baby boomers retire, there will be a huge departure of the middle class from California, in fact, it is already happening now. The only thing stopping it is that these folks think their house values are going to go back up (which they won't).

The only thing that will save California is drill, baby, drill...get those oil rigs out there off the coast and we will make money again.