California Should Declare Bankruptcy

John Seiler:

If you’ve been reading, you know I’ve written in favor of the state declaring bankruptcy. As I wrote back in April:

There are couple of things to note here. First, for a family of four, $7,220 is owed just for the California’s state-government debt.

Second, California’s debt per capita of $1,805 is more than twice that of the 50-state median of $865.

Third, the states with the worst rankings – New Jersey and New York – also join California on the “States That Do Everything Wrong” ranking that I wrote about in my article, “CA doing ‘everything wrong’.” The ranking was based on a study by the American Legislative Exchange Council. And in that same study, California and New York headed the list for the “Moving Van Effect” – citizens leaving a state for other states.

When a family of four moves from California to Texas, for example, its state debt drops from $7,220 to $2,080.

Treasurer Bill Lockyer was on the John & Ken show Friday evening, talking about bankruptcy and debt. (Audio link here.) They discussed a federal bill that would allow states to declare bankruptcy. (Although, even under current law, if a state doesn’t pay its bills, how is that different from bankruptcy?)

I’ve met Lockyer many times over the years, interviewing him at The Orange County Register. He’s intelligent and personable. Although a politician and lawyer, he was a quick study when he became treasurer four years ago.

He said the state’s bond payments currently run around $6 billion a year. He added that, according to the state constitution, payments must be made  in this order: K-14 education, then bonds.

Currently, the state budget is about $86 billion, and education about $40 billion. Bonds are $6 billion. So that leaves $40 billion for everything else: higher ed, police, roads, parks, etc.

He insisted that, if there’s not enough money for the bonds, or for the pension payments from the general fund, then taxes just would have to be raised. It’s a permanent obligation, he insisted. He said the constitution is the last word, and that’s that.

John Kobylt objected: No, he said, he wasn’t going to raise taxes to pay for the bond or pension obligations. Just declare bankruptcy.


I pay my debts. And I hope you pay yours. But I never signed the credit-card slip for the state’s current $71 billion in bond indebtedness. I never voted for any bonds. I never voted for any politicians who stuck us with the bonds. I also didn’t vote for the  pension-spiking of a decade ago, allowing government shirkers to retire in Lucullan luxury, many raking in more than $200,000 a year, while I pay for it as a tax slave.

It’s not my fault that the pension fund doesn’t have enough money in it. Why should retired government functionaries get to raid the general fund just because some politicians their union bought off a decade ago passed a law allowing it?

Does the California Constitution ban bankruptcy and mandate pension payments if the fund goes dry? I don’t care. Why is it that the government cites the constitution only when that means increasing its power and grabbing our money? The California Constitution has become a document shredded to confetti.

So, just declare bankruptcy. Bondholders will get stiffed, but any investment involves risk. Millions of Californians “invested” in their homes in the mid-2000s, expecting high home prices to go even higher. They since have gone into foreclosure, and the banks that loaned them the dough got stiffed. (Or they got “bailouts” of taxpayer money from the TARP scheme from the crooked Bush regime, or the similar bailout from the crooked Obama regime. Bush and Obama robbed Main Street to bail out Wall Street.)

If payments from the general fund to pensioners are ended, the pension funds still will have about 75 percent of their equity. So the retirees  just have to scale back their payments to retirees by 25 percent. Contrast that with millions of California who have no income because they lost their jobs, and might even be living on the street.

California needs to go to a pay-as-you go system.

Declare bankruptcy. Then: No more bailouts. No more taxes. No more debt. No more payments from the general fund to pensions.

No more nonsense.

Jan. 23, 2011

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