Sometime in the next couple of months The Federal Government is going to give the state of California a lot of money. After lavishing more than a trillion dollars on Banks, Insurers and Auto Companies, there is a 0% probability that the government will sit idly while the largest state collapses.
There real question is how do we go about propping up California. Whether we like it or not, California will set a precedent for the rest of the country. Believe it or not California is not the only State struggling to keep its head above water. Congress and the administration need to have a strategy ready before Arnold comes crawling cap in hand to Washington.
Rather than putting together an ad-hoc plan for California, we should develop a national strategy for dealing with insolvent states. The plan that I am proposing is simple, non-intrusive and will ensure that Federal Government gets back every penny that it spends bailing out the states.
Federal loans should be made available to any state that chooses to accept them. In exchange, the state will be required to levy a 1% sales tax, whose revenue would be directed to the Federal government until the loan is repaid.
While, no one would enjoy paying the extra tax, it wouldn’t be nearly as devastating as the massive budget cuts currently facing states across the country. By securing a dedicated revenue stream the loan would be virtually risk free for the Federal Government. Furthermore, enacting a national policy would assure investors that state bonds were a safe investment, reducing borrowing costs for every state.
The greatest advantage of this plan would be in avoiding the political circus of negotiating a special bailout for every state in need. My plan would not solve the underlying problems facing California, but that is intentional. It is up to voters and politicians in California to find a long term solution to the state’s budget crises. Allowing Washington to interfere in the fine details of the State budget would be far worse.
This is pure bull. This state has seen its best days which are now gone forever. The state is the highest taxed state in the nation and you want to add another tax? Get serious! What we need to do is get rid of our dysfunctional legislature and incompetant govenor who is incapable of governing and start fresh.
At the current exodus rate of people and corporations, soon there will be no one left to pay the bills. When the silent majority say enough and the welthy close their bank accounts, only the sick, lame and lazy will be left. What then????!!!!????
We need to balance the budget. Stop the unnecessay spending. Eliminate the legislative pet projects. And, restore this states pride.
I think that spending cuts are needed, but unless people are willing to give up many of the services they currently demand, a tax increase is needed as well to balance the budget. Basically, people are going to have to start paying for the services they use instead of pushing it off onto later generations by issuing debt.
Post edited 3:42 am – January 4, 2012 by jane2hamilton
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