Barring drastic action, the Golden State will run out of cash in March.
There is no provision in the Constitution for dealing with a bankrupt state. But then, there’s nothing explicit dealing with federal bankruptcy, either. The founding fathers didn’t expect their republic to permanently accumulate debt. Indeed, Thomas Jefferson wished to foreswear all sovereign debt. He considered the practice parasitic.
Our leaders are supposed to run our governments so to avoid debt crises.
But, because politicians do just the opposite, they run into cash flow crunches. Last year, California’s statesmen borrowed $5.4 billion to cover the lean time before Spring’s tax revenues flowed in. They had figured they would be good through June, but miscalculated. Now they’re scrambling for an extra $3.3 billion.
Time to fudge the books! Pay late. Not answer the phone or respond to dunning notices.
Of course, the real problem is over-spending. California’s politicians spend too much.
Alas, it doesn’t look like they are about to reform.
Gov. Jerry Brown still pushes the huge “investment” of high-speed rail, for the grandest example. The project’s supporters have over-estimated ridership, underestimated costs (the most realistic official accounting now puts the system at $98 billion), and have been forced to restrict the extent of the line, excluding both San Diego and the state capital. Brown’s response? Making up for cost overruns by hijacking funds from the state’s “cap-and-trade” (the nation’s only carbon-footprint-based) tax.
Ah, politicians: Spend, spend, spend, even as the institutions they are responsible for lurch into insolvency.
This is Common Sense. I’m Paul Jacob.