Bond Ratings and Bailouts

Mar 24, 2010
Business & Economic Development
Press

Jim Pethokoukis with Reuters is calling attention to a recent analysis in the Boston Globe which suggests that one might be better off buying government bonds from the nation of Iraq than the State of California.   

This sounds ridiculous, but California and a handful of other states are on a path not dissimilar from Greece.  With no room left to tax or borrow Greece finds itself unable to continue to pay its government employees who are unwilling to accept that their generous pay and benefits are unsustainable.  California and several other states could find themselves in the same unstable situation should they not undertake major reforms.

Mona Charen discussed this problem earlier this month in the National Review contrasting New Jersey which is undertaking reforms as they are out of options and California where student protests are reminiscent of Greece.

I worry that California will be turning to the taxpayers of the other 49 states to prolong the spending binge that put them in their current predicament rather than looking to the New Jersey model for a way out. 

In related news: The nation of Greece via the European Union is coming to the U.S. hat in hand to bail them out.  I took to the pages of BigGovernment.com to say that this is totally unacceptable.

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