Actually states piled up a record 'rainy day fund' balance before the crash, in aggregate. It wasn't enough. This was (is) a big drop. You're right that in general if they established adequate reserves through adequate taxation they could weather downturns with little difficulty, but the tendency on the Dem side is to ratchet up spending when the money is flowing in, then hope in 'two steps forward, one step back' fashion you can keep some of the gains when revenues sink. A friend who works in the PA legislature tells me this is what Rendell did; now they're in the shit. On the right, there is hostility to reserves on the bogus premise of overtaxation, or somewhat less bogusly, that the reserve serves as a political slush fund.
CA is a bit of a special case, since their dopey fiscal rules prevent financing services in a rational way. On Thu, Aug 12, 2010 at 3:52 PM, Shane Mage <[email protected]> wrote: > > On Aug 11, 2010, at 9:31 PM, Max Sawicky wrote: > > > States as sovereign entities cannot go bankrupt and cannot be sued > > for default; that is my understanding, possibly wrong. But if they > > want to borrow in the future they dare not default...States will gut > > their budgets before defaulting on GO debt, since if they did > > default, their borrowing costs would increase, perhaps to a > > prohibitive level. > > States are supposed to balance their budgets, nicht wahr? So if they > normally run a primary surplus (ie., excluding debt service) why would > any state with the guts to adjust its tax rates properly ever need to > borrow again after default (even given that National Income would be > doing well just to remain stagnant over the next several years)? > > > > > > Shane Mage > > "All things are an equal exchange for fire and fire for all things, > as goods are for gold and gold for goods." > > Herakleitos of Ephesos, fr, 90 > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l >
_______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
