While the media worries about the European debt crisis, there is one looming closer to home. Many Progressive states like California and New York are over burdened with debt. The voters in those two states voted in far left Progressives and continue to support policies that are bankrupting those states. The problem is rooted in the power of the Government Unions. Government workers make 2 to 1 pay vs. private sectors and have cushy pensions, while private workers have 401K’s. These generous salaries and pay are a burden on tax payers. Instead of laying off workers and freezing pay, these Leftist states just raise taxes. The problem is a tipping point and is being reached with disastrous consequences.
The global financial crisis could be heading to a blue state near you: that is the latest grim news from the New York Times: “Mounting Debts by States Stoke Fears of Crisis.“ Normally a cheerleader for the free spending (in bluespeak, compassionate) policies of the public sector union dominated, high tax, high cost states like California, Illinois and New York, the Times now warns that fiscal ruin could be at hand.
The problem is state debt. New York, California and Illinois look more like Greece to their bondholders every day. Since the November elections, investors have been dumping their bonds, and hedge funds are betting against them, perhaps realizing that a Republican House is not going to offer generous, condition free bailouts.
[…]
The Times story compares blue state debt to the subprime crisis and the Greek meltdown. A deeply disturbing graph shows a true panic underway as investors pull money out of mutual funds that invest in municipal bonds even faster than at the height of the market collapse in October 2008. With as much as $4 trillion in off-the-books pension and health care liabilities, the worst hit states may soon be unable to operate without massive federal support.
The crisis could come much faster than Washington thinks. States and municipalities sold more than $55.6 billion in debt this November even as individual investors reduced their holdings of mutual funds containing these funds by $5.37 billion in the two weeks ending November 24. If supply keeps rising while demand sinks, sooner or later prices are going to crash.
If things go wrong in the markets for blue state debt, watch out. If big blue states like New York, California and Illinois hit a point of market failure when private investors will no longer buy their bonds, Washington will have to decide what to do. Fast.
It will be ugly, and it will hurt.
Read the rest: NY Times Warning: Blue State Armageddon On The Way
If these states go bankrupt, the Federal government should do nothing. This will test the Republicans to prove that this time, they will stand by their convictions. If the GOP elite back a bailout of states as they did TARP, the Republican Party will cease to exist and a New Center Right one based on fiscal discipline will replace it.
Voters in California, New York and Illinois must face the consequences of their votes. They wanted Progressive policies, well deal with the result!
No bailouts for states.
