OT: Estimated state budget deficit reaches $25.4 billion

[davelj]

[quote=BigGovernmentIsGood]
Good lord. You conservatives never cease to amaze me with your ignorance. Please stop watching FoxNews, Rush Limbaugh, Glen Beck and other conservative sources that are making you more retarded by the day and learn to read fact-based news sources like Slate and HuffingtonPost.

From Slate:

Can a state declare bankruptcy? Can a country?

No and no. Chapter 9 of the U.S. bankruptcy code allows individuals and municipalities (cities, towns, villages, etc.) to declare bankruptcy. But that doesn’t include states. (The statute defines “municipality” as a “political subdivision or public agency or instrumentality of a State”—that is, not a state itself.) For one thing, states are said to have sovereign immunity, as protected by the 11th Amendment, which means they can’t be sued. In other words, they don’t need any protection from angry creditors who would take them to court for failing to pay their debts. As a result, states can simply borrow money ad infinitum.

Say the state can’t make its debt payments, and no one will lend it any more money. In that case, the federal government can step in and put the state into receivership. This would involve the assignment of an accountant to manage the state’s debt, overseen by a judge. It would be a lot like bankruptcy, except instead of following a structured set of steps—informing creditors, appointing creditors’ committees, a 120-day window to file a plan, etc.—a receiver has the authority to force creditors to renegotiate loans in a speedy fashion. However, the accountant in charge would not have the power to make decisions about the state’s budget, such as which programs needed to be cut and which taxes had to be raised. (No state has ever gone into receivership.)

http://www.slate.com/id/2246915/
[/quote]

Let’s assume for a moment that a state can’t declare bankruptcy – or, more specifically, let’s assume that California can’t declare bankruptcy. Just for argument’s sake, of course, so that there won’t be some great debate over the technical legalities.

The article above – assuming it’s correct – clearly states that “receivership” is “a lot like bankruptcy,” but for some technical and procedural differences.

So the bottom line appears to be that California can end up in a state of affairs – “receivership” – which is, for all intents and purposes, “a lot like bankruptcy.” Consequently, bankruptcy and receivership in the context of the State of California are distinctions without significant differences. To the layperson they look pretty much the same from the outside.

Bankruptcy law is legislated at the federal level. With the exception of cases involving federal entities (e.g., banks via FDIC), most receivership law is legislated at the state level. But, trust me, whether an entity is in receivership or bankruptcy – it’s up shit creek. Debating the difference between the two is like arguing about whether you’d rather have your right leg or left leg amputated. They’re both unpleasant.

[no_such_reality]

The more likely scenario, and hopeful scenario, is that California defaults on a bond payment.

California then is effectively broke. Once broke, borrowing money will be cost prohibitive if money can be even be borrowed. Once that occurs, California will need to live with the cash in it’s pocket.

Rosey predictions, annual taxes all become irrelevant as the monthly payroll and vendor payments need to be met, just like any other cash strap California business with the monthly cash flow from activities.

[no_such_reality]

The more likely scenario, and hopeful scenario, is that California defaults on a bond payment.

California then is effectively broke. Once broke, borrowing money will be cost prohibitive if money can be even be borrowed. Once that occurs, California will need to live with the cash in it’s pocket.

Rosey predictions, annual taxes all become irrelevant as the monthly payroll and vendor payments need to be met, just like any other cash strap California business with the monthly cash flow from activities.

[no_such_reality]

The more likely scenario, and hopeful scenario, is that California defaults on a bond payment.

California then is effectively broke. Once broke, borrowing money will be cost prohibitive if money can be even be borrowed. Once that occurs, California will need to live with the cash in it’s pocket.

Rosey predictions, annual taxes all become irrelevant as the monthly payroll and vendor payments need to be met, just like any other cash strap California business with the monthly cash flow from activities.

[no_such_reality]

The more likely scenario, and hopeful scenario, is that California defaults on a bond payment.

California then is effectively broke. Once broke, borrowing money will be cost prohibitive if money can be even be borrowed. Once that occurs, California will need to live with the cash in it’s pocket.

Rosey predictions, annual taxes all become irrelevant as the monthly payroll and vendor payments need to be met, just like any other cash strap California business with the monthly cash flow from activities.

[no_such_reality]

The more likely scenario, and hopeful scenario, is that California defaults on a bond payment.

California then is effectively broke. Once broke, borrowing money will be cost prohibitive if money can be even be borrowed. Once that occurs, California will need to live with the cash in it’s pocket.

Rosey predictions, annual taxes all become irrelevant as the monthly payroll and vendor payments need to be met, just like any other cash strap California business with the monthly cash flow from activities.

[PatentGuy]

“Once that occurs, California will need to live with the cash in it’s pocket.”

IMO, a more likely scenario is that the feds bail out CA (“TBTF”), plus other states. Maybe the bondholders will be paid in full (ala AGI bailout), or maybe they will take haircuts (ala GM bailout), I don’t know, but I highly doubt the feds make the pensioners take a haircut. (Did any GM pensioners (union or non-union) take a haircut?).

Haircuts and cram-downs have to happen at some point to get rid of the debt. 100% bailouts may happen on a case by case basis, but the net result will be offsetting currency debasement.

[PatentGuy]

“Once that occurs, California will need to live with the cash in it’s pocket.”

IMO, a more likely scenario is that the feds bail out CA (“TBTF”), plus other states. Maybe the bondholders will be paid in full (ala AGI bailout), or maybe they will take haircuts (ala GM bailout), I don’t know, but I highly doubt the feds make the pensioners take a haircut. (Did any GM pensioners (union or non-union) take a haircut?).

Haircuts and cram-downs have to happen at some point to get rid of the debt. 100% bailouts may happen on a case by case basis, but the net result will be offsetting currency debasement.

[PatentGuy]

“Once that occurs, California will need to live with the cash in it’s pocket.”

IMO, a more likely scenario is that the feds bail out CA (“TBTF”), plus other states. Maybe the bondholders will be paid in full (ala AGI bailout), or maybe they will take haircuts (ala GM bailout), I don’t know, but I highly doubt the feds make the pensioners take a haircut. (Did any GM pensioners (union or non-union) take a haircut?).

Haircuts and cram-downs have to happen at some point to get rid of the debt. 100% bailouts may happen on a case by case basis, but the net result will be offsetting currency debasement.

[PatentGuy]

“Once that occurs, California will need to live with the cash in it’s pocket.”

IMO, a more likely scenario is that the feds bail out CA (“TBTF”), plus other states. Maybe the bondholders will be paid in full (ala AGI bailout), or maybe they will take haircuts (ala GM bailout), I don’t know, but I highly doubt the feds make the pensioners take a haircut. (Did any GM pensioners (union or non-union) take a haircut?).

Haircuts and cram-downs have to happen at some point to get rid of the debt. 100% bailouts may happen on a case by case basis, but the net result will be offsetting currency debasement.

[PatentGuy]

“Once that occurs, California will need to live with the cash in it’s pocket.”

IMO, a more likely scenario is that the feds bail out CA (“TBTF”), plus other states. Maybe the bondholders will be paid in full (ala AGI bailout), or maybe they will take haircuts (ala GM bailout), I don’t know, but I highly doubt the feds make the pensioners take a haircut. (Did any GM pensioners (union or non-union) take a haircut?).

Haircuts and cram-downs have to happen at some point to get rid of the debt. 100% bailouts may happen on a case by case basis, but the net result will be offsetting currency debasement.

[Anonymous]

[quote=no_such_reality]The more likely scenario, and hopeful scenario, is that California defaults on a bond payment.[/quote]

CA cannot default on bond payments until they stop paying for everything else. It’s in the state constitution. The legislature and Governor don’t have a choice: They cut the interest checks first.

I think that the chance that interest payable during any year could exceed tax revenues is close to zero. The state is not *that* broke.

How much is left for everything else (payroll, welfare, and whatever) is the real question.

[Anonymous]

[quote=no_such_reality]The more likely scenario, and hopeful scenario, is that California defaults on a bond payment.[/quote]

CA cannot default on bond payments until they stop paying for everything else. It’s in the state constitution. The legislature and Governor don’t have a choice: They cut the interest checks first.

I think that the chance that interest payable during any year could exceed tax revenues is close to zero. The state is not *that* broke.

How much is left for everything else (payroll, welfare, and whatever) is the real question.

[Anonymous]

[quote=no_such_reality]The more likely scenario, and hopeful scenario, is that California defaults on a bond payment.[/quote]

CA cannot default on bond payments until they stop paying for everything else. It’s in the state constitution. The legislature and Governor don’t have a choice: They cut the interest checks first.

I think that the chance that interest payable during any year could exceed tax revenues is close to zero. The state is not *that* broke.

How much is left for everything else (payroll, welfare, and whatever) is the real question.

[Anonymous]

[quote=no_such_reality]The more likely scenario, and hopeful scenario, is that California defaults on a bond payment.[/quote]

CA cannot default on bond payments until they stop paying for everything else. It’s in the state constitution. The legislature and Governor don’t have a choice: They cut the interest checks first.

I think that the chance that interest payable during any year could exceed tax revenues is close to zero. The state is not *that* broke.

How much is left for everything else (payroll, welfare, and whatever) is the real question.

[Author]

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