[William Tell]

From the governor's office: "The bond would only be sold if the voters approve the state spending limit described above to ensure politicians can never again put current year spending on the state's credit card," the governor's office says.

Publius6961 said: "The California Constitution prohibits deficit spending."

Publius6961 makes it sound like Kalifornia already has a constitutional spending limit. Perhaps it didn't work because liberals will attempt to spend the money anyway. Now Arnold appears to be doing the same thing.

Davis encouraged the legislature to pass some $12 billion in "deficit bonds" to allow state spending to exceed revenue. Now Arnold is proposing to do the same thing.

The courts are about to rule that Davis' "deficit bonds" are illegal because they have not been approved by a vote of the people. Arnold's "deficit bonds" may well be ruled illegal by the courts because they are not intended to finance capital improvements.

I pointed out on another thread that recent calculations of how much deficit funding is needed seem to assume that the part of Davis' deficit bonds which have already been sold can remain in circulation. This may be as much as 3 or 4 billion. When the courts rule that these bonds must be refunded, I expect that Kalifornia will experience an immediate cash crisis and will default on its payments.

[FirstPrinciple]

This is exactly how third world countries try to balance their budgets. Except, I don't think American people will be as forgiving as the IMF. Come to think of it, why doesn't California borrow the money from IMF?