Posted on 01/13/2010 1:48:31 PM PST by NormsRevenge
SAN FRANCISCO (Reuters) – Standard & Poor's cut California's main debt rating on Wednesday by one notch, saying the government of the most populous U.S. state could nearly run out of cash in March -- and another rating cut might follow.
The state government's nearly $20 billion budget gap over the next year and a half leaves it in a precarious situation, requiring tax increases or spending cuts, either of which may slow economic recovery, the agency said.
"If economic or revenue trends substantially falter, we could lower the state rating during the next six to 12 months," S&P said after cutting the rating on general obligation debt to A- from A. The new level is four notches above "junk" status, a level at which many investors refuse to buy debt.
"The big question is, is there any fear they will get downgraded out of investment grade (so) you may have to sell...that's where I think it would get interesting or hairy," said Evan Rourke, an Eaton Vance portfolio manager in New York. Bond prices did not move much, though, since many expected the downgrade, he said.
California already had the lowest debt rating of any U.S. state before the downgrade. A total of 39 state governments are struggling with shortfalls this fiscal year, according to the nonpartisan Center on Budget and Policy Priorities.
Many are begging for more federal funds and caught between cutting social programs, raising taxes, or both.
The housing market implosion was particularly hard felt in California, a subprime mortgage lending center. Its double-digit unemployment rate, one of the highest in the United States, is expected to endure for a year or more.
(Excerpt) Read more at news.yahoo.com ...
It’s OK.. SantaBama will bail us out. Right, Gubby?
The NEW ballad of Jed Clampett
Come and listen to a story ‘bout a man named Jed
Poor oil entrepreneur barely kept his family fed
Then one day he was working for some food,
And up through the crowd come a bumbling fool
(Arnold that is, RINO gold, more taxes please)
Well the first thing you know old Jed’s taxes are to much to bear,
Kin folk said Jed move away from there!
Said California is no place for you to be
So they loaded up the truck and they moved from Beverly
(go’n back to the Hills they are, fish’n holes, country and western stars)
Well now it’s time to say goodbye to Jed and all his kin
They would like to thank you folks for kindly dropping in
You’re all invited back again to their new locality
To have a heaping helping of their hospitality
(Redneck Hillbillies, is what the press call ‘em now,
Clingers of bibles and guns and to Obama no bow!
Nice folks Y’all come back now, ya hear?)
CORRECTION, Spending CUTS will HELP the economy! The article writer can’t escape the leftist bias. :)
Doing my schadenfreude dance!!! I am glad I moved out. Welcome to the 3rd world. Maybe they will just declare bankruptcy since they headed towards Mexico, Venezueala or Argentina status.
a precarious situation, requiring tax increases or spending cuts, either of which may slow economic recovery
I saw that .. amazing how the gubamint spending less is seen as a bad thing or not desireable, especially in the long run.
If California has to make a decision of whether or not to cut spending or raising taxes..........guess what it’s going to do. If they raise taxes, they will get even less revenue because the people will have less to spend. If they cut taxes, people will spend that money and the state will increase their revenue. But.....higher taxes are the way they normally go.
I guess they’ll be paying their bond interest with IOUs, eh?
Lending to California will be like “Hotel California”:
“You can check out any time you like, but you can NEVER leave!”
You reap what you sow......
This is not a good time to buy California bonds. The risk of default is getting higher. (and I’m a California citizen)
One glance at those who are allowed to hold office and “Kalifornia’s” mess is explained!
In a related news item, Mexican authorities are shoring-up their patrols and fences along their border with California as drastic budget cuts prompt large numbers of desperate welfare recipients to flee the state.
Even a broken bond rating agency is right twice a day.
Can we give it to Mexico?
They'll still be “lowering” their ratings when California paper is being used as wallpaper or to start fires in those few remaining California homes that have fireplaces.
Just curious. Is there a viatical agency that pays present value on periodic payments which are obligations of the State of California?
No one also talks about the complete and utterly bloated pension system not too mention illegals.
Good job AAAAAAAAHNOLD.
I thought we already did.
California just needs a reasonable tax hike.
100% is fair. :)
Have a nice day.
-your friends on the American left
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