It is incredibly telling to me that S&P is being quoted as critiquing the proposed budget. That means two things.
People (investors) want to know what is happening to the risk associated with their investments. Remember news services write stories for folks to read and only run stories they think that people will read.
Second, S&P has been willing to speak out in such a way that they feel is important to try to influence state budget decisions. This means that S&P is getting pro-active and saying what they think is acceptable state fiscal policy and what is not.
I am reminded of when Chile under a communist government repudiated all their foreign loans. It was just a couple of years later that this communist country renegotiated the loans and started making payments under them again. They realized that they were dependent upon the international money markets for the country's economic survival. Even communists do what Wall Street says is important.
California Democrats will also have to tow the mark in putting together the emergency budget and next years budget. Tough Love for Democrats.
Yes, that is what is needed!
ROFL!!
Yeah but... CA doesn't have Communists, it has Commonists!!! There is hardly any distinction, just as the spelling is only changed by one letter.
They are so obsessed with their subjective version of "fairness," that they insist we all suffer to the lowest common denominator... OR ELSE!!! Nothing else will be tolerated, not even a difference from their opinion!!!
You always write the most insightful opinions, Robert.
I don't see it as "tough love". The dems are going to get everything they want, and will be able to blame it on somebody else. It's a perfect world for them.
The size of the California govt. will remain essentially the same as it is now - only token cuts will be made will be made here and there. Those fat pension increases granted two years ago will never be rolled back, that would be "mean-spirited". Taxes will be increased (on the "rich", of course) - there is no other possibility. (I still predict a huge estate tax increase, since that will be a way of getting back at the feds since state death taxes are deductible from federal death taxes.)
Also look for huge shifting of costs from the state to cities and counties. That's a way to get back at the rural "red zones" - make them suffer or raise local taxes to make up for the cutoff in state funds.
And the dems will not get the blame, wall street will, although this scenario was entirely predictible 18 months ago. They've got to be secretly pleased over this outcome, regardless of all the public hand-wringing.