We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
...federal fiscal bailouts put our federal system at risk. In essence, the national government is acting as if states are too big to fail. In the next financial crisis, the federal government may decide that states need to be treated like General Motors or, at least, be given ever bigger handouts of the kind the Obama administration seems committed to making.
But if the federal government is going to tacitly assume responsibility for state debts, then those $3 trillion in sovereign state debt must be added to the $14 trillion national debt that has already caused grave concern, pushing the current U.S. debt into the danger zone. Even if pension liabilities are ignored, the combined federal-state-local debt runs in excess of 120% of GDP.
The costs go beyond dollars and cents. The more often the federal government bails out the states, the more Washington bureaucrats will insist on regulating state and local affairs. At some point the United States will see the end of state fiscal sovereignty and the demise our federal system of government.
Bankrupt vote-buying blue states run to the Feds for free cash, compromising their sovereignty. The Feds run to China for free cash, compromising our national sovereignty. Where does China run to?
I used to shoot craps in my errant youth. There was a mentality that gripped us sometimes, not our day (especially with loaded and trick dice slipped into games) but you couldn't quit because the luck might change. It seems like our political elites ever doubling up bad bets defying the odds (how many times can snake eyes come up??.....every time when you''re a chump)
It's worth remembering that the US once helped bankrupt France in order to gain our freedom. We sought their money to free ourselves, and they gave it to us.
It's also worth remembering that the Federal government has assumed state debt before, in order to create the Federal government's final residence in Washington, DC. The northern states had borne the brunt of the fiscal burden, and Federal assumption would force the much wealthier southern states to pay a portion. Charleston was one of the wealthiest city in the US, at the time.
Of course, 'this time is different' probably is true right now. Mainly because there is nowhere to turn. Virtually every state is in debt, and there are few lenders of last resort remaining.
Who bails out the lender of last resort? It's an intriguing question. The answer? Print more money!