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Monday, July 06, 2009

California IOU's Will Defeat 'Obamanomics'?

Kevin Hassett writes a piece for Bloomberg, a must read. Here is a little teaser:

The California morass has Democrats in Washington trembling. The reason is simple. If Obama’s health-care plan passes, then we may well end up paying for it with federal slips of paper worth less than California’s. Obama has bet everything on passing health care this year. The publicity surrounding the California debt fiasco almost assures his resounding defeat.

It takes years and years to make a mess as terrible as the California debacle, but the recipe is simple. All that you need is two political parties that are always willing to offer easy government solutions for every need of the voters, but never willing to make the tough decisions necessary to finance the government largess that results. Voters will occasionally change their allegiance from one party to the other, but the bacchanal will continue regardless of the names on the office doors.

California has engaged in an orgy of spending, but, compared with our federal government, its legislators should feel chaste. The California deficit this year is now north of $26 billion. The U.S. federal deficit will be, according to the latest numbers, almost 70 times larger.

Read the whole thing.

More on California issuing IOU's to their creditors found here.

Other states may be forced to do the same thing.

With the massive spending Obama is proposing with his "public option" not to mention how his massive spending bills with quadruple our deficit, America's IOU's won't be worth the paper they are printed on, just as California's aren't.