California continues to have huge debt problems and it appears the state is still struggling in their attempt to balance their budget. The state still is $20 billion in the whole and J.P. Morgan is warning banks and investors that if California defaults on their debts, it could potentially have adverse affects on the economy. California’s Governor Arnold Schwarzenegger has been trying to reduce the debt but so far has not been able to do so. This is another serious case of broken government.
In a recent article it states that:
Earlier this week, the state’s legislature passed bills that will cut the deficit by $2.8bn through budget cuts and other measures. However the former Hollywood film star turned politician is looking for $8.9bn of cuts over the next 16 months, and is also hoping for as much as $7bn of handouts from the federal government.
Earlier this week, John Chiang, the state’s controller, said that if a workable plan to reduce the deficit and increase cash levels is not reached soon, he will have to return to issuing IOU’s, forcing state workers to take additional unpaid leave and potentially freezing spending.
This statement is an eye opener:
and is also hoping for as much as $7bn of handouts from the federal government.
Hold on here people. This would be like giving an obese child a Whopper, large fry and a candy bar! If the feds start bailing states out that over spend, like a drunken sailor in a whore house, this will not solve the underlying problems. I fear we are heading for a financial disaster as the feds continue to spend money and we could potentially face being unable to pay the debt back.