Just keeps getting worse and worse in the one-time Golden State:
Antioch’s leaders earlier this month said bankruptcy could be an option for the cash-strapped city of roughly 100,000 on the eastern fringe of the San Francisco Bay area.
Antioch’s fiscal woes are standard issue for local governments in California: weak revenue from retail sales and property taxes is forcing spending cuts, layoffs and furloughs.
But cost-cutting measures may not be enough to keep Antioch’s books balanced, so its city council is openly discussing bankruptcy.
“We just want to alert people to the possibility,” Antioch Mayor Pro Tem Mary Helen Rocha said.
Antioch is not even remotely alone – and California is not the only State with ailing municipalities. And this, my friends, is why even if there is a recovery, it is doomed – there is simply too much debt. It can’t be repaid – default in some form is inevitable and when it happens it takes down whatever remains of our financial system.
There are, of course, rumors out there that Uncle Sam might ride to the rescue. Having the ability to print endless amounts of money does give the federal government the ability to move State and local debt on to the federal books…but the price of that is both a weaker US dollar and a exceptionally strong risk of sovereign default on the part of the federal government. There simply is a limit to all this – when, exactly, it will be reached is unknown and unknowable…but eventually the money people figure there’s a chance they won’t get paid, and then they either stop buying US bonds, or start charging extortionate interest rates.
If Uncle Sam doesn’t bail them out, then it will be the cities and States which bring the house of cards down. This would actually be the less painful option for the country as a whole. It would force governments to cancel the absurdly generous public sector union contracts while also imposing fiscal discipline on profligate governments. The problem here, for Democrats, is that it means less union money for campaigns and, temporarily worse, a big spike in the unemployment numbers right before election day as government workers are let go.
Not a pretty picture – and there is no easy way out.
Blogs For Victory 