Thursday, May 21, 2009

What Were the People of California Thinking?

Californians are insane. They just voted down their best hope of avoiding insolvency. When you’re in a sinking boat, stop blowing holes in it. So now the U.S. government should take care of them when they decide to spend more than they have? People in states which balance their budgets prudently should subsidize those who do not?

Does democracy mean that the thrifty should subsidize the profligate? Perhaps Californians will not have any incentive to pay their bills unless bonds are secured and creditors can start seizing state government land. In such scenario, tax increases and spending cuts might commence rather quickly.

Everyone should have the right to bear the consequences of their actions. The people have voted for insolvency. Why should the U.S. Treasury give them money? The problem is not a lack of money in California, it is a lack of virtue on the part of voters. No amount of money will ever appease those who insist on spending money they do not have. Every capital infusion is exhausted by a new level of profligacy.

Of course, as we have seen, I suspect that political support for a bailout will come not just from Californians, but also from those bondholders dumb enough to lend to them. Of course, rather than bear the cost of such idiocy, they are hoping to enjoy the higher interest rate of a California debt obligation while enjoying the security of the U.S. Treasury in a bailout. It will be yet more affirmative action for the rich and stupid.

Again, our U.S. government deficits are subsidizing vice and penalizing virtue. Nothing good will come of it.