Quote:
Originally Posted by Schneed10
Because California collects a lot less money in taxes than it pays out in salaries for workers and other spending. If they keep doing that unchecked the state government's credit rating will be downgraded (like Greece has been), which will lead to higher interest rates on it's debt, which will lead to even more spending to finance the higher interest payments, which could ultimately lead to the state defaulting on it's obligations.
Same thing as if you were to ring up a big credit card balance. You may be able to make the minimum monthly payment. But what if you keep spending and adding to that balance? The minimum monthly payment gets bigger. What if it got so big that one month you had to choose between paying your car payment and paying the credit card bill? You could end up losing your car. Same thing is at play here with California.
They need to live within their means.
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Nice post sir . Ill. and Ca . have serious problems paying their state pension plans
Mish's Global Economic Trend Analysis: Illinois Pension Fund $61 Billion Underwater; State Borrows Money For 2010 Contribution; California $20 Billion in the Hole Again ....
Sinkhole! . You are correct , spending more than you take in is ultimate failure , borrowing on top of that is only going to make matters worse .