Drop Dead California

Thats what Peter Schiff thinks Obama should tell California:

During the height of New York City’s financial crisis in the 1970’s, President Gerald Ford had the good sense to turn down Mayor Abe Beame’s request for a federal bailout. The refusal prompted the famous New York Post headline, “Ford to City: Drop Dead.” More than 30 years later, as California Governor Arnold Schwarzenegger makes a similar plea to Washington, I hope President Obama will show similar restraint. Unfortunately, given Obama’s recent string of unwise economic decisions, it’s hard to imagine that his judgment will suddenly improve.

A federal bailout would spare California from having to make spending cuts needed to bring its budget into balance. The matter has become urgent since California voters rejected several tax-hiking ballot initiatives. Rather than taking the vote as a signal to dramatically curtail spending, the state turned to the feds. If they get a free pass, the politicians can avoid fixing any of their past mistakes or preparing California for the future...

Its worth reading in full, if for nothing else an excellent example of clear economic writing. Its relevant to Australia too. The government gave the banks a 100% government guarantee on their deposits so State governments are finding it harder to raise capital , forcing them to either raise interest rates on their bonds or ask the Feds for a bigger handout.