Saturday, July 30, 2011

How California Could Be Impacted by the Debt Negotiations

There won't be much that will be cut from government spending as part of the debt negotiations, but one area that could be cut dramatically is federal revenues given to states. The states simply don't have the pool of voters at the ready with which to scare politicians into protecting handouts to states---and those handouts are huge. Consider the case of California.

According to the San Francisco Chronicle, California gets $79 billion a year from the federal government - nearly 40 percent of what it spends. The state now spends $208.5 billion a year, $79 billion of it from the federal government.

Even with federal assistance, California is on the financial edge. It is still not known how the ultimate debt plan will develop, but a significant cut in the assistance could put the government of California over the edge very rapidly. Not that it isn't headed in that direction anyway, but things would be speeded up dramatically. 


  1. I would love to see the implosion of CA. It could not happen to a better bunch.

  2. These federal handouts is the way US controls state legislatures. As soon as they figure out that no more fed money is coming to save their asses, they'll start making laws pulling more power towards themselves - all the way to seccession.

  3. Anon 3:12,

    We can only hope!!
    Keep that happy thought! :)

  4. Maybe Meredith Whitney, the "scaremonger", will be proven correct after all..