28 May 2013

California Dreaming

Only a few days more than a year ago I posted here about California's state of insolvency. In Sunday's NYT there's an article about California's sudden positive financial turn. Not surprising to anyone who has even a slightly realistic view of the integrity and probity of elected officials, the state's legislators want to spend as much of this windfall as possible.

California's surplus is largely a function of exceptional tax payments due to the run-up in the stock market. In turn, the stock market's extraordinary run is due more to the Fed's program of qualitative easing than to fundamental changes to the American much less California's economy. To spend this one-off tax pop would be foolish. Anyone willing to bet against legislative foolishness?

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