Megan McArdle asks whether California is to big to let fail and what sort of moral hazard would be involved in this sort of bail out. And is this the end of federalism? The U.S. Treasury's (actually the Fed's) printing presses may soon be available to state legislators as well as local officials.
Just before California's legislators agreed to the package that was soundly defeated at the polls yesterday, I attended an event at which California House speaker Karen Bass lamented that the rest of the world could move forward if just one or two Republicans would "get it" and get over their narrowly partisan hang-ups. Just a few days later, she got her few Republican votes. And yesterday it all went up in flames. I have no idea whether the speaker was being disingenuous or whether she had spent too much time in the Sacramento echo chamber. Perhaps some of each.
If Bastiat wondered whether government is the illusion that everyone can live at the expense of everyone else, what would he say and do in a world of unfunded liabilities and the power of the printing presses extended to bail outs that may soon extend to local politicians??!