California taxpayers receive less federal funding per dollar of federal taxes paid than the average state. In 2005, California taxpayers received only 78 cents in federal expenditures for every dollar in federal taxes sent to Washington DC. (source – LINK) Mississippi, for example, takes $2.02 for every dollar they pay pay in federal taxes. New Mexico takes $2.03 for every dollar they pay in federal taxes. Therefore, California is referred to as a donor state because they give more than they get.  (The highest donor state is New Jersey). The District of Columbia isn’t a state, but it takes $5.55 for every dollar it contributes.
As contemptible as some California politicians seem to be (Gov. Jerry Brown and Sen. Barbara Boxer being some of the most notorious), the state’s bankruptcy would increase the federal deficit because California would no longer be a donor state. Taken as a world economy, if California was a nation on its own, it would be the eighth largest. Is is the largest of any US State, even though it is clearly a state in decline. (source – LINK) California’s GDP is roughly equal to France.
State Bankruptcy would mean that all California’s revenue would be kept inside the state and used to bring it’s financial house into order. Those outside California who gleefully hope for its demise might want to think twice because it would benefit that state at the expense of the other states.
I am not suggesting that California is too big to fail. I am suggesting that if it fails, and reorganizes, it will become stronger at the expense of the rest of the country.

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7 COMMENTS

  1. Larry,

    One of the problems with accepting Federal Dollars is that it drys up after a couple of years. What happens is that say you want to build a bridge. The Feds promise they will pay for 50% of this "needed" bridge. The locals must come up with the rest in advance. The locals thinking they have a great deal start the bridge. The next year, they only get half of what the feds promised. The feds are having problems with coming up with the rest, but you locals can come up with the rest. The locals don't want a 3/4 bridge, gulp and come up with the rest and vow to never accept the feds help again, but another part of the locals get a great deal. The feds promise 2/3 this time, for the locals 1/3 and this time they mean it… Do you see where it is going?

    Most of the programs were started with Fed Dollars. Now they are wholly supported by State Dollars yet the Feds still control it.

  2. All modern governments run on a deficit. Including those damn Chinese that are taking up all of our debt.

  3. To begin with, remember about 5 or 6 years ago California was the 6th largest economy in the world? wow, we sure have come a long way. ah yes, but Sacramento still continues to spend. I can be gone in 30 miles ….

  6. What will it take to shake some sense into the majority of California voters!

    I still say letting certain municipalities go belly up sequentially would be an object lesson for others and would help restore some sanity.

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