Prop Zero
The Starting Point for Commentary and Coverage of California Politics

OK, I'm Scared About U.S. Debt Limit Now

Email
|
Print

    NEWSLETTERS

    It's summer, so I had given myself permission to ignore the Washington debate over the debt limit.

     I assumed President Obama, the Republicans and the Democrats would find some way to raise the limit -- and maybe cut a little bit from the budget deficit in the process.

    This week, I woke up scared.

    The cold cup of coffee came courtesy of State Treasurer Bill Lockyer, who announced that he, acting on behalf of the state of California, would seek $5 billion in short-term loans next Tuesday -- so that the state isn't caught short of cash in the event the debt limiit is not raised and the federal government defaults on its obligations.

    The deadline for raising the debt limit is Aug. 2.

    The specific fear here is that a default would create havoc in the credit markets and make it difficult for California to borrow money it needs to pay its bills.

    California is one of a dozen states that routinely does this sort of short-term borrowing, though the reason behind this sale of revenue anticipation notes is a bit unusual.

    Californians have grown accustomed to talk of bankruptcy and cash shortages (and even default, though the state is unlikely to do so). So if Californians, of all people, are worried about America' solvency, the whole world should be worried.