Exercise In Inertia

These are the golden days of gallows humor, my friends.  Behold a hypothetical exercise in which the participants play the role of federal officials confronted with the fiscal default of a major state.  Stick with it to the end for the hysterical punchline:

....Sorry, the vid won't embed.  You'll have to settle for text instead.  But at least you'll save some time:

WHAT happens if an individual state defaults? That was the question posed to a panel of luminaries at the Buttonwood gathering in New York, including Robert Rubin, Josh Bolten, Glenn Hubbard, Laurence Meyer and Laura Tyson.

The panel was assumed to be a bunch of Presidential advisers faced with a request for funding from New Jefferson, a fictional state with many of the problems of a typical state - unfunded pension promises, years of fiddling the numbers to balance the budget and a government divided between the parties. New Jefferson is shut out from the markets and asks the Federal government for $1.5 billion to meet a debt repayment due forty-eight hours away. There could be systemic risks if default occurs with the Chinese government raising the issue of contagion and with some state banks owning a substantial portion of the state's bonds.

The panel reluctantly agreed to provide temporary funding for the state - say for thirty days - but to require the state to sort out its mess. But it suggested a whole series of stringent conditions, including the use of proper accounting and a requirement to fund its pension plans properly. [But t]hey were divided over what would happened if New Jefferson failed to save its problem within thirty days.

In other words, they caved to "New Jefferson" and effectively agreed to bail it out.  Because there is no such thing as a "temporary" bailout.  The "whole series of stringent conditions," is just public relations bullshit to "temporarily" hold off public anger as long as possible.

Or, in other words, pretty much what will happen for real when California, Illinois, and New York come, tin cups in hand, to D.C., separately or all together.  A day that Barack Obama is absolutely creaming his shorts in anticipation of, and John Boehner had better be prepared for as his "Newt Gingrich" moment.  On such will the outcome of the 2012 political cycle very likely pivot.

Meanwhile, personal income - you know, the economic metric that libs never get tired of dishonestly gibbering went down during the Bush years - um, declined in September.

This guffaw brought you by the good folks at Recovery Summer!