Monday, March 08, 2010

Iceland rejects debt repayment

Iceland has voted overwhelmingly against a plan to repay some unusual and excessive debts created by its bank. This is great. How can we vote to repudiate debt?

California has a constitution requiring a balanced budget, and yet we have accumulated vast amounts of debt.

I think that we need a new California constitution amendment to limit debt. It should say that no session of the legislature should be obligated to pay a debt burden created by a previous session.

I particularly object to debt created by unbalanced budgets and unfunded pension plans.

Someone might argue that such an amendment would interfere with federal law on the enforcement of contracts, but I don't think so. California would just have to put a clause in its contracts that state obligations are limited by constitutional spending authority. If some state agency signs a contract with a union saying that employees can retire at 95% of full salary with annual increases, then a clause would have to say that the pension payments could be limited by what is in the fund and what some future legislature decides to appropriate. It should be legally impossible for the state to guarantee a pension greater than that.

As it is, we have thousands of state bureaucrats retiring on six-figure pensions, and they are bankrupting the state. The politicians who made these promises are gone and no one is accountable.

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