Daily Archives: June 20, 2010

Warren Buffett on the state of California and its finances

In this good article summing up the dire economic condidtion that California is in (California on ‘verge of system failure’ – The Globe and Mail), there is this quote:

Billionaire Warren Buffett, who advised U.S. President Barack Obama during his White House run, suggested recently that a Washington bailout of California and other troubled states is inevitable. How, he wondered, can Washington deny California after saying yes to General Motors, AIG and dozens of banks.

“I don’t know how you would tell a state you’re going to stiff-arm them with all the bailouts of corporations,” Mr. Buffett said.

Warren Buffett is a smart man when it comes to money, so I am wondering how he could have made that comparison. For the companies that accepted (or were made to accept) bailout money had to do so with signifigant strings attached. I wonder if the same could be said for states that were to accept bailout money. Would California turn governing over to the Feds? It seems unlikely, so that comparison seems invalid.

That said, there is a model of how this could be achieved that is already being demonstrated in the U.S. It’s the Race to the Top program that is part of the Stimulus Act (ARRA, American Recovery and Reinvestment Act of 2009). Perhaps something similar could be put in place to spur reform in areas other than education.

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