Jul 20, 2009
Starting July 2, California has been printing IOUs to make some of its payments. “IOU” is the new name for scrip, familiar from the Great Depression era.
Who is getting IOUs? Workers getting refunds on their taxes, state pensioners, students and needy people on financial aid, as well as some businesses. The state is also sending some IOUs to local governments, which may eventually prevent them from making their own payments.
Now that most big banks have stopped accepting these IOUs, it has gotten harder for more people to cash them at face value. Of course, hardest hit by IOUs will be people who are short of cash and have to go to loan sharks to get their scrips cashed for a “fee.”
And why is California putting people through all this? Supposedly because state politicians have not been able to agree on a budget before the June 30 deadline. What a lame excuse!
One thing is certain: state politicians are trying to use the hype around the IOUs as another excuse to cut even deeper into the state programs that serve the needs of the population.
It’s true that the economy is in a downturn. But it’s also obvious that there is still plenty of wealth in California. It just happens to be in the hands of big business and the capitalists, who fatten themselves off of vast tax breaks and subsidies. Take away those tax breaks and subsidies and there would be no budget deficit.