California Bond Woe Bodes Ill for States - WSJ.com
The normally staid market has grown volatile the past week, posting its sharpest selloff in nearly two years, as investors demand higher interest rates to buy paper issued by states, cities and counties to finance their operations. Localities have been hammered by a drop in tax revenue amid the downturn—and unlike the federal government, most are barred constitutionally from running deficits.
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This means state and local governments will be making more service cuts and raising whatever taxes and charges they can.
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