CHESSNOID

I own a small business and when the economy took a turn for the worse, I was forced to layoff my employees.  I did not want to get in a situation where I could not pay them because that would be extremely unfair.  And the idea of giving them IOUs seemed ludicrous.  That was over a year ago and the economy has actually become worse.

Now, I thought about this because this happens to big companies that file for bankruptcy without warning and close shop literally the next day.  Seems like that is happening with more frequency.  The craziest thing is if you do work and the organization you work for doesn’t file bankruptcy but simply just doesn’t pay you.  That is what is happening at the state government levels.

I know in California, the state was issuing IOUs which not all banks were honoring.  In other states, well it is even worse.  The employees worked, the state didn’t pass a budget, and so no one gets paid.

CNN.Money:

Struggling to resolve a 17-day-old budget impasse, Pennsylvania is withholding pay for 69,000 state employees for time worked after July 1. Workers Friday received only 70% of their salary, covering days worked in June. Starting two weeks from now, they’ll get nothing on payday until a state budget is approved.

Pennsylvania is one of three states that have yet to pass budgets for fiscal 2010, which began July 1. The other two — Connecticut and North Carolina — are operating under temporary spending measures. Still two others, Illinois and Ohio approved their 2010 budgets this week.

In California, which passed a budget in February, Gov. Arnold Schwarzenegger and lawmakers are moving closer to resolving a $26 billion budget shortfall that has forced the state to send out nearly 150,000 IOUs to residents, contractors and small businesses.

When Pennsylvania state workers open their paychecks, they’ll see the words “Budget Impasse Leave without Pay” for the time worked in July. Even after a budget is signed, employees won’t see the money for several days. And they won’t get interest on the money owed, said a governor’s spokeswoman.

Some 29 financial institutions, primarily credit unions, are offering workers no-interest or low-interest loans. Several food banks are also providing emergency supplies to employees in need. They can also check with the state to see if they are temporarily eligible for food stamps or welfare.

Republicans and Democrats are battling over how to close a $2 billion budget gap. The former don’t want to raise taxes, while the latter don’t want to cut too deeply into state services.

I am against bailouts and stimulus packages. I do not like the idea of public money going into private companies just so executives can get their bonuses! Yet, it seems strange to me that the Obama administration does not want to help the states out which are public entities funded by tax money and are not allowed to make profits.

I never bought into the argument by our current Obama and former Bush administrations that these companies are too big to fail carp theories.  But if I were to argue using that logic, then is the Obama administration contradicting its reasoning: wouldn’t states be considered too big to fail? Most of those states are much bigger than any of the companies they bailed out.  The federal government is willing to help private insolvent companies that are still paying CEOs  million dollar bonuses but not public state governments (Pennsylvania 69,000 employees). Very strange indeed.