California may default to the US federal government due to the state’s failure to return borrowed funds. In this respect writer Epoch Times citing the findings and expert opinion.
California owes about $18.6 billion, according to the U.S. Department of the Treasury, while a few years ago the state borrowed about $20 billion from the federal government to cover unemployment benefits during the coronavirus pandemic. However, Governor Gavin Newsom recently waived part of the $750 million debt budgeted for 2023-2024.
According to market experts, this decision indicates that the regional budget does not have the resources to cover the debt. At the same time, Newsom’s actions change some of the state’s responsibility to pay off its debt to businesses. For example, the federal unemployment tax rate of 0.6% will increase by 0.3% annually starting in 2023 until the loan is repaid. Therefore, now California has become an extremely unfavorable state for employers.
Analysts felt the situation in the state was complicated by high levels of fraud, due to poor surveillance and outdated computer systems. For example, according to data analytics firm LexisNexis, the total cost of fraud is $32.6 billion. All of this could result in a state defaulting on federal loans and paying off the rest of the country.
Earlier Wednesday, Stan Druckenmiller, Chairman and Founder of Duquesne Capital declarationThe U.S. economy is on the verge of a recession as we expect a pretty hard landing in the form of high unemployment and a rise in the number of bankruptcies.