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it'll start with the people of NJ.

I think the NJ problem comes mostly from a strong blue state coalition that has an iron clad grip on state politics. They have to screw up pretty badly to get kicked out of office. Its a coalition of liberals, unions, and inner city minorities. The unions provide vans to get the vote out on election day. When you go to a political meeting, its usually the Dems splitting up the public pie. Cronyism. Politicians who get credit for a full years service in the state pension plans by working at a contract for $1000. Easy to work last few years at full pay to get full pension. Lots of mayors and political bosses who double dip by also serving on state legislature. Tax payers/voters do not have a prayer. They are caught in a cage.

eventually the feds would bail them out one way or another

Detroit, Harrisburg, PA, and now Puerto Rico all provide a guide for what might be possible. I don't think the feds put up lots of money. Mostly they required strict austerity. And its bond holders who took it on the chin.

If we use the auto industry as an example, the feds offered loans, but the loans had to be repaid.

I doubt the blue states are powerful enough in Congress to make major bailouts possible. The red states will hold out for austerity first.
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