Why Britain struggles to assimilate immigrants.
Thursday, June 05, 2008
In a weird way, state governments are like banks: they have a fundamental and inevitable duration mismatch. Banks loan money long and borrow short (a demand deposit, aka your bank account, acts in crises like a renewable daily loan); under the right (wrong) conditions, the short lenders flee and the bank collapses.
This is not a perfect analogy with state governments of course. But they make long promises with only short funds, and when long and short durations collide, disaster can occur--just ask John Lindsay. Plus both have an implicit guarantee from the Federal government that allows them to be less fiscally responsible than they ought.
There is a certain irony here. In a year that for historical and contemporary reasons should be a Democratic shoo-in, the Democrats have nominated about the only candidate who can lose in November, the Republicans the only one of their own who can still win it.