With California moving closer to the financial abyss the Obama Administration is saying no to a federal bailout of the State. Yesterday’s Washington Post detailed the federal concern that a state meltdown would cause a severe problem to the national economy, but despite that concern would refuse to give federal financial help immediately. California is faced with a deficit of about $24 billion dollars, and has gridlocked politically on solutions. With the State close to meltdown California has begun to call for help.

Facing gridlock and few options other than severe cuts, California began to look to Washington for help. State Treasurer Bill Lockyer sent a letter to Geithner in mid-May, urging him to consider helping cash-strapped municipalities.

“A fiscal meltdown by California or any other large state or municipality would surely destabilize the U.S., if not worldwide, financial markets,” Lockyer wrote. If the state were to default, it could shake bond markets and undermine investor confidence in a still-fragile financial system.

The federal response has not been enthusiastic.

In testimony before Congress, Geithner did not rule out aiding California. But he was far from enthusiastic about such a proposal, instead suggesting that Congress was better positioned to help the states — and that states should balance their budgets.

“A lot of the burden,” Geithner said, “is going to be on them to lay out a path that gets their deficits down to the point where they’re going to be able to fund themselves comfortably.”

California’s crazy political system, including legislative districts that appear to have produced extremes of both left and right, has contributed to the paralysis. The federal refusal is unfortunately the correct course. California must self govern and balance their own budget. If they cannot do that temporary federal help will not solve anything, but merely postpone the day of reckoning. But then again many in government have made postponement of reality formal policy. Read the Washington Post story here.