Investing through the rearview mirror, with excessive dependence on historic default rates, has been discredited by the financial crisis. But government officials still do it when it suits their purposes. Last week’s stress tests of bank balance sheets, for example, assigned the same risk-free rating to top-tier municipal debt that US Treasuries enjoy. Admittedly, muni default rates in recent decades have been minuscule – lower even than on corporate debt of the same rating. This was the argument Bill Lockyer, California’s treasurer, made last year in saying that rating agency methodologies needlessly saddled state governments with added debt servicing costs.

But it is Mr Lockyer’s state that is most likely to upset this tax-exempt $2,700bn market much favoured by individual savers. Downgraded to the lowest rating of any state this year, California could face a $23bn cash shortfall by July. Polls indicate a May 19 vote on propositions to reduce the gap will fail. It is not only voters who may leave California’s hands tied – the Obama administration intervened on behalf of an influential union facing pay cuts, threatening to revoke $6.8bn in stimulus if they are not reversed.