States of Crisis for 46 Governments Facing Greek-Style Deficits

[Arraya]

http://www.bloomberg.com/news/2010-06-25/states-of-crisis-widen-as-46-governments-in-u-s-face-greek-style-deficits.html
Californians don’t see much evidence that the worst economic contraction since the Great Depression is coming to an end.

Unemployment was 12.4 percent in May, 2.7 percentage points higher than the national rate. Lawmakers gridlocked over how to close a $19 billion budget gap are weighing the termination of the main welfare program for 1.3 million poor families or borrowing more than $9 billion in the bond market. California, tied with Illinois for the lowest credit rating of any state, is diverting a rising portion of tax revenue to service debt, Bloomberg Markets magazine reports in its August issue.

Far from rebounding, the Golden State, with a $1.8 trillion economy that’s larger than Russia’s, is sinking deeper into its financial funk. And it’s not alone.

Even as the U.S. appears to be on the mend — gross domestic product has climbed three straight quarters — finances in Arizona, Illinois, New Jersey, New York and other states show few signs of improvement. Forty-six states face budget shortfalls that add up to $112 billion for the fiscal year ending next June, according to the Center on Budget and Policy Priorities, a Washington research institution. State spending is 12 percent of U.S. GDP.

“States are going to have to cut back spending and raise taxes the same way Greece and Spain are,” says Dean Baker, co- director of the Center for Economic and Policy Research in Washington. “That runs counter to stimulating the economy and will put a big damper on the recovery in the latter half of this year.”

Stimulus Dries Up

State budget woes are a worsening drag on growth as the federal government tries to wean the economy from two years of extraordinary support. By Jan. 1, funds from the $787 billion federal stimulus bill will dry up. That money from Washington has helped cushion state budgets as tax revenue has plunged.

State leaders won’t be able to ride out this cycle the way they have in the past. The budget holes are too large. For the first time since 1962, sales and income tax revenue fell for five straight quarters, through December 2009, according to the Nelson A. Rockefeller Institute of Government at the State University of New York at Albany.

Lawmakers need to overhaul tax policy, underfunded public pensions and entitlement spending programs such as Medicaid if they want to establish long-term plans that will foster growth, says former New Jersey Governor Christine Todd Whitman.

[Zeitgeist]

Glad you posted this and not me.

[Zeitgeist]

Glad you posted this and not me.

[Zeitgeist]

Glad you posted this and not me.

[Zeitgeist]

Glad you posted this and not me.

[Zeitgeist]

Glad you posted this and not me.

[EconProf]

In many ways the dynamics of Ca’s fiscal decline are beginning to resemble the nation’s real estate decline. They both contain elements that feed on each other making the situation worse. These feedback loops fueling the state’s fiscal crisis include a declining economy which reduces revenue: a real estate price decline reducing 1) consumer confidence, 2) consumer spending (no more house ATM), (3)property tax revenues; state and local government spending soon to fall; the flight of besieged businesses to friendlier states and countries, etc.
Also, like Greece, CA faces much higher interest cost on our debt since our state is tied with Illinois for worst credit rating. Investors will increasingly look to how a state handles its finances.
The worst development from the recent weeks’ news is that the economy is not rebounding, which in past cycles always bailed us out. The question now is how much do collapsing state and local budgets affect real estate? We are about to find out.

[EconProf]

In many ways the dynamics of Ca’s fiscal decline are beginning to resemble the nation’s real estate decline. They both contain elements that feed on each other making the situation worse. These feedback loops fueling the state’s fiscal crisis include a declining economy which reduces revenue: a real estate price decline reducing 1) consumer confidence, 2) consumer spending (no more house ATM), (3)property tax revenues; state and local government spending soon to fall; the flight of besieged businesses to friendlier states and countries, etc.
Also, like Greece, CA faces much higher interest cost on our debt since our state is tied with Illinois for worst credit rating. Investors will increasingly look to how a state handles its finances.
The worst development from the recent weeks’ news is that the economy is not rebounding, which in past cycles always bailed us out. The question now is how much do collapsing state and local budgets affect real estate? We are about to find out.

[EconProf]

In many ways the dynamics of Ca’s fiscal decline are beginning to resemble the nation’s real estate decline. They both contain elements that feed on each other making the situation worse. These feedback loops fueling the state’s fiscal crisis include a declining economy which reduces revenue: a real estate price decline reducing 1) consumer confidence, 2) consumer spending (no more house ATM), (3)property tax revenues; state and local government spending soon to fall; the flight of besieged businesses to friendlier states and countries, etc.
Also, like Greece, CA faces much higher interest cost on our debt since our state is tied with Illinois for worst credit rating. Investors will increasingly look to how a state handles its finances.
The worst development from the recent weeks’ news is that the economy is not rebounding, which in past cycles always bailed us out. The question now is how much do collapsing state and local budgets affect real estate? We are about to find out.

[EconProf]

In many ways the dynamics of Ca’s fiscal decline are beginning to resemble the nation’s real estate decline. They both contain elements that feed on each other making the situation worse. These feedback loops fueling the state’s fiscal crisis include a declining economy which reduces revenue: a real estate price decline reducing 1) consumer confidence, 2) consumer spending (no more house ATM), (3)property tax revenues; state and local government spending soon to fall; the flight of besieged businesses to friendlier states and countries, etc.
Also, like Greece, CA faces much higher interest cost on our debt since our state is tied with Illinois for worst credit rating. Investors will increasingly look to how a state handles its finances.
The worst development from the recent weeks’ news is that the economy is not rebounding, which in past cycles always bailed us out. The question now is how much do collapsing state and local budgets affect real estate? We are about to find out.

[EconProf]

In many ways the dynamics of Ca’s fiscal decline are beginning to resemble the nation’s real estate decline. They both contain elements that feed on each other making the situation worse. These feedback loops fueling the state’s fiscal crisis include a declining economy which reduces revenue: a real estate price decline reducing 1) consumer confidence, 2) consumer spending (no more house ATM), (3)property tax revenues; state and local government spending soon to fall; the flight of besieged businesses to friendlier states and countries, etc.
Also, like Greece, CA faces much higher interest cost on our debt since our state is tied with Illinois for worst credit rating. Investors will increasingly look to how a state handles its finances.
The worst development from the recent weeks’ news is that the economy is not rebounding, which in past cycles always bailed us out. The question now is how much do collapsing state and local budgets affect real estate? We are about to find out.

[Allan from Fallbrook]

California’s woes also illustrate the dangers of extremist politics.

We’ve gone from California’s “Golden Age” of the 1960s, when Democratic (Pat Brown) and Republican (Ronald Reagan) governors worked together on education, infrastructure/transportation and innovation to make California business-friendly and dominant in industries ranging from high-technology to aerospace. Our education system was excellent at all levels. Our infrastructure and transportation/road system was designed for efficiency and speed and the business climate was conducive to continued solid growth in diverse markets and industries.

Juxtapose that with the present situation, especially the gridlock in Sacramento, the erosion of nearly all of our competitive advantages, most critically in education, and a business-unfriendly environment that is driving companies to Nevada, Texas and Arizona. The extremists of both parties essentially control just enough respective power to ensure that nothing gets done, nothing gets fixed and a realistic budget never gets passed.

We’ve gone from dominance to a cautionary tale in two generations.

[Allan from Fallbrook]

California’s woes also illustrate the dangers of extremist politics.

We’ve gone from California’s “Golden Age” of the 1960s, when Democratic (Pat Brown) and Republican (Ronald Reagan) governors worked together on education, infrastructure/transportation and innovation to make California business-friendly and dominant in industries ranging from high-technology to aerospace. Our education system was excellent at all levels. Our infrastructure and transportation/road system was designed for efficiency and speed and the business climate was conducive to continued solid growth in diverse markets and industries.

Juxtapose that with the present situation, especially the gridlock in Sacramento, the erosion of nearly all of our competitive advantages, most critically in education, and a business-unfriendly environment that is driving companies to Nevada, Texas and Arizona. The extremists of both parties essentially control just enough respective power to ensure that nothing gets done, nothing gets fixed and a realistic budget never gets passed.

We’ve gone from dominance to a cautionary tale in two generations.

[Allan from Fallbrook]

California’s woes also illustrate the dangers of extremist politics.

We’ve gone from California’s “Golden Age” of the 1960s, when Democratic (Pat Brown) and Republican (Ronald Reagan) governors worked together on education, infrastructure/transportation and innovation to make California business-friendly and dominant in industries ranging from high-technology to aerospace. Our education system was excellent at all levels. Our infrastructure and transportation/road system was designed for efficiency and speed and the business climate was conducive to continued solid growth in diverse markets and industries.

Juxtapose that with the present situation, especially the gridlock in Sacramento, the erosion of nearly all of our competitive advantages, most critically in education, and a business-unfriendly environment that is driving companies to Nevada, Texas and Arizona. The extremists of both parties essentially control just enough respective power to ensure that nothing gets done, nothing gets fixed and a realistic budget never gets passed.

We’ve gone from dominance to a cautionary tale in two generations.

[Allan from Fallbrook]

California’s woes also illustrate the dangers of extremist politics.

We’ve gone from California’s “Golden Age” of the 1960s, when Democratic (Pat Brown) and Republican (Ronald Reagan) governors worked together on education, infrastructure/transportation and innovation to make California business-friendly and dominant in industries ranging from high-technology to aerospace. Our education system was excellent at all levels. Our infrastructure and transportation/road system was designed for efficiency and speed and the business climate was conducive to continued solid growth in diverse markets and industries.

Juxtapose that with the present situation, especially the gridlock in Sacramento, the erosion of nearly all of our competitive advantages, most critically in education, and a business-unfriendly environment that is driving companies to Nevada, Texas and Arizona. The extremists of both parties essentially control just enough respective power to ensure that nothing gets done, nothing gets fixed and a realistic budget never gets passed.

We’ve gone from dominance to a cautionary tale in two generations.

[Author]

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