NYT editorial: The Looming Crisis in the States
For most of this year, the state of Illinois has lacked the money to pay its bills. Some of its employees have been evicted from their offices for nonpayment of rent, social service groups have laid off hundreds of workers while waiting for checks, pharmacies have closed for lack of Medicaid payments. Faced with $4.5 billion in overdue payments, Illinois has proposed a precarious plan to sell its delinquent bills to Wall Street investors in exchange for cash, calculating that the interest it must pay the investors will be less than the late fees it owes.
It is no way to run the nation’s fifth largest state, and it is not even clear that investors will agree, but these kinds of shaky deals are likely to become increasingly common as the states try to cope with the greatest fiscal drought since the Great Depression. Starved for revenue and accustomed to decades of overspending, many states have been overwhelmed. They are facing shortfalls of $140 billion next year. Even before the downturn, states jeopardized their futures by accumulating trillions in debt that they swept into some far-off future.
But that future is not so distant, and the crushing debt has made recovery far more difficult to achieve. As The Times reported, Illinois, California and several other states are at increasing risk of being the first states to default since the 1930s. The city of Prichard, Ala., has stopped sending out its pension checks, breaking state law and shocking its employees.
A state or city unable to make its bond payments would send harmful ripples through the financial system that could cause damage even to healthier governments. But if states act quickly to deal with their revenue losses and address their debt — and receive sufficient aid from Washington — there is still time to avoid a crisis.
(More here.)
It is no way to run the nation’s fifth largest state, and it is not even clear that investors will agree, but these kinds of shaky deals are likely to become increasingly common as the states try to cope with the greatest fiscal drought since the Great Depression. Starved for revenue and accustomed to decades of overspending, many states have been overwhelmed. They are facing shortfalls of $140 billion next year. Even before the downturn, states jeopardized their futures by accumulating trillions in debt that they swept into some far-off future.
But that future is not so distant, and the crushing debt has made recovery far more difficult to achieve. As The Times reported, Illinois, California and several other states are at increasing risk of being the first states to default since the 1930s. The city of Prichard, Ala., has stopped sending out its pension checks, breaking state law and shocking its employees.
A state or city unable to make its bond payments would send harmful ripples through the financial system that could cause damage even to healthier governments. But if states act quickly to deal with their revenue losses and address their debt — and receive sufficient aid from Washington — there is still time to avoid a crisis.
(More here.)
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1 Comments:
Crisis? What crisis? Just borrow more money as Paul Krugman advocates and all should be right with the budgets in every city, every county and every state. In fact, the federal government should borrow 400 quadrillion dollars to bail out every state, county and city acrosss America. This is what Paul Krugman advocates so, let's give it a shot! Remember, we need to 'replace' private sector enterprise with public sector enterprise as the only possible solution to our economic woes so why pussy foot around with a couple of billion here and a couple of billion there. Let's just borrow, borrow and borrow and bail out, bail out and bail out!! AS Paul Krugman tells us, the problem is not we are borrowing too much, it's that we are not borrowing enough!
And if you believe Paul Krugman, you are an absolute economic moron.
OK, on a serious note, I have been commenting on stories published in Vox Verax for years warning of the impending calamity due to both Democrat and Republican proligacy and the warnings I have talked about in my commentaries on Vox Verax have, for the most part, come to fruition. Just borrowing, taxing or inflating is not going to fix anything. Borrowing, taxing or inflating is only going to make things worse. We are at a tipping point in America and we still have a chance to fix our financial problems, but only if the politicians are more concerned about fiscal restraint and fiscal soundness rather than just being concerned with the next election. Cities, counties and states must cut their budgets massively. There simply is no other way to fix our financial problems.
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