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Municipalities across the U.S. have deep budgetary problems and the chance of default on their bonds grows every day. Recent estimates put the State of California budget deficit in excess of $24 billion, about a quarter of the size of the total budget, a shortfall that must be addressed in the next 30 days. What's more, while California has become the poster child for the problem, many other state and local governments are in the same fix. Some estimates put the total shortfall for all state budgets at almost $170 billion.
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As we have seen repeatedly over the past year or so, things can get out of hand rather quickly in our current financial environment. If the economy does not turn around and the employment picture does not improve soon, states will have less revenue and municipalities could run the risk of not being able to pay their bondholders. In that case the federal government will face a very tough choice. It could decide, as the administration has suggested lately, to do nothing. On the other hand, inaction seems out of step with the federal government's recent habit of granting relief with a free hand. California alone accounts for about 12% of our nation's gross domestic product, which makes it difficult for the federal government to look the other way while trying to prop up the national economy. It's difficult to tell what the federal government will do, but the ramifications of a bailout are something to consider. The trade-off essentially would be between avoiding a potential near-term disaster and setting up further disasters down the road.
No households just changed to the way of government in many locations.I thnik taht sates and local governamnt will change like we have never seen since the shift from agriculture to a industrial society.Many ciites have been in trouble for decades only supported by rising federal dollars influx but that will change as the feds switch to other things as priorites. California would have gotten bailouyt bu now in the 70's.I more a case of sink or swim how.
Municipalities across the U.S. have deep budgetary problems and the chance of default on their bonds grows every day. Recent estimates put the State of California budget deficit in excess of $24 billion, about a quarter of the size of the total budget, a shortfall that must be addressed in the next 30 days. What's more, while California has become the poster child for the problem, many other state and local governments are in the same fix. Some estimates put the total shortfall for all state budgets at almost $170 billion.
***
As we have seen repeatedly over the past year or so, things can get out of hand rather quickly in our current financial environment. If the economy does not turn around and the employment picture does not improve soon, states will have less revenue and municipalities could run the risk of not being able to pay their bondholders. In that case the federal government will face a very tough choice. It could decide, as the administration has suggested lately, to do nothing. On the other hand, inaction seems out of step with the federal government's recent habit of granting relief with a free hand. California alone accounts for about 12% of our nation's gross domestic product, which makes it difficult for the federal government to look the other way while trying to prop up the national economy. It's difficult to tell what the federal government will do, but the ramifications of a bailout are something to consider. The trade-off essentially would be between avoiding a potential near-term disaster and setting up further disasters down the road.
pennsylvania is also in trouble and it has no budget agreement, as well. if you look at the timeline for this disaster you can see some of the mistakes.
rendell increased spending by 1 billion dollars and then predicted a 2.3 billion dollar shortfall. DUH! now they are going to lay off at least 800 workers and propose a bunch of new taxes.
May 31: Pennsylvania reports the first of what is now nine consecutive monthly revenue shortfalls.
July 3: Some Senate officials from both parties hint at the possibility of a massive shortfall, one day before Gov. Ed Rendell signs the 2008-09 budget INCREASING SPENDING BY 1 BILLION.
Sept. 16: Gov. Ed Rendell orders a hiring freeze, a ban on out-of-state travel and $200 million in spending cuts.
Sept. 30: Pennsylvania reports its biggest first-quarter shortfall _ $281 million _ in at least two decades.
Oct. 6: Two top state senators predict a massive budget shortfall that will require a tax increase to erase.
Dec. 3: Rendell says thousands of state employees will get no cost-of-living raises after shortfall reaches $658 million.
Dec. 9: Rendell predicts a $1.6 billion fiscal-year gap between revenues and expectations, and presents plan to address it.
Jan. 22: Rendell increases shortfall prediction to $2.3 billion and threatens layoffs of state employees.
Feb. 4: Rendell slated to deliver proposed budget for 2009-10, which is expected to include deep spending cuts and new taxes on natural gas and tobacco.
Seriously now, either Obama is gonna make things batter or the precious lil USA is gonna have its second civil war. ITS ALL OVER. Your children and grandchildren will NOT see the American Dream.
ITS DEAD.
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