$2B is this year (ending June 30, 2010. Next year (beginning July 1, 2010) is
closer to $4B.

Isn’t that cheerful?

Fifty Greeces: weakness at the periphery

Connecticut’s Lisbon, New York’s Rome, Georgia’s Athens and Iowa’s Madrid may lack the sense of budgetary crisis being felt lately in their European namesakes, but America’s states and municipalities could yet spark equally vexing problems for the United States. Like the eurozone’s members, America’s states have no currencies of their own to devalue and must tread cautiously between entrenched public sector unions and irate taxpaying voters.

Growth in state budgetsAnd just as those betting on the health of the euro once paid too much attention to what was happening in its financial centres, without fully appreciating looming weakness at the periphery, the budgetary strains in America’s 50 states and 52,000 municipalities get too little attention.

Though not as profligate as some peripheral European nations, US states spent freely before the recession. In the 30 years ending in 2008, spending grew at a compound annual rate of 6.7 per cent, well above inflation. Even after cutting an estimated $256bn from their budgets from 2009-2011, substantial gaps remain with several states recently identifying other shortfalls. Even this understates the problem, though, as actuaries have identified pension funding shortfalls as high as $3,000bn, or double all annual state spending.

Like Europe’s “no bail-out clause”, an explicit federal lifeline is taboo, although states are dependent on Washington. The 2011 federal budget sets aside $646bn for state transfers, including an extra $85bn in Medicare payments. Then there is the estimated $39bn annually in foregone revenue through the tax exemption given to most of the $2,800bn municipal debt market.

But the extra stimulus that has recently covered shortfalls will soon ebb, leaving budgetary holes that may tempt cities into Chapter 9 bankruptcy. With companies and residents free to relocate to any other city state, there is a limit to how deeply services can be cut or taxes raised before this becomes attractive. Timothy Geithner, US Treasury secretary, recently scoffed at the prospect of America losing its triple A rating, but most of its constituent parts already have and some may soon be in outright default.

You guys dont see the recovery? Leading indicators are up EVERY MONTH since April 09… GDP was 5.7% in Q4 ?!? (Is everyone taking crazy pills).

You guys are gonna be waiting for that “depression” trade… which isnt even worth much… for another 50 years.

And why shouldn’t this be so? 90% of the people who inhabit these grossly overpaid positions don’t deserve a quarter of what they have been paid, let alone the lavish retirements for doing practically nothing their entire lives, but getting their sponsors re-elected.

Fuck ‘em, every single one of ‘em.

Greece needs to cut spending and increase tax revenues. Period. If it gets bailed out, where is the impetus ever to do so going to come from. Sometimes it takes a crisis to force the tough (Responsible?) decisions.

Greece needs to cut spending and increase tax revenues. Period. If it gets bailed out, where is the impetus ever to do so going to come from. Sometimes it takes a crisis to force the tough (Responsible?) decisions.