Signs of Depression: States & Municipalities Defaulting
We’ve been discussing different signs that our economy is headed into a depression. Today, we’ll look at the condition of our states and cities. Most of the United States are flat broke today! And many of the cities are as well. They have allowed themselves to be bloated and now face massive problems. Deficits are enormous.
The National League of Cities says that municipalities will come up between $56 & $83 Billion between now and 2012. These are depression numbers.
Thirty two states have already run out of funds to pay unemployment benefits and must borrow from the US Government to make them. Many states are on the verge of defaulting on their obligations and this does not even consider the fact that the combined unfunded liabilities for all 50 states is estimated at $3.2 Trillion. Those problems are still a little further down the road. Some states have taken to delaying the payment of tax refund checks. We haven’t seen a state declare bankruptcy since the great depression, but we are headed in that direction.
In much the same way that Greece needed a bail out from Europe, many US cities and states are going to need a bailout from the US Government.
There is no way for them to balance their budgets without laying off many thousands of government employees. In these early years of this new depression, public companies have been quick to respond and lay off workers to return to profitability. Governments have not. This situation must change.
This will be another enormously difficult strain on the economy. Many new unemployed people looking for work. The money that they were earning and spending before will evaporate. The economy will stall and enter a depression.
This is Part 7 in the series Economic Depression. To continue with this series, click on Pt 8. To use this as a growth tool to better understand your own calling, please read Part 1, Pt 2, Pt 3, Pt 4, Pt 5 and Pt 6.
Photo credit: doctorious
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