Thursday, December 24, 2009


US States’ Fiscal Deterioration

The fiscal situation of US states is going from bad to worse. California is $68 billion in the hole and begging for help from the federal government. Help from the federal government of course means that taxpayers in other states will foot the bill. There goes the nation’s love for California. Arizona is staring into the abyss. New York State parks are shutting down. New Jersey is slashing its budget. Hawaii’s tourism decline is battering the beleaguered state (see the recent post on Hawaii, below). So many people have defected from Michigan that the state’s population is now below 10 million. And nationally, state and local governments have $530 billion in unfunded pension liabilities. This last item is the tip of the iceberg, as pension systems around the world are in big trouble.

This is what happens to a system predicated on economic growth when growth slows and begins its decline. In that connection, take a look at this chart and then assure me that we will return to the good old days.

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