State and Local Government's Going Bankrupt

Huge problem, especially considering that most local and state municipalities are the on the brink of fiscal disaster due to a severe reductions in revenue streams due to the recession and increases in borrowing costs. If some changes in Federal law go through permitting state's to file for bankruptcy, we may very well see a few big defaults before the end of the year. This is already likely to happen with local municipalities. Of course, fears of governmental default are oftentimes self-fulfilling prophesy. Such rumors might cause bond values and borrowing costs to skyrocket accordingly. We saw the same thing happen in Iceland and Greece last year. If a state should be allowed to default on its debts, it can then dispose of its pension costs and other obligations that are tied by contract. This approach seems to be the new favorite issue of the right-wing, who want to use default as a tool to reduce the size of government in the long term, even if it will set back a public i... Read more

Not much to add on abichara's review (as usual). A few points. The tragic shooting last week obfuscated an important event in Washington: the appointment of JP Morgan executive William Daley as White House Chief of Staff. Gee, talk about change I can't believe in... Does anyone really think Obama is going to upset the status quo and do what is necessary to halt our slide into the financial abyss? What is scary is that his continuation of his predecessor's policies will get him kicked out of office in 2012, and the angry public will elect a conservative president who will only increase the slide by greasing the slippery slope with more tax cuts and financial goodies for the very rich... But it might come sooner. Gov. Moonbeam might not be able to halt California's impending implosion, and as many states lose the tax goodies that were squandered on the financial elite (and getting great jobs like the White House Chief of Staff) the increasing pressure on state and local communities wil... Read more