Quote from trefoil:
Still can't back up anything with a fact about the US as of today.
FYI, bankruptcy is a result of liabilities exceeding assets: negative net worth. The US isn't even remotely close to such a condition. All the echoing back and forth of fact free statements from now until eternity isn't going to change this simple, easily obtainable (as I have already shown) fact.
the US is the next Argentina. the provinces bankrupted Argentina.
the states will do the same to the US.
http://www.nytimes.com/2010/12/05/us/politics/05states.html?hp
# The New York Times Reprints
December 4, 2010
Mounting State Debts Stoke Fears of a Looming Crisis
By MICHAEL COOPER and MARY WILLIAMS WALSH
The State of Illinois is still paying off billions in bills that it got from schools and social service providers last year. Arizona recently stopped paying for certain organ transplants for people in its Medicaid program. States are releasing prisoners early, more to cut expenses than to reward good behavior. And in Newark, the city laid off 13 percent of its police officers last week.
While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt â several trillion dollarsâ worth, with much of it off the books and largely hidden from view â that it could overwhelm them in the next few years.
âIt seems to me that crying wolf is probably a good thing to do at this point,â said Felix Rohatyn, the financier who helped save New York City from bankruptcy in the 1970s.
Some of the same people who warned of the looming subprime crisis two years ago are ringing alarm bells again. Their message: Not just small towns or dying Rust Belt cities, but also large states like Illinois and California are increasingly at risk.
Municipal bankruptcies or defaults have been extremely rare â no state has defaulted since the Great Depression, and only a handful of cities have declared bankruptcy or are considering doing so.
But the finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe.
Analysts fear that at some point â no one knows when â investors could balk at lending to the weakest states, setting off a crisis that could spread to the stronger ones, much as the turmoil in Europe has spread from country to country.
Mr. Rohatyn warned that while municipal bankruptcies were rare, they appeared increasingly possible. And the imbalances are so large in some places that the federal government will probably have to step in at some point, he said, even if that seems unlikely in the current political climate.
âI donât like to play the scared rabbit, but I just donât see where the end of this is,â he added.
Resorting to Fiscal Tricks
As the downturn has ground on, some of the worst-hit cities and states have resorted to fiscal sleight of hand to stay afloat, helping them close yawning budget gaps each year, but often at great future cost.
Few workers with neglected 401(k) retirement accounts would risk taking out second mortgages to invest in stocks, gambling that the investment gains would be enough to build bigger nest eggs and repay the loans.
But that is just what Illinois, which has been failing to make the required annual payments to its pension funds for years, is doing. It borrowed $10 billion in 2003 and used the money to invest in its pension funds. The recession sent their investment returns below their target, but the state must repay the bonds, with interest. The solution? Illinois sold an additional $3.5 billion worth of pension bonds this year and is planning to borrow $3.7 billion more for its pension funds.
It is the long-term problems of a handful of states, including California, Illinois, New Jersey and New York, that financial analysts worry about most, fearing that their problems might precipitate a crisis that could hurt other states by driving up their borrowing costs.
But it is the short-term budget woes that nearly all states are facing that are preoccupying elected officials.
Illinois is not the only state behind on its bills. Many states, including New York, have delayed payments to vendors and local governments because they had too little cash on hand to make them. California paid vendors with i.o.u.âs last year. A handful of other states, worried about their cash flow, delayed paying tax refunds last spring.
Now, just as the downturn has driven up demand for state assistance, many states are cutting back.
The demand for food stamps has been rising significantly in Idaho, but tight budgets led the state to close nearly a third of the field offices of the stateâs Department of Health and Welfare, which take applications for them. As states have cut aid to cities, many have resorted to previously unthinkable cuts, laying off police officers and closing firehouses.
Those cuts in aid to cities and counties, which are expected to continue, are one reason some analysts say cities are at greater risk of bankruptcy or are being placed under outside oversight.
Next year is unlikely to bring better news. States and cities typically face their biggest deficits after recessions officially end, as rainy-day funds are depleted and easy measures are exhausted.
This time is expected to be no different. The federal stimulus money increased the federal share of state budgets to over a third last year, from just over a quarter in 2008, according to a report issued last week by the National Governors Association and the National Association of State Budget Officers. That money is set to run out next summer. Tax collections, meanwhile, are not expected to return to their pre-recession levels for another year or two, given that the housing market and broader economy remain weak and that unemployment remains high.
Scott D. Pattison, the budget associationâs director, said that for states, next year could be âthe worst year of this four- or five-year downturn period.â
And few expect the federal government to offer more direct aid to states, at least in the short term. Many members of the new Republican majority in the House campaigned against the stimulus, and Washington is debating the recommendations of a debt-reduction commission.
So some states are essentially borrowing to pay their operating costs, adding new debts that are not always clearly disclosed.
Arizona, hobbled by the bursting housing bubble, turned to a real estate deal for relief, essentially selling off several state buildings â including the tower where the governor has her office â for a $735 million upfront payment. But leasing back the buildings over the next 20 years will ultimately cost taxpayers an extra $400 million in interest.
Many governments are delaying payments to their pension funds, which will eventually need to be made, along with the high interest â usually around 8 percent â that the funds are expected to earn each year.
New York balanced its budget this year by shortchanging its pension fund. And in New Jersey, Gov. Chris Christie deferred paying the $3.1 billion that was due to the pension funds this year.
It is these growing hidden debts that make many analysts nervous. States and municipalities currently have around $2.8 trillion worth of outstanding bonds, but that number is dwarfed by the debts that many are carrying off their books.
State and local pensions â another form of promised debt, guaranteed in some states by their constitutions â face hidden shortfalls of as much as $3.5 trillion by some calculations. And the health benefits that state and large local governments have promised their retirees going forward could cost more than $530 billion, according to the Government Accountability Office.
âMost financial crises happen in unpredictable ways, and they hit you when youâre not looking,â said Jerome H. Powell, a visiting scholar at the Bipartisan Policy Center who was an under secretary of the Treasury for finance during the bailout of the savings and loan industry in the early 1990s. âThis one isnât like that. You can see it coming. It would be sinful not to do something about this while thereâs a chance.â
