Mounting Debts by States Stoke Fears of Crisis
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 — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.
“It seems to me that crying wolf is probably a good thing to do at this point,” 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.
- John Mauldin: How Not To Run A Pension
For all the focus on the unfunded liabilities of Social Security and Medicare, there is another unfunded crisis brewing, and this one is in your own back yard. It’s coming to you even if you live outside of the US; it just might take a little longer...
- Stockton, Ca Files For Bankruptcy
In opting to become the nation's largest city to seek federal bankruptcy protection, this river port of 290,000 took a rare financial step of last resort after struggling with the economic downturn, soaring pension costs and contractual obligations....
- Building Boom In China Stirs Fears Of Debt Overload
WUHAN, China — In the seven years it will take New York City to build a two-mile leg of its long-awaited Second Avenue subway line, this city of nine million people in central China plans to complete an entirely new subway system, with nearly 140 miles...
- Public Pension Funds Are Adding Risk To Raise Returns
Does anyone think this is likely to end well? States and companies have started investing very differently when it comes to the billions of dollars they are safeguarding for workers' retirement. Companies are quietly and gradually moving their pension...
- Inflation Won’t Solve Our Debt Problems – By Catherine Rampell
Thanks to Ian for passing this along. Lately I have seen a few suggestions, here and there, that the United States should consider inflating its way out of its rising debt burden. The country essentially inflated its way out of much of its debt during...