Ominous Clouds over State and Local and Federal Government Financing

The dark clouds seem to be spreading over government financing throughout the western world. These clouds have been observed in Europe during the debt crisis that occurred there earlier this year. Now the clouds are becoming darker and darker in the United States.

We get a picture of this in the article by Mary Williams Walsh in the New York Times this morning, “Cities in Debt Turn to States, Adding Strain,”

“Harrisburg, the capital of Pennsylvania, dodged financial disaster last month by getting money from the state to make a payment to its bondholders.

Now Harrisburg is calling on the state again. On Friday, the city said it could not meet its next payroll without money from the state’s distressed cities program.”

But, we learn that there are 19 more cities in Pennsylvania that are in the distressed-cities program. Michigan has 37 in its program; New Jersey has seven; Illinois, Rhode Island and California have at least one. And, this is on top of the troubled housing programs (see Philadelphia), power efforts, and hospital authorities.

And, this doesn’t include anything about the problems that states are having. Let’s highlight California, Illinois, Nevada, and New Jersey as a beginning. And, this is on top of the underfunded state pension programs that exist throughout the country.

Let’s see…if the states pick up the financial shortfalls in the municipalities…and the federal government picks up the financial shortfalls in the states…who picks up the financial shortfalls in the federal government?

Like I said earlier, the dark clouds seem to be spreading over government financing throughout the western world.