State Debt Woes Grow Too Big to Camouflage

New York Times ^ | March 29, 2010 | Mary Williams Walsh

[reaganaut1]

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

And states are responding in sometimes desperate ways, raising concerns that they, too, could face a debt crisis.

New Hampshire was recently ordered by its State Supreme Court to put back $110 million that it took from a medical malpractice insurance pool to balance its budget. Colorado tried, so far unsuccessfully, to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002. It wanted the money for its university system and seems likely to get a lesser amount, perhaps $200 million.

Connecticut has tried to issue its own accounting rules. Hawaii has inaugurated a four-day school week. California accelerated its corporate income tax this year, making companies pay 70 percent of their 2010 taxes by June 15. And many states have balanced their budgets with federal health care dollars that Congress has not yet appropriated.

Some economists fear the states have a potentially bigger problem than their recession-induced budget woes. If investors become reluctant to buy the states’ debt, the result could be a credit squeeze, not entirely different from the financial strains in Europe, where markets were reluctant to refinance billions in Greek debt.

“If we ran into a situation where one state got into trouble, they’d be bailed out six ways from Tuesday,” said Kenneth S. Rogoff, an economics professor at Harvard and a former research director of the International Monetary Fund.

[reaganaut1]

It is misleading to compare state debts to those of countries because residents of those states will need to pay both state AND federal debts. States cannot amass as much debt the Federal government can, because their residents can and will leave if taxes rise too high. At the Federal level, I don't know what countries Americans can flee to. Canadian taxes aren't lower than those in the U.S., and the tax code tries to punish people who flee the country for economic reasons. Tax evasion through underground transactions and barter may grow.

[crz]

China.. I dunno you tell me. It seems as if the Chinese have been moving to a capitalist form of government and the rest of the world to fascism.

[RobRoy]

You can flee to lower taxed states. My annual property tax on my house and farm in Kentucky is less than the monthly tax on the house I just left.

Stuff like that.

[RobRoy]

You only have to pay the federal debt if you earn taxable income. It is a good time to join an MLM company (Multi Level Marketing) and deduct heavily - but legally.

[Psycho_Bunny]

'“If we ran into a situation where one state got into trouble, they’d be bailed out six ways from Tuesday,” said Kenneth S. Rogoff, an economics professor'

With what, genius???

[dashing doofus]

Exactly. And, conversely, when you read articles comparing US debt (per capita or as percentage of national GDP) to Greece or Ireland debt, the US debt does not include the massive debt at the state and local levels, which this article is talking about. Over $3 trillion, from state underfunded retirement systems alone. And THAT number excludes local systems, and the costs of long-term health care insurance provided to many public sector retirees.

Our combined national debt is absolutely massive, and Obama is ratcheting it up at a record pace.

[Pollster1]

That's easy to solve though:

Just print more money! [This message brought to you by the socialist perspective on economics.]

[mrsmel]

In the One World Government which is coalescing, I’m not going anywhere where I don’t have a right to keep and bear arms, and that rules out most places other than the US (for the time being).

[PA-RIVER]

It already is underground. Starve the Beast.

Half of all the blue collar workers that are unemployed are working off the books doing odd jobs while collecting Unemployment.

I expect this to be the norm going forward. Half the income being Sate supplied, the other half underground and not taxed. The state half shrinking, the underground growing.

I think you have hit on something big. This is how we starve the beast. For all the work you need done, hire an unemployed guy and pay in cash.

[jiggyboy]

California accelerated its corporate income tax this year, making companies pay 70 percent of their 2010 taxes by June 15.

Note that yet again, California plays accounting tricks and shell games that do nothing to solve the real problem.

A little known feature of our state budget process is that the budget only has to balance "on paper". They can write down "and we'll get a $100M credit here in the Lottery Fund if somebody wins the lottery and doesn't collect it" and it's good to go.

[greeneyes]

“You only have to pay the federal debt if you earn taxable income. It is a good time to join an MLM company (Multi Level Marketing) and deduct heavily - but legally.”

Even if you don’t have taxable income, they are going to get you - The VAT is coming. Get you major purchases out of the way now before VAT and inflation.

[nmh]

“China.. I dunno you tell me. It seems as if the Chinese have been moving to a capitalist form of government and the rest of the world to fascism.”

YES!
China is VERY capitalistic.

The Chinese students were literally laughing at Gathers, who went over there to leture at a Chinese University to their students about how the U.S. manages it’s finances.

Reuters: Chinese Students Laugh at Geithner
Submitted by photoshopwiz on Tue, 06/02/2009 - 10:40
in Daily Paul Liberty Forum
“Chinese assets are very safe,” Geithner said. His answer drew loud laughter from his student audience at Peking University ...

* Dollar assets are safe, Geithner assures China
* Recession losing force; U.S., China must alter growth tack
...

http://www.dailypaul.com/node/95025

http://www.youtube.com/watch?v=X2AEiYEei3o&feature=related

Here’s the clown talking and being laughed at in China:

http://www.youtube.com/watch?v=ZNNy_yz1f_E&feature=related

[who knows what evil?]

My annual property tax on my house and farm in Kentucky is less than the monthly tax on the house I just left.

No kidding...property taxes in the northeast are 10 - 20 times HIGHER than many other states.

Conservatives should leave, but you don't want the lefties bring their bad habits with them...

[VOA]

I must mention the situation in Missouri.
Governor Blunt put Missouri on the path of financial sanity.
Then the state elected Democratic gov. Nixon partly on his promise
to re-institute state Medicare payments...

Now Nixon is trying to push through cuts on the state Medicare program.

(I give Nixon credit, for a Democrat he is facing the current ugly
financial reality and acting in a sane fiscal manner. Of course he
doesn’t get d-mned in the press because he’s a Democrat...)

According to a family member, thanks to the actions of Gov. Blunt, Missouri
is in the top 10 of states that are not suffering (relatively)
from the current economic downturn. Even thought state tax revenues keep falling.

[RobRoy]

I buy almost everything through Craigslist and garage sales. I’ve been migrating towards going Galt for two years now. With the farm in Kentucky, it will be almost complete. We already slaughtered our first steer. I may have to buy the occasional car and materials for the large home we plan on building, but things like getting our driveway reworked (It’s 1/4 mile long) and other things can be done “under the table”.

Frankly, I’ve been following threads on other sites and apparently a LOT of construction work in the US now is being done “under the table”. That’s gonna leave a mark.

Welcome to Soviet Union II.

[RobRoy]

China moved to ECONOMIC capitalism. Not Political capitalism. And when it stops working, they’ll go back to the old way. They already suspended the sale of real estate.

Imagine any government body in the US doing that - and you are a real estate agent, or mortgage broker.

[dashing doofus]

NH: No state income or sales taxes. And property taxes much, much, much lower than CT, NJ, or NY.

Right now a purple state, but I expect at least two of the three moonbats now up for re-election to be tossed aside in November.

[who knows what evil?]

And property taxes much, much, much lower than CT, NJ, or NY.

According to Forbes; NH's Merrimack County has the highest property taxes in the nation excepting New Jersey and New York. Very expensive to register a car, especially if it is new. Then there are all the toll roads...

They get your money...one way or another

You are right about losing a couple of moonbats in November, though...I expect both Che-Porter and Hodes to lose...now if they could only send Shaheen packing next time around...

[crz]

They already suspended the sale of real estate.

Imagine any government body in the US doing that - and you are a real estate agent, or mortgage broker.

I’d think that over if I were you..I just got back from the bank today trying to get a pre approval for a place near here. 784 C score, never defaulted or was late on any payment anywhere, and guess what? No WAY. They said; You got a place in AZ and you have to show us this and that and on and on. Even thought the place we wanted to get would have saved us 400 bucks a month in travel expense. Banker said that it is nearly impossible to loan to anyone these days-even to those who get the 8 grand credit. FHA rules are kinda strict, but conventional rules are out of this world.

So..in short, the sale of real estate has been suspended here in a way.

[RobRoy]

There are always restrictions and, yes, they can be punitive. However, as a renter I was able to buy my farm in Kentucky with no problems at all. And due to problems stemming from a divorce, my credit was score was way worse than yours. It’s already a LOT better now thoughy... :)

In this market, there is no way I would loan money to someone who wants to move from their current home (assuming they own it) until they sell it first.