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Subject: [doc-jp 74003] Bull & Bear - State Budget
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The numbers are simply staggering=2E  How can this possibly continue witho=
ut a piper being paid=3F!=3F!


by Mike Shedlock

Dropping tax revenue, rising unemployment and yawning budget gaps are wrea=
king havoc in states from Arizona to Wisconsin, a new report shows=2E

CNNMoney reports 10 states face financial peril=2E

The same economic pressures that pushed California to the brink of insolve=
ncy are wreaking havoc on other states, a new report has found=2E

The 10 most troubled states are: Arizona, California, Florida, Illinois, M=
ichigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin=2E

Other states -- including Colorado, Georgia, Kentucky, New York and Hawaii=
 -- were not far behind=2E

The list is based on several factors, including the loss of state revenue,=
 size of budget gaps, unemployment and foreclosure rates, poor money manag=
ement practices, and state laws governing the passage of budgets=2E

In a separate study released Wednesday, the Center on Budget and Policy Pr=
iorities found that states will likely have to make steep cuts in their fi=
scal 2011 budgets, which start next July 1 in most states=2E That's becaus=
e the critical federal stimulus dollars will run out by the end of 2010=2E=


These cuts could take nearly a percentage point off the national gross dom=
estic product and cost the nation 900,000 jobs, the study found=2E

The Center on Budget and Policy Priorities, a liberal research group, says=
 the states need additional federal fiscal relief to avoid budget cuts tha=
t will hurt both the economy and people=2E State and local spending accoun=
ts for about one-eighth of the GDP=2E
And in California, Gov=2E Arnold Schwarzenegger said Tuesday that his stat=
e is facing a budget gap of up to $7 billion=2E The state will likely anno=
unce across-the-board spending cuts in January=2E

"So we just have to hang in there, tighten our belts and live within our m=
eans," he said=2E
The center would like to see the federal government allocate another $50 b=
illion, while economist Mark Zandi said about half of that would be needed=
=2E Congress should pass the additional aid now since states are currently=
 crafting their fiscal 2011 budgets=2E

Budget projections show that states could face deficits as large as $260 b=
illion in 2011 and 2012 after stimulus funding is exhausted=2E State econo=
mies usually take up to two years longer to recover after the nation's fis=
cal health begins to improve=2E

New budget cuts and tax increases "will be a serious drag on the economy a=
t just the wrong time," said Mark Zandi, chief economist at Moody's Econom=
y=2Ecom=2E
Without assistance, the economy could slide back into a recession, he said=
=2E

CNNMoney lists the problems facing each state in the list=2E Inquiring min=
ds may wish to take a look=2E

Stimulus Not Needed

I am sick of economists like Mark Zandi who think the answer is to print m=
ore money=2E

The problem is state budgets are bloated with overpaid bureaucrats who oug=
ht to be fired=2E Services that are needed out to be privatized to elimina=
te problems with pension funding=2E

Throwing more money at the problem just raises future liabilities while ad=
ding to interest on the national debt=2E Worse yet, throwing money at it m=
asks the structural problem that needs to be addressed=2E

If you throw money at the problem, unions will claim there is enough money=
 and benefits do not need to be cut=2E Keep throwing money at the problem =
and you create a currency crisis everyone has to live with=2E

The time to address the problem was 10 years ago=2E Zandi wants to postpon=
e the problems still further=2E Then he will ask for more, then more, then=
 more, never bothering to look at history and see how failed Keynesian and=
 Monetarist policies failed spectacularly in Japan=2E

We are in this mess because of loose money policies=2E Sadly, politicians =
listen to economists like Zandi when common sense alone would suggest that=
 you cannot cure budget deficits by going deeper in debt=2E

The only reasonable comment in the CNNMoney article comes from Arnold Schw=
arzenegger who said "So we just have to hang in there, tighten our belts a=
nd live within our means=2E"

Now if only the governor and the California legislature would practice wha=
t he speaks=2E Don't count on it as long as "free money" is being sloshed =
around=2E




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