Journal: US Depression, Round Two–The States

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Mounting Debts by States Stoke Fears of Crisis

The New York Times

By MICHAEL COOPER and MARY WILLIAMS WALSH

Published: December 4, 2010

EXTRACT: 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.

EXTRACT: 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.

EXTRACT: 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.

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Phi Beta Iota: It merits observation that the states have not lacked for integrity as much as for insight and intelligence–they literally have made many bad, uninformed decisions, ignorant of the “true costs” of those decisions.  The need for public intelligence extends to all elements of all governments at all levels, not only to the public itself.  Informed governance, not just self-governance and structured governance, but hybrid governance, will be the mindset breakthrough of the 21st Century.