What We Need Is More Tax Cuts

Cities and states issue bonds to pay for public services. The trouble is that municipalities are no longer collecting enough in taxes to meet their budgetary needs. According to a 60 Minutes report Sunday -- which received almost no attention by the popular press -- US cities have spent nearly half a trillion more than they've collected in taxes, and face pension shortfalls of $1 trillion.

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"There's not a doubt on my mind that you will see a spate of municipal bond defaults. You can see fifty to a hundred sizeable defaults – more," [financial analyst Meredith] Whitney added. "This will amount to hundreds of billions of dollars' worth of defaults."

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The New York Times reported on the affluent New York county of Nassau, where a Republican county executive -- "who won one of the first upsets of the Tea Party era" -- came into office and promptly cut taxes without trimming public benefits or services. The county’s deficit now approaches nearly $350 million.

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In June, New York state announced that they would borrow from the state's pension fund to make current payments to the fund .[...] "The maneuver would cost the state and local governments about $1.85 billion in interest payments, according to an estimate by the State Senate, though a number of factors could drive interest payments up or down."

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[Detroit] does not generate enough wealth to maintain services for its 900,000 inhabitants."

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[Illinois] has a 21% chance of default, more than any other [state], according to CMA Datavision, a derivatives information provider.

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"California has raised state university tuition fees by 32%. Arizona has sold its state capitol and supreme court buildings to investors, and leases them back."

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Some investors believe the default of a major city is low, arguing that states would be likely to bail out their beleaguered metropolises.

Raw Story

And if the states themselves haven’t got the money, Some?

If one of the wealthiest counties in the country – Nassau, NY – can be so indebted, how can we cover up the problem by claiming it’s just a matter of the underserving poor?

We don’t care! More tax cuts!