(CBS) Besides the federal deficit, another crisis looms that media has not yet focused on.
States are collectively in deficit to half-trillion dollars since recession wrecked economies & reduced their income. Their pension funds also have a shortfall of a trillion dollars.
The debt crisis is making Wall St nervous, & some believe it could derail the recovery. A million public employees could lose their jobs. Another big bailout might be needed.
Meredith Whitney made her reputation warning that big banks were in trouble before the 2008 collapse. Now she's warning about state & local governments : "It has tentacles as wide as anything I've seen. I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the US economy."
"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. This will amount to hundreds of billions of dollars' worth of defaults."
Her 600-page report The Tragedy of the Commons (economic parable of selfish farmers who graze sheep on common pasture till barren) released 28 Sept 2010, rates states on 4 criteria: Economy, Fiscal health, Housing, Tax.
The worst states are: 1. California, 2. New Jersey, Illinois & Ohio (tie), 3. Michigan, 4. Georgia, 5. New York, 6. Florida; & best states: 1. Texas, 2. Virginia, 3. Washington, 4. North Carolina.
Guardian 20 Dec 2010 Elena Moya :
Overdrawn American cities could face financial collapse in 2011, defaulting on hundreds of billions of dollars of borrowings and derailing the US economic recovery. Nor are European cities safe – Florence, Barcelona, Madrid, Venice: all are in trouble
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