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Brown Brothers Warns On Deterioration In State And Local Government Deficits, Cautions Of Comparable European Collapse

Tyler Durden's picture




 

Brown Brothers joins Meredith Whitney, who earlier noted that the collapse of state and local government funding is one of her primary concerns, in warning that the "The similarities between Europe and the US, in terms of debt and deficit issues, are much greater than the different political, social and regulatory regimes may suggest. While investors are well acquainted with the US federal deficit, they may be only vaguely aware of the increasingly difficult strait of many US states and local governments." BBH's Marc Chandler, Head of Currency Strategy, presents his view on the dramatic surge in regional deficits, and concludes that Whitney's words of caution need to be seriously considered: "The essay does warn that the cutbacks by state and local governments will retard the US economic recovery for the next year or two. These cuts have blunted the impact of increased federal stimulus. Going forward, perhaps after the November Congressional elections, the increase in federal spending will also slow, reducing its offset of state and local budget cuts. The US may face a greater fiscal drag than many observers suspect due to the impact of state and local government fiscal conditions. Investors would do well to consider the possible impact of similar fiscal conditions in European regions and cities." Yet Chandler's most relevant observation is that even as the domestic implications of this topic have been largely underreported, what is happening in Europe is likely far worse, and even more under the radar.

Full report from BBH:

State and Local Government: What a Drag

The European debt crisis has thus far unfolded as a sovereign debt crisis. And the sovereign here is the national government. This is particularly true in Greece. However in the coming months, it may become clearer that local and regional governments in Europe, including those of Germany, Spain and Italy, also face serious fiscal challenges.

The similarities between Europe and the US, in terms of debt and deficit issues, are much greater than the different political, social and regulatory regimes may suggest. While investors are well acquainted with the US federal deficit, they may be only vaguely aware of the increasingly difficult strait of many US states and local governments. It is the latter to which we turn our attention.

The State of the Drag

On 1 July, 46 of the 50 US states will begin a new fiscal year. The cumulative deficit of the 50 states is about $127.5 bln. State and local government borrowing reached a record 22% of US GDP this year, up from about 15% in 2000. Their outstanding debt is about $2.2 trillion, a 57% increase since 2000.

US states and local governments did the same thing that governments around the world have done. There was a general reluctance to tax citizens to fund the various programs that were provided by the state and local governments. Governments responded not by slashing the programs, but by borrowing to fund them. Governments accumulated debts and lengthened maturities.

They seemingly gamed their way around rules, including at times, constitutional requirements for balanced budgets or fiscal responsibility. This left them particularly vulnerable to a decline in revenues. Each business cycle may be unique, but they are all periodic, even if difficult to predict. What appears sustainable in an upswing may not be on the downside. Until the business cycle is repealed, governments, like businesses, need to embrace this key fact.

State and local governments have cut spending and raised taxes. Roughly speaking, these cuts in the first quarter more than offset the increased expenditures at the federal level. Consequently, the government sector was only a small drag on Q1 GDP.

State and local government however shaved nearly 0.5% off of GDP, the largest drag since 1981. Conservative estimates warn that the drag from state and local governments will continue in the next fiscal year, and probably the one after that too.

Fiscal Reform Coming to a Town near You

State and local governments are addressing their fiscal straits by cutting services and increasing user-fees and taxes. State and local government tax and fee increases were nearly $24 bln in FY 2010. An estimated 40 states have cut spending by nearly $22 bln.

They are also reducing their workforce. State and local governments employ around 20 mln American workers. In the 12-month period through May, state and local governments laid off 190k employees. This same pace more or less is expected to continue over the next twelve months.

The need for civil service reform in Europe seems paitently obvious to many observers who followed the Greek tragedy. Civil service reform will have to come to the US as well. This is not a political claim—a normative discussion about what ought to be, it is simply a descriptive claim. Wages and benefits account for a full 50% of some state and local government budgets.

The average salary of state workers was about $47,230 in 2008. One study found that this was 5% higher than comparable private sector jobs. City and local governments paid an average salary of about $43,600, about 2% more than similar jobs in the private sector.

On top of this, the state and local government employees receive much more generous benefits. Most notably, businesses in the US have largely converted from defined benefits programs to defined contributions. Roughly 80% of private sector employees participate in defined contribution programs. Approximately 85% of state and local employees participate in defined benefit programs.

The primary reason businesses shifted was to save money. Defined benefits leave the employer responsible for making up pension shortfalls. This is part of the unfunded liabilities that employers, including governments, face, often due to the vagaries of the market place.

Defined contribution programs effectively allow employers to shift the responsibility, and repercussions, of investment decisions to the employees. The employees, either directly or as a part of a matching employee-contribution program, select from a universe of funds that the employer makes available. If at retirement the 401k is short of necessary funds, the adjustment falls to the employee, not the employer.

As officials look for ways to put their state and local governments on more solid fiscal footing, it should not be surprising if there is a move to adopt defined contribution plans. Workers in the government sector tend to be organized better and may resist it more than the private sector, but in the face of necessity, principles have a way of being sacrificed. Perhaps it can be accepted in lieu of fewer job cuts.

The Feds

To be sure, these issues are not confined to US state and local governments, they apply to the federal government as well. One study found that federal employees earn higher salaries in eight of ten occupations in which there is a private sector equivalent. These include accountants, nurses, chemists, surveyors, cooks, clerks and janitors.

For occupations that exist in both the public and private sectors, federal employees earned about $67,700 in 2008. The average pay for the same occupations in the private sector is near $60,000. A recent press report found that a nurse in the Veteran’s Administration earns on average about $57,000 a year. This is $4,500-$10,700 more than private sector nurses.

There are all kinds of mitigating factors, including seniority and age of the employee. Often the skills and complexity of the work, like an accountant, for example, may be different for a government employee than a private sector employee. Nevertheless, it does challenge the idea that government jobs are poorly compensated.

In addition to the wages, federal employees also receive a generous package of benefits. According to the Bureau of Economic Analysis, health care, pensions and other benefits are worth an average of almost $41,800 for federal employees, compared to only about $9,900 for private sector employees.

The US may not be alone in this regard. The London-based Policy Exchange found a similar situation in the UK. Public sector workers were better compensated, with more lucrative pension plans than the private sector. The median salary of government employees was 12% higher than the private sector average and the pension plans were 15% more generous.

Public sector employees, the study found, worked fewer hours and retired earlier than their private sector counterparts. Over the course of a career, private sector employees work 23% more hours, which is roughly equivalent to a little more than 9 years, than public sector employees. The new UK government has drawn attention to the discrepancy and may seek to address early on in its tenure.

Conclusion

Many investors and observers have focused on the fiscal policy of the US federal government. In Europe the focus, for the most part, has similarly been on the national level. This essay briefly sketches out what is happening on the state and local government level in the United States. It does not address the transfers of funds from the federal government to the states. Nor does it have anything to say about the merits or demerits of municipal bonds.

The essay does warn that the cutbacks by state and local governments will retard the US economic recovery for the next year or two.

These cuts have blunted the impact of increased federal stimulus. Going forward, perhaps after the November   Congressional elections, the increase in federal spending will also slow, reducing its offset of state and local budget cuts. The US may face a greater fiscal drag than many observers suspect due to the impact of state and local government fiscal conditions. Investors would do well to consider the possible impact of similar fiscal conditions in European regions and cities.

Marc Chandler

Global Head of Currency Strategy

 

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Mon, 06/21/2010 - 11:44 | 424999 Turd Ferguson
Turd Ferguson's picture

First the Bank of Canada and now this?!? I can't stand all the good news! I must get in this market!

BUY! BUY! BUY! I don't care what. REITS, AAPL, the ES!!! BUY! BUY! BUY!

Mon, 06/21/2010 - 13:42 | 425188 Oh regional Indian
Oh regional Indian's picture

Hey Turd and Zero and TD and all you "in the know"ers.

I've been following an interesting story for a few months now that I even posted about earlier when CaliBLOWnia and it's pathetic fiscal situation had come up over the past few months.

Have you all read or heard about CAFR? The true state of state finances, with billions socked away?

Check it out @

http://cafr1.com/

Is it true? Why no noise?

ORI

http://aadivaahan.wordpress.com

Mon, 06/21/2010 - 11:46 | 425001 HarryWanger
HarryWanger's picture

Funny, I was just reading this California on 'verge of system failure’ when you posted. 

I hope all those Californians own AAPL stock.

http://www.theglobeandmail.com/report-on-business/economy/california-on-...

 

Mon, 06/21/2010 - 12:37 | 425090 jkruffin
jkruffin's picture

Borrowing more and government bailouts do not solve this problem ever.  This is a result of exporting all your production overseas, and not investing in your infrastructure.  The entire US has not put any money into infrastructure in many many years.  This is a result of letting millions of illegals leech off citizens.  It is a result of fantasy land economics.  This is a result of spending trillons of dollars on other countries' well being and building their infrastructure and bailing them out at our expense. 

Oh my, where we could be today if we hadn't wasted all that money over the years.  Heck, we might have a national transit system, or something better.  It is too late now.

 

 

Tue, 06/22/2010 - 09:06 | 426504 TexasAggie
TexasAggie's picture

A long time ago (as my daughter's say - when the dinos roamed the earth), I did a rate study for a multi-utility in Texas providing water to several cities.  They had in their rate, funds for a sinking fund to repay the bonds as the bonds matured. This then did not come out of the general fund.

In Civil Engineering - Engineering Economics that was always a requirement.

Did cities raid these funds to keep from raising taxes to support the general fund?

If the SF is present as the bonds are paid off, more bond could be sold to help restore the water lines (other infrastructure) and the current rates should allow the replacement.

 

Mon, 06/21/2010 - 12:00 | 425024 breezer1
breezer1's picture

"stay thirsty my friend".

Mon, 06/21/2010 - 12:00 | 425026 I need more asshats
I need more asshats's picture

The only way to solve the pain from bloat is to increase taxes. This will further reduce discretionary funds. Property tax mill rates will have a crippling bias toward punishing the 'nice neighborhoods'.

When Kernen was questioning Meredith this morning about consumer spending I just shook my head in disbelief. What a group of clowns the cheer leading crew is. Clowns.

Mon, 06/21/2010 - 12:30 | 425078 Mad Max
Mad Max's picture

Around here, any increase in tax rates seems likely to spark a rebellion.

I see local govts finding a form of deficit spending and some really sneaky "revenue enhancements," followed by a fiscal explosion and perhaps near collapse of many local governments.

Mon, 06/21/2010 - 12:01 | 425027 digalert
digalert's picture

CA lawmakers have the answer: "we need more revenue" idiots

Mon, 06/21/2010 - 18:14 | 425657 Rainman
Rainman's picture

Arnie's got the answer on revenue. He's already blown off the Cali job for a side gig. He and Sly Stallone have a new movie coming out.

I think he'll donate his end of the box office to rid Cali of its deficit. Then he can go out with his head held high.

Mon, 06/21/2010 - 12:02 | 425029 MsCreant
MsCreant's picture

No one is putting the oil spill into their projections. I wonder why? Just because you cannot know precise numbers does not mean it should not factor into these bearish kinds of discussions. States and cities are going to suffer losses of revenues from business and tourism being down, and paying people to clean up, buy equipment, etc. 

Mon, 06/21/2010 - 16:51 | 425543 I need more asshats
I need more asshats's picture

Have you research Exxon stock price on and around March 24, 1989?

Granted this spill is a different kind of kitty cat, oops I mean a different kind of oil spill in terms of net potential damage awards. But Exxon's stock price behaved very differently than BP's.

Tue, 06/22/2010 - 00:40 | 426219 MsCreant
MsCreant's picture

Folks, 

I need an honest opinion. Does my "ass" look ugly? No matter how hard I work on it I can't seem to get rid of it (see #425543). If ya'll think he is cute, I'll keep him (why wouldn't a girl want a good looking ass?). 

Tue, 06/22/2010 - 01:55 | 426310 Hephasteus
Hephasteus's picture

LOL one of my uncles has donkeys. They are so much fun and so great to be around. Horses and donkeys bite you as a bonding practice. They stand front to back and bite each other on the necks. So an hour with them is pretty much like a 6 months of puppy chewing.

At some point in it all you start thinking. Ok. I'm going to give this damn donkey a bath and just chew the shit out of his neck till he finally understands ok yes I'll herd up with you.

Tue, 06/22/2010 - 10:12 | 426612 MsCreant
MsCreant's picture

This is really funny. I did not know this about donkeys but it very much suits the spirit of the post. Cats do this too. Mine will nip me (no real hurt) and then run like hell through the house hoping I will follow in a fit of mock rage. 

Mon, 06/21/2010 - 12:03 | 425030 jkruffin
jkruffin's picture

Gee, wonder how this helps the economy?  People bailed out need a bail out. 

 

http://finance.yahoo.com/news/More-borrowers-exit-Obama-apf-887634101.ht...

Tue, 06/22/2010 - 04:51 | 426364 StychoKiller
StychoKiller's picture

[quote]Requiring homeowners to provide documentation of income has turned people away from enrolling in the program.[/quote]

Ha!  Bluffers got caught with a bust hand!

Mon, 06/21/2010 - 12:05 | 425042 Joe Shmoe
Joe Shmoe's picture

Policy response to excessive government spending and financial crisis in Europe are exactly what caused teh big time double dip in the 30s. 

Mon, 06/21/2010 - 12:11 | 425052 chet
chet's picture

"This sucker could go down."

Mon, 06/21/2010 - 12:23 | 425067 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

A W. quote on the Brown Brothers article; brilliant!

Was Dubya speaking about Jeff Gannon or the market?

Mon, 06/21/2010 - 12:14 | 425055 crzyhun
crzyhun's picture

There is so much that is under the radar that it is a virutal ant hill. Sorry for the mixed metaphor. Again, we have the number one law to recall....the law of unintended consequences or the road to hell is paved with unfunded gov't largess.

 

Tue, 06/22/2010 - 04:55 | 426366 StychoKiller
StychoKiller's picture

Yet, what's mind boggling to me is how so many clutch at straws to prove that all is well, "as the dominoes fall -- checkmate!" [Zap Brannigan]

Mon, 06/21/2010 - 12:21 | 425063 bugs_
bugs_'s picture

They have been fighting the fall since 2001 and it won't be denied.

Mon, 06/21/2010 - 12:24 | 425068 Dr. Richard Head
Dr. Richard Head's picture

I went to the local Village COuncil Meeting after the council decided to put a 1% income tax on residents NOT working in the Village.  I was apparently the only village idiot there.  After reviewing the village's financials, their insolvency was immediately recognizable and the $330,000 plus deficit for a village of 2,000 or so was a good display of what cities, towns, and villages are all going through.

At least here in Ohio the council was excited about the prospect of being able to ticket motorists without having to have a radar reading.  They gleefully believe the 1% income tax increase, increased ticket writing, and only a 2% raise for the tax feeders would alleviate their problems. HAHAHAHA

Mon, 06/21/2010 - 12:28 | 425072 wafflehead
wafflehead's picture

the solution to budget problems is laying off public employees and cut pensions.

I know for sure in the police department we can do the same quality of service with less people. There is no reason why when there is an accident 5 or more police cruisers show up. Complete waste of tax payers money.

Mon, 06/21/2010 - 12:33 | 425083 MaximumPig
MaximumPig's picture

California and other states in trouble could easily solve their fiscal problems by legalizing and taxing marijuana (if not all illegal narcotics).  In fact, Cali has a referendum on it this November--not medical marijuana, which they already have, but outright decriminalization for everyone.

Once Cali taps into the sales tax revenue on an estimated $14bn/year market (which is the size of the semi-legit medical marijuana industry in Cali alone), and issue $50 billion of "recovery" pot bonds, every other state and local government in the union is going to want a piece of that action. Not to mention the drop in costs of law enforcement and incarceration.

In other words, watch as inexorable economic forces wash over and erase cultural taboos.

Call it Munijuana.

 

Mon, 06/21/2010 - 12:40 | 425092 JLee2027
JLee2027's picture

Yeah right, keep dreaming.

Mon, 06/21/2010 - 15:54 | 425391 MaximumPig
MaximumPig's picture

Fact is, there will be a referendum on the ballot, so we'll just see what happens in November.

Mon, 06/21/2010 - 13:26 | 425165 Bam_Man
Bam_Man's picture

Yeah, and think of all the "jobs" it will create in bong manufacturing, as well as the addiction counseling and medical de-toxification fields.

I can see it now (through the smoky haze): "The Stoner Economy".

Mon, 06/21/2010 - 14:30 | 425270 aerojet
aerojet's picture

I'd rather have that stoner economy than the fascist militarized police state one we have been working on since the 1970s.

Mon, 06/21/2010 - 17:30 | 425602 tip e. canoe
tip e. canoe's picture

agreed.   willie nelson for president.

Mon, 06/21/2010 - 18:51 | 425711 Mr Lennon Hendrix
Mr Lennon Hendrix's picture
This joke goes for America as well. Joe Rogan Solves the War with Pot:

http://www.youtube.com/watch?v=W6cZdSJvOME

Tue, 06/22/2010 - 01:51 | 426306 tip e. canoe
tip e. canoe's picture

cue the flying squirrels!

Mon, 06/21/2010 - 12:41 | 425086 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Brown Brothers Harriman laundered money for Fritz Theissen, who was the main funder of the Nazi party.  They also owned and operated Amerika Shipping Lines and Amerika Mining (correct spelling) in Germany while the Nazi party was being established.  Averell Harriman was known as the founder of the new Democratic party and his wife was the Chief fundraiser.  Averell held many upper level cabinet positions both before after WWII, notably US Ambassador to the Soviet Union during WWII, US Ambassador to Britain after the war,  Secretary of Commerce under Truman, and Governer of NY.  Prescott Bush acted as President while the bank was laundering the Nazi money; he was charged with the 'Trading with the Enemies Act' during WWII, before he became Senator of Connecticut.  He was also one of Ike's favorite golfing buddies.  Averell's brother "Bunny" was the main shareholder of the bank.  George Herbert "Bert" Walker become CEO of said bank, this while establishing himself in NYC during the "roaring 20's".  He was an enthusiastic sportsman; he established Madison Square Garden and was in charge of the PGA, thus the 'Walker Cup'.  Prescott married Bert Walker's daughter, and passed down the family name to his eldest son, who did the same.  All three men (Averell '13, Bunny '17, Prescott '17) were Scull and Bones at YALE University, respectively.

Oh, and of course I will add, the Doelarr is dead.

Mon, 06/21/2010 - 12:42 | 425094 Turd Ferguson
Turd Ferguson's picture

House of Bush, House of Saud?

Mon, 06/21/2010 - 12:46 | 425097 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Absolutely.  The former swing oil producer was thought of as family.

http://media.photobucket.com/image/bush%20saud/yolhuani/activism/politic...

Mon, 06/21/2010 - 13:09 | 425146 LeBalance
LeBalance's picture

The roots (sorry) of BBH go way back to slavery in RI and Baltimore and before.  They are much more of a driver and much more insidious than many orgs we all shudder at the names of.

The Walker (Windsor) Bush Family is, but one of their arms.  The most public.

Mon, 06/21/2010 - 13:08 | 425145 Escapeclaws
Escapeclaws's picture

I don't know who flag you as junk, but everything you say about BBH is backed up by Kevin Phillip's book on the Bush dynasty. Kevin Philips is no radical rabble-rouser.

Mon, 06/21/2010 - 14:37 | 425279 aerojet
aerojet's picture

That pretty much sums up what our problems in the US are.

Democracy is such a waste of breath.

Mon, 06/21/2010 - 12:47 | 425099 aaronb17
aaronb17's picture

I'm not trying to advocate big government, but the comparison of pay per employee for government versus private industry makes no sense to me.  There is a huge range of employers in the private sector. 

What are average government wages compared to comparably-sized entites (if there are any)?   For example, a government IT worker v a Microsoft IT worker with the same or similar duties. 

That would seem to be a better comparison.  This idea that government employees are highly paid compared to the private sector is entirely new to me.   It's certainly not the case at higher management/professional levels.  If it's the case at lower levels, it's only because government generally doesn't dredge the bottom of the employment barrel to reduce the bottom line, the way the private sector employers often do when they're pressured to show growth.

Tue, 06/22/2010 - 05:00 | 426368 StychoKiller
StychoKiller's picture

Compared to private sector productivity, most public employees are extremely overpaid!  Go to any large city DMV and see for yourself.

Mon, 06/21/2010 - 12:47 | 425100 bigdumbnugly
bigdumbnugly's picture

I would like to submit that California is welcome to the sage advicement of our New York State legislature if they are so inclined.

Oh, never mind, the two are already of one mind.  Does that make them half-wits?

 

 

Mon, 06/21/2010 - 12:59 | 425121 Almost Solvent
Almost Solvent's picture

Instead of a yearly budget, NYS is passing one WEEK budgets.

One week is all NYS can afford to fund at this time.

ONE WEEK!!!!!!

NYS is now living (tax)paycheck to (tax)paycheck just like many households, assuming they even still have a paycheck.

Otherwise it's living gov't benefit check to gov't benefit check!

Mon, 06/21/2010 - 13:01 | 425126 Turd Ferguson
Turd Ferguson's picture

So SELL YOUR GOLD! 

Mon, 06/21/2010 - 12:56 | 425113 Xibalba
Xibalba's picture

"The essay does warn that the cutbacks by state and local governments will retard the US economic recovery for the next year or two." -or 10 or 12. 

Mon, 06/21/2010 - 14:12 | 425239 Hephasteus
Hephasteus's picture

Or give it the nastiest case of ecephalitis ever seen and we will watch the puss run from it's ears and eyeballs for 3 years.

Retardation. Hah. This thing is heading for vegetative state.

Mon, 06/21/2010 - 13:14 | 425150 Escapeclaws
Escapeclaws's picture

As usual,

no discussion of our bloated military or why we seem to be incapable of not waging at least two economy-sucking wars at the same time. How much has Iraq cost, $2 Trillion?  We didn't even get the goddamned oil. What about Afganistan $1 Trillion? How much have our 700 bases cost us over the last 10 or 15 years. Why is there never a cost benefit analysis of our miltary expenditures? Because there are all costs and no benefits.

The 401K as a replacement for the defined benefit pension was and is nothing but a scam. Who has benefited the most from that? Hint: not retirees.

 

Mon, 06/21/2010 - 15:16 | 425330 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Ah, sadly the military-industrial complex is doing exactly what it should be. The cost/benefit for Halliburton et al are stellar and with no defined goal or ending, they can count on the gravy train continuing.

There is no intention to have cheap oil, since you can't shore up the profits if it's easily available to poor schmucks with long commutes. Part of the strategy is denial of commodities and relationships for China (or practically anyone else).

But I agree that it is sickening and stupid to the nth degree.

Mon, 06/21/2010 - 13:15 | 425154 Mercury
Mercury's picture

Who knows offhand what the size ratio of federal to state and local government is in the US as opposed to a typical EU country?  In other words if you live in France, Germany or Spain how big a of a presence in your life (and in your taxes) is non-federal government?

I'm guessing non-federal government -municipal government- is much bigger in the US and therefore the US is at risk of a type of crisis that isn't as big an issue in Europe: government insolvency by governments that aren't able to print or muscle their way to the next coupon payment.

The Feds could try and support the munis to an even greater extent than they are now of course but (hopefully) that will be hard to pull off politically.  Although I'm sure Obama would prefer to have the Feds control all government everywhere.

Mon, 06/21/2010 - 14:10 | 425234 Apostate
Apostate's picture

The US government is by far the largest, most socialistic, and most violent in the world on a size basis.

Also the most indebted. The US situation is way worse than in the EU. Anyone who claims that it's just a European problem is projecting.

One more print-a-thon, then they all fall down.

Mon, 06/21/2010 - 14:42 | 425296 Mercury
Mercury's picture

The question though was is it not significant that there is a large amount of government in the US that exits outside the federal system which cannot print money or do other things that federal governments can do?

Mon, 06/21/2010 - 13:59 | 425218 Apostate
Apostate's picture

Bang-bang, America.

You're dead. 

Mon, 06/21/2010 - 13:59 | 425220 Oh regional Indian
Oh regional Indian's picture

In case someone missed it on the upside, I'll put it here again on the down.

Any bright folks aware of CAFR?

http://cafr1.com/

Dig in and reply or post. Real of hoax? Seems really real to me and I've been following this story for a bit.

Looks like there is no deficit at all!

ORI

http://aadivaahan.wordpress.com

Mon, 06/21/2010 - 15:47 | 425376 Bruce Krasting
Bruce Krasting's picture

I looked into this. For what it is worth, I think it is bunk. This is about how to invest working capital. The money that is available has been committed to future expenditures. If you wanted to be absolutely sure that your goal was to destroy municipal finance in the USA you you would do this.

We have to starve the beast before we can tame it. Debt is death. The sooner we accept that the better off we will be. The plan to tap municipal reserves just kicks the can down the road and sets us up for a harder fall.

We robbed borrowed $2.5T from the SS Trust Fund. That is going to be a hell of a mess to fix. The cafr idea is no different.

Mon, 06/21/2010 - 16:05 | 425417 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

"tame" it

edit:

"kill" it

Mon, 06/21/2010 - 22:52 | 426073 Oh regional Indian
Oh regional Indian's picture

Thanks Bruce.

I can take my tinF hat off on that one.

Tue, 06/22/2010 - 01:56 | 426313 tip e. canoe
tip e. canoe's picture

most reasoned rebuttal bruce...well done.

oRi, you actually picked the perfect thread to shine this particular piece of tin, so wear your hat with pride sir.

Tue, 06/22/2010 - 12:22 | 426885 Oh regional Indian
Oh regional Indian's picture

It's on, always on.

Eyes are wide open now, cannot help it!

Much better this way, eh?

ORI
http://aadivaahan.wordpress.com

Mon, 06/21/2010 - 14:16 | 425248 Gimp
Gimp's picture

I know in South Florida, counties have been laying-off, hundreds of police, corrections officers,(just as crime is rising with overcrowded jails) firefighters, teachers and many other county jobs at an increasing rate since the beginning of the year. They are trying to keep it as quiet as possible so not to hurt that hopey changey promise that was delivered last year..

 

Mon, 06/21/2010 - 14:22 | 425255 adamselene
adamselene's picture

Why wouldn't the FED just continue to bail out state and local governments in secret?

 

Mon, 06/21/2010 - 16:35 | 425488 Bankster T Cubed
Bankster T Cubed's picture

no shit sherlock, er...I mean no shit "brown" brothers

they must have another analyst that's wildly bullish on equities at the same time, no?

Do NOT follow this link or you will be banned from the site!