Tags: muni | bond | crisis | california

NY Times: California the New Greece?

Tuesday, 30 Mar 2010 04:27 PM

By Dan Weil

  Comment  |
   Contact  |
  Print  
|  A   A  
  Copy Shortlink
Many states have huge financial holes that could lead to a systemic crisis, experts say.

Budget deficits run into the billions of dollars in California and New York. States have taken on huge debt loads, many face shortfalls in their pension funds, and many are using accounting tricks to hide their true position.

The difficulties have faded to the background as the municipal bond market has surged. But if investors start to shy away from municipal debt, a crisis could rage at some point soon.

“If we ran into a situation where one state got into trouble, they’d be bailed out six ways from Tuesday,” Harvard economist Ken Rogoff told The New York Times.

“But if we have a situation where there’s slow growth, and a bunch of cities and states are on the edge, like in Europe, we will have trouble,” said Rogoff, a former International Monetary Fund chief economist.

California provides a good example of the accounting smoke and mirrors some states now use.

The state’s official debt totals 8 percent of its GDP, a large number but not out of control.

However when you add pension obligations, the number soars to 37 percent, according to The Times.

State and local governments will have to take severe steps, experts say.

"This is a completely unprecedented crisis," Ethan Pollack of the Economic Policy Institute, told CNBC.

"The budget cuts are going to get more and more severe."

© 2014 Newsmax. All rights reserved.

  Comment  |
   Contact  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Obama Sought Immigration Order for 'Fullest Extent' of His Legal Authority

Friday, 28 Nov 2014 22:11 PM

Months before his landmark announcement about executive action on immigration, President Barack Obama entered into disc . . .

Rick Perry Revs Up Campaign for 2016

Friday, 28 Nov 2014 21:33 PM

Texas Gov. Rick Perry will spend his last month in office meeting with more than 500 major GOP bundlers and donors in De . . .

Pope Francis Heads to Istanbul in Symbolic Visit

Friday, 28 Nov 2014 21:21 PM

Pope Francis on Saturday heads to Istanbul for the second leg of his first trip to Turkey, in a richly-symbolic visit se . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved