Tags: Cities | States | Drowning | Debt

Cities, States Drowning in Debt

By    |   Tuesday, 15 Jun 2010 10:42 AM

As federal government spending skyrockets, taxpayers are just now realizing that states and cities face increasingly hard-to-meet long-term obligations.

Governments have loaded up on debt, stretched out repayment times, and used slick maneuvers to avoid constitutional borrowing limits, Steven Malanga, a senior fellow at the Manhattan Institute, writes in The Wall Street Journal.

Local borrowing has hit 22 percent of GDP, an all-time high, and could rise to 24 percent in two years, he reports.

A sharp decline in tax revenues has prompted more abuse as politicians use long-term debt to kick short-term fiscal problems down the road, Malanga says.

As an example, Malanga points out that New Jersey will pay $100 million a year for decades on debt take on to build the Meadowlands Stadium. The debt started out at $302 million four decades ago and was meant to be paid back within 25 years.

Treasury last week said the federal deficit this fiscal year is at $935.61 billion, down from $992 billion last year. The deficit for fiscal 2009 was $1.42 trillion.

Deficits have become a huge point of contention in Washington. Some argue it is only a matter of time before investors lose confidence in U.S. bonds and send interest rates sharply higher. A similar scenario could soon play out for municipal bonds, which are subject to the same market forces, raising interest rates and killing bond prices.

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As federal government spending skyrockets, taxpayers are just now realizing that states and cities face increasingly hard-to-meet long-term obligations.Governments have loaded up on debt, stretched out repayment times, and used slick maneuvers to avoid constitutional...
Cities,States,Drowning,Debt
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2010-42-15
Tuesday, 15 Jun 2010 10:42 AM
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