Unlike Federal government, states and munis do have to balance the budget and we are getting more cities bankrupt as previously predicted. We have to bite the bullet somehow otherwise we can never service our growing debts. We're running out of suckers like China to lend up more money.
Most likely it will happen as followed.
* States will not bankrupt, but muni bonds will lose a lot of value. QEn will be used to rescue the state. Property and state taxes will be if not already raised.
* State/muni bonds together with Federal bonds will have the junk status, so in the future it is hard to raise money that are needed for any project.
* Cut state employees. It is easy to cut about half of the state workers and you will not notice any loss of service (as most of them work short hours and are not motivated under the union umbrella). I just get sick of the routine 'discoveries' how few hours they work as reported by our newspapers while we've about 18% real unemployment rate and we've folks begging for work.
However, the firemen, policemen, and teachers should be paid fairly.
* Then cut their pension and increase retirement age. Most state workers have just a little less than their regular salaries when they retire at a young age. Most big companies do not have pensions now.
* Cut the entitlements/benefits that encourage folks not to work like benefits to teenage mothers, no more free medical care for illegal’s... All expenditures
have to be a fair percentage of our GNP not how much we can borrow.
We do not need large government, but lean and mean government to provide us efficient services. All those taxes are not good for the economy and businesses (how can you compete with those foreign countries with minimal taxes). Without business expanding (not government expanding), we do not have real jobs.
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Now, we need to set up a law to require the federal government to balance budget and not to be the world policemen which we cannot afford.
Joke of the day. Sell Alaska with Sarah P. as a required clause not a bonus to China. Sell California with the big-mouth governor to Brazil
(c) TonyP4 2/26/2011
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Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
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Our experts told us to stay away. They're wrong. However, their arguments are not wrong, but just the timing. Muni seldom default their bonds as they cannot issue new bonds in the future if they do.
ReplyDeleteThe reality is some municipals are just dying and they just cannot keep on paying the interest. There are better places to invest.