Most U.S. Cities and States Float in a Sea of Red Ink

Nearly every state in the Union and nearly every large city are facing ballooning budgets and shrinking tax revenue. (confiscation) Some, such as Illinois and California, are boarding on insolvency and need to fill budget holes that are tens of billions of dollars. Tax receipts everywhere are plummeting because of the high unemployment rate that, in reality, is above 22%. On top of that, foreclosures hit another record nationwide in 2010 and are expected to set yet another one this year.

Those empty homes are shrinking property tax receipts and are another blow to budgets across the country. States and cities cannot print money, so cuts are being made to make up for the shortfalls. Public pensions alone are $2.5 trillion in the red. There’s talk of passing Federal legislation that will allow individual states to go bankrupt as a way to slash pension obligations. Cites are cutting workers and laying off firefighters and police. Things have gotten so bad in Camden, New Jersey, that it fired half its police force this week. Camden is the second most dangerous city in America and is probably on its way to number one.

Illinois is going the other way. Last week, the state legislature passed a bill that would raise personal income taxes by 67% and corporate taxes by 46%. Bordering states can’t wait for the new businesses and taxpayers fleeing the land of Lincoln. How can we be in a economic recovery when cities and states are fighting to stay afloat?

The one thing you can’t count on is a bailout from the Federal Reserve. Never mind the Fed spent a staggering $12.3 trillion to bail out foreign and domestic banks, private individuals, hedge funds, and corporations like Toyota and Harley-Davidson. When it comes to the guy on main street, the Fed said kiss-off.

Last week, Ellen Brown wrote an excellent article on the Fed’s recent decision NOT to help the common man. Ellen and I disagree on the inflationary effect of the Fed’s actions, but her sourcing and journalism are excellent. Please take the time to read her first-class work below:

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