Recent comparisons made between some American states' finances and those of Greece are exaggerated; however, credit-default-swap (CDS) spreads, which measure investors' expectations of default, are wider for some American states than for some of the eurozone's other peripheral economies.
On June 17th the cost of insuring Illinois' bonds against default hit a record high, rising above that of California, America's largest municipal borrower. Both are considered riskier than Portugal's debt. New York and Michigan are higher than Ireland's.
Like euro-zone members, American states may not declare bankruptcy and cannot be sued by creditors. And like many European governments, legislators are reluctant to impose the pain necessary to close budget deficits.
See just how the financial markets are pricing the financial troubles of these selected states and countries.
Source: The Economist
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I don't get the Paul Krugman's of the world who think we need to double down on racking up debt in order to stimulate the economy. Fed to State gov't 'stimulus' is simply a massive sugar rush that doesn't force states to address their problems. Now the opposite view of slashing everything in site would be equally bad because it would shock the system. States and local governments need to systematically change the way on how they do business. I see that the city of Tosa couldn't sell its bonds in the last sale....even though the city has a very high rating. Smart gov't entities will learn how to operate without credit because that may be the only way they would be able to get some.
ReplyDeleteShould have retired debt during the fat years to provide a cushion during the lean years.
ReplyDeleteRaising taxes now would be catastrophic and Wisconsin's structural deficit is a train wreck waiting to happen.
Why anyone would want to be Governor is puzzling.