32 States Now Officially Bankrupt: $37.8 Billion Borrowed From Treasury To Fund Unemployment

[girl gone mad]

32 States Now Officially Bankrupt: $37.8 Billion Borrowed From Treasury To Fund Unemployment; CA, MI, NY Worst

Courtesy of Economic Policy Journal we now know that the majority of American states are currently insolvent, and that the US Treasury has been conducting a shadow bailout of at least 32 US states. Over 60% of Americans receiving state unemployment benefits are getting these directly from the US government, as 32 states have now borrowed $37.8 billion from Uncle Sam to fund unemployment insurance. The states in most dire condition, are, not unexpectedly, the unholy trifecta of California ($6.9 billion borrowed), Michigan ($3.9 billion), and New York ($3.2 billion). With this form of shadow bailout occurring, one can only wonder how many other shadow programs are currently in operation to fund states under the table with federal money.The full list of America's 32 insolvent states is below, sorted in order of bankruptedness.

Read more: http://www.zerohedge.com/article/32-states-now-officially-bankrupt-378-billion-borrowed-treasury-fund-unemployment-ca-mi-ny-w


I blame those lazy Greek tax-evading pensioners.

[Zynx]

1. Only an idiot would throw around terms like "Officially Bankrupt".

I am constrained by my confidentiality agreements with my state government, but I can assure you that Zero Hedge has no idea what they are talking about.

[girl gone mad]

3. How about the Economic Policy Journal?

Are they wrong, too?

http://www.economicpolicyjournal.com/2010/05/32-states-have-borrowed-from-treasury.html

[femrap]

5. You think CA, NY, MI

aren't broke? In arrears? Whatever term you want besides 'officially bankrupt.' Those states are in the red...how about that?

Are you in state prison or something?

[Statistical]

8. Being in the red isn't bankrupt.

Bankrupt has a very specific definition.

Having negative cashflow and borrowing money from Treasury may make a state insolvent but doesn't meet the definition of bankrupt.

Also the program is available to all states. Even financiallly stable states like VA are using the program. I mean if you are a state budget official why NOT use it. Why issue bonds at higher rate than what Treasury is allowing you to borrow from?

[femrap]

11. WASF nt

[madrchsod]

2. cost of war figures for....

California...126,320,000,000

michigan..26,497,300,000

new york...69,454,780,000

2001 to the second.

look up your state or city..worse how much it has cost you personally.

http://www.costofwar.com/

[pnwmom]

4. The fact that they borrowed money doesn't make them bankrupt.

A person or organization goes bankrupt only when it decides it has no ability to repay its debts. None of these states have done that.

[jtuck004]

6. The fact that they cannot pay their obligations makes them something ;)

They may not have filled out the Chapter 7 forms, but states are not paying their obligations. Califonia is issuing I.O.U.'s while banks there have said they are no good, Philadelphia quit paying it's vendors, states across the nation are deferring payments into pension funds that already don't have enough to keep paying their obligations...

Insolvent, like it said in the article, is a better word. But these states, most of whom have state constitutions that mandate a balanced budget, face permanent layoffs. Tax increases might help, but with over 27 million people either un- or under-employed that may not be possible. Philadephia is planning a bond issue, but the bonds have already been downgraded - not much of a sales pitch.

There are quite likely pensioners that are not going to get checks, vendors that will never be paid.

The states may not be bankrupt, but it is going to feel like they are.

[Statistical]

9. However all 32 states are not in situations like that.

Some states are in violation of balance budget requirements.
32 states are borrowing from Treasury. Some state like VA are borrowing a small amount and are doing so simply because the cost is lower than trying to issue a bond in an economy like this.

That doesn't mean 32 states are bankrupt.
As you pointed out more accurate term would be insolvent.
Even if you use term insolvent saying ALL 32 are insolvent because they are using a credit window made available by Treasury is a stretch.

Bankruptcy is simply incorrect.

[AdHocSolver]

7. The main cause of U.S. economic problems is the elimination of jobs due to offshoring.

Unemployed people don't earn income and don't pay taxes. People without income can't pay their debts. Corporations that offshore jobs avoid paying taxes.

Governments that can't collect taxes can't pay their employees and pay for other obligations.

The only action that can save this economy is to bring jobs back to the U.S. Only when at least 80 percent of what Americans BUY (clothes, shoes, appliances, tools, furniture, electronics) is manufactured by Americans in the U.S., will the REAL economy recover.

The U.S. has to reverse the policies that brought about the financialization of business such that the elimination of jobs actually increased corporate profits.

The rampant stock market and financial fraud has to be made illegal again, by bringing back New Deal legislation such as the Glass-Steagall Act. Computerized trading has to be eliminated. Its only function is to hide stock market manipulation.

Corporate cartel agreements such as NAFTA, the WTO, the IMF, and similar ilk must be replaced with policies that level the playing field for smaller U.S. companies in international trade.

Last, but not least, the operation of the Federal Reserve must be audited and made transparent. It has been a main contributor to the boom and bust cycles and Ponzi schemes perpetrated by Wall Street.

It doesn't take a degree in rocket science (or economics) to understand the causes of our economic problems. The U.S. is spending beyond its means because it lacks income. It is borrowing heavily to subsidize a "lifestyle" that it can't pay for.

Unfortunately, the situation is probably going to have to get a lot worse before any substantive action is taken to correct the problems. In fact, we see that the banking fraud is causing entire countries being unable to function. The fiction that is the "global economy" is starting to collapse.

Let us hope that our political leaders find better solutions to this economic crisis than merely bailing out the corporate crooks.

[Statistical]

10. It is unpopular but that isn't correct.

US GDP per capita has risen doubled in last 20 years.

The problem isn't that the US isn't productive (manufacturing output in US today is higher than 20 years ago) or prosperous (high GDP, high GDP per capita, and still very sustainable 4% growth rate).

The problem simply is that the distribution has been totally one side.

In the past the govt got some, the rich got some, the middle class got some, and the poor got some.

In last 2 decades we have seen the:
governments share go down
the poor share go down
the middle class share barely break even
the rich share skyrocket.

BTW: When I am talking about rich I am not talking about $100K a year job I am talking about multi-millionaires and billionaires.

Imports make up less than 10% of the US economy. Even if our imports (and exports) dropped to 0. We sealed the borders it wouldn't fix the problem as long as 99.999999% of the wealth gains are siphoned off by the top 0.001% of the country.

[AdHocSolver]

12. GDP, GNP, Rotini, Ravioli. Only the last two groups of letters, means anything.

The distribution of income has been one-sided BECAUSE most of what we BUY is made elsewhere, and Americans earn no income when other Americans buy mostly foreign made goods.

GDP per capita is a meaningless, irrelevant statistic to confuse people as to why the economy is in the toilet.

The most important activity to sustain an economy is the manufacturing of everyday goods, and it is also the most important activity to develop and sustain a middle class.

If you like books that are heavy into economic jargon, then read some of Kevin Phillips' books, such as "Wealth and Democracy". He describes how all of the great empires from the Roman Empire to modern times collapsed because they went heavily into colonization and built massive armies which drained their treasuries and broke their "middle classes".

Offshoring jobs and military occupation of other countries is the modern equivalent of colonialism.

Thanks to offshoring of jobs and the draining of the treasury by the massive military budget, the U.S. is approaching a late stage of empire, and headed toward banana republic status.

[Statistical]

13. Once again not true.

Less than 10% of US economy comes from imports and even less when you consider NET imports (imports - exports).

GDP is a measure of national wealth created from production (as opposed to wealth created from capital = investments). The problem is that wealth hasn't been shared equally. The last 2 decades have been amazing .... if you are in the top 0.1%. Utterly amazing expansion of wealth not seen since 1920s.


"The distribution of income has been one-sided BECAUSE most of what we BUY is made elsewhere, and Americans earn no income when other Americans buy mostly foreign made goods."

Another falsehood. Trade deficit is about $40 billion per month (latest figure). So roughly half a trillion. Sound like a lot but we have a population of roughly 307 million persons. The Average American spends about $1563 on net imports (imports bought by Americans - exports bought by foreign citizens).

This is a one again a small fraction of total US economic output and consumption.
While we should work to normalize trade that alone won't bring prosperity to the United States.

Another little know fact:
Us industrial output has increased every decade. We produce more today then we did in 1990s, 1980s, 1970s, 1960s, 1950s, 1940s, etc. One of the problems in labor market has simply been productivity has risen FASTER than output. Thus it takes less people to produce the same amount of good resulting in falling employment.

Another way to look at it:
US GDP: $14,600.
US workforce population: 139 million.
US productivity output: roughly $104K per worker.

US workers are highly productive however they haven't been rewarded for this productivity. Instead each year more and more of this hard earned/created wealth gets siphoned off to the top 0.01%.

Overall productivity in US continues to expand.
Overall GDP in US continues to expand.
Overall industrial output continues to expand.
Overall wealth in the US continues to expanded.

However all the ultra minority is swallowing up a larger and larger and larger % of the wealth creation.

In essence the pie IS getting larger however the middle class share of the pie is shrinking faster than the pie is getting larger to their cut isn't even keeping up with inflation.

[AdHocSolver]

14. The issue is NOT exports versus imports. The issue is jobs, and earning one's way.

I have got to give you credit for persistence in trying to muddle the issues.

When one has to go into debt (max out one's credit card) to pay for the necessities of life, then it matters not that the monetary value of the country's exports exceeds the monetary value of the country's imports.

When entire cities and vast regions of the country are in debt just to buy necessities, because large numbers of its citizens are unemployed or underemployed, when large numbers of state and local governments threaten to default on their obligations, then GDP, exports, imports, and all the econometric "toys" don't mean jacksh#t to explain the problems or how to solve them.

In fact, econometrics (mathematical analysis applied to economic data) is little more than a means of obfuscation to muddle the minds of the peons so that they won't really understand HOW they are getting screwed.

GDP, "free trade", "global economy", "productivity", and other jargon are all designed, not to enlighten, but to confuse the peons so that they will give up trying to understand how they are being played.

Let's take the term "productivity" as an example. Most people assume increasing productivity means giving a worker increased training or giving a worker a better tool to do her job more "efficiently".

There is another way to increase productivity. Force the worker to work more hours for the same pay (unpaid overtime) or force the worker to work more hours at reduced pay (or lose his job). That increases the productivity the same way, as far as the company is concerned. It also increases the economic numbers such as profit. However, it plays havoc with workers lives and the economy as a whole.

How do I know? I earned my degree in economics before many of the current buzz words became popularized.