Brink of Bankruptcy

" Combine that plummeting tax revenue and massive budget gap leaving nearly a dozen states in financial crisis mode as a new report out and it's grim. Saying ten states could soon be on the brink of bankruptcy and it's not just California California might be the tightest spot but not far behind his New Jersey. Rhode Island Florida Illinois Michigan hammer. Wisconsin Nevada Arizona in the state of Oregon and Jeffrey Margaret to Harvard. -- this I guess that a new masses are good morning to you. Why haven't they dig themselves out of this before the facts there I guess the the other the other 3039 states."

" They basically have to cut spending -- line almost in these states and many many other states. The rate of spending always goes up enormously during good times people act as though those are gonna last forever. And they just spent like drunken sailors. And the only way to fix the situation is significant ways to cut that spending back now try to keep it while going what do you think that's likely dating cut the spending a bigger raise taxes as an option -- here is it be most likely. I suspect they'll end up doing some combination of both what a lot of them of course are going to do was rely on that time mark technique known as prayer that is hoping the federal government will bail them out. Obviously that's not so likely governments federal governments in bad shape as well. But there may belt will be some deals where the federal government absorbs some of the losses of course that's truly disastrous it bails out. The excessive spending by those states that was the most profit."

" I think you made two great points or producers I just wanna going to -- is a bit more your point is that these states and many others just like him. They raised their spending excessively when times are good. So that's the case they're locked into a corner there. There are locked in the corn they have no choice but to try to reduce it now. But and of course there's a lot of things -- spending money on that are excessive there are huge huge wage union wage -- yeah. In construction contracts teachers' salaries. There's lots of goofy environmental projects along with some which make more sense there's bridges to nowhere highways to nowhere to the a lot of stuff that should be cut regardless of the state of the budget. I'll all the more reason Condit if the budget isn't such fashion we'll get your forecast to for this ripple effect as we read about all the time even if you don't live in one of those states is cause for alarm. Simply states -- Michigan on form as well over 15%. Other predictions -- and other places to go much higher than that I'm betting that those are enormous numbers and numbers we have not seen. Since the early 1980s. It if that is the case I was the rest of the country going to deal with this."

" Well we're going to deal with that I hope by gradually letting the private sector start to rebuild. But. Nothing that the federal or the state governments are doing seems to be in that direction and we have accepted this view that only the government can get us out of the recession. The fact I think a large part of our problems come from the excessive government intervention. So I don't have any good optimistic -- scenario or any sort of sure fire thing for policy to do. I think basically they need to stop trying to fix it let it get better on its own."

" This map looks like election I frankly I'm a look at this is an unemployment above the rate of 10% of the country today west coast hammered this southeast upper midwest hammered as well. The jobless some of that was announced today by the president. In the month of December what can that do for us."

" The job summit is basically just try to convince people they should feel better it's just sort of politics. Having a summit doesn't do anything -- creates more jobs as well and the private sector. Is believes that they're going to be good profit opportunities believes the government's gonna run sensible stable. A small government policies and therefore people want to invest and produce and and hire more people to help them do that."

" gonna get worse before it gets better -- some forecasts -- for 2010 these states of it if they don't take serious action now. The whole but the living in could be much --"

" Yeah it's could be a lot worse. There certainly are precedents for double dip recessions there's a lot of things that really haven't been fixed and economy. That should have been fixed we have a -- housing prices fall nearly as much as they probably ought to fall we've been propping bat out. And so. And we've been subsidizing risk taking in a huge way this same thing they've got some initial mass so there's certainly are reasonable possibilities that we're -- earlier we were all."

" We're learning some tough lessons from this side ten states by the way that we talked about they account for 13 of the country's population 13 of the nations. Economic output Jeffrey -- thank you for coming in today at a -- Massachusetts my pleasure."