Guess What America? Your Cities And States Are Flat Broke

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Now that the economic boom times of the earlier part of the decade are over, cities and states across America are going bust.  In fact, for a growing number of local governments throughout the United States, there is no getting around the fact that “flat broke” accurately describes the situation that they are facing.  For many of these cities and states that are on the verge of bankruptcy, the American Dream is quickly turning into the American Nightmare.  Unlike the federal government, which can ask the Federal Reserve to print up some more money when they get into trouble, state and local governments have nowhere to go when the well runs dry.  They either have to raise taxes or cut spending.  But in many areas of the country, services have already been cut to the bone and people are already being taxed into oblivion.  So what can be done?  Well, many of these state and local governments are just going to have to cut spending even deeper, squeeze even more taxes out of their residents, or go to the federal government for a handout.       


America Your Cities Are Broke

Once upon a time, municipal bonds (used to fund such things as roads, sewer systems and government buildings) were viewed as one of the very safest of investments. 

But now all of that is changing.

According to Distressed Debt Securities, in 2009 183 municipal borrowers were unable to make $6.4 billion in loan payments.

Just two years earlier, those numbers were 31 and $348 million.

As you can see, that is not a good trend.

The truth is that municipal governments are facing an unprecedented fiscal crisis.

In fact, the National League of Cities recently announced that municipal governments will collectively come up somewhere between $56 billion and $83 billion short between now and 2012.

So where will all of that money come from?

It will have to come from spending cuts, tax hikes or handouts from the federal government.

Or, if something is not done, we are going to see a massive wave of municipal defaults.

Case Study: Detroit

The situation is particularly dire in areas that have been hit hardest by the economic crisis.

To make up for a projected 2010 budget shortfall of 280 million dollars, the city of Detroit issued 20-year municipal notes totalling 250 million dollars in March.  But there is a real question as to whether or not Detroit is actually going to be able to meet these obligations.  In fact, Detroit officials are openly admitting that if the financial state of the city does not rapidly improve, it could be forced to declare bankruptcy.

What a sad state of affairs for what was once one of America’s greatest cities.

During the economic boom times of the 1950s, Detroit was a thriving metropolis of approximately 2 million people.

Today, the current population is less than half that and people are leaving in droves.

But even the people who are still there can’t get jobs.  The mayor of Detroit says that while the “official” rate of unemployment in Detroit is 27 percent, the “real” unemployment rate in his city is somewhere in the neighborhood of 50 percent.

But at least houses are cheap.

In Detroit, it is not uncommon to see homes advertised for under $1000, and in fact there are some houses in the city that you can actually purchase for just one dollar.

Not that you would want to live in those homes.

Violent crime is dramatically increasing in Detroit and vandals have been running around stripping everything of value off of many of the homes.

So what is Detroit doing about this crisis?

Well, they have decided to downsize.

Emergency Financial Manager Robert Bobb recently announced a plan to close 44 Detroit schools.

Also, Mayor Bing has promised to bulldoze 3,000 Detroit homes this year, and an additional 7,000 over the following three years.

But that will only make a dent in the urban blight.  According to one estimate, the city of Detroit has 33,500 empty houses and 91,000 vacant residential lots.

So if you are looking for some really cheap housing you might want to consider moving to Detroit.

Just don’t count on getting a job.

America Your States Are Broke

But it is not just local governments that are broke.  Entire U.S. states are on the verge of bankruptcy.

In fact, a large number of U.S. states are preparing for their biggest budget cuts in decades.

An article in CNN recently put it this way….

“Think states have made deep spending cuts? You ain’t seen nothing yet.”

In 2008 and 2009, economic stimulus money helped many states make it through the financial crisis, but now that money is drying up and many states do not know what they are going to do.

Already, half a dozen cash-poor U.S. states have announced that they are delaying their tax refund checks.

That would have been unthinkable a couple of decades ago, but these are desperate times.

In fact, New York state has delayed paying bills totalling $2.5 billion as a short-term way of staying solvent.

But those bills have got to be paid some time.

So what has caused this huge financial mess?


Just like the U.S. federal government, state governments have gotten themselves into reckless amounts of debt, and now the day of reckoning is here.

And things are going to get a lot worse.

According to, 32 U.S. states have already run out of funds to make unemployment benefit payments and so the federal government has been supplying these states with funds so that they can make their payments to the unemployed.

So what happens when the U.S. government says that it wants to stop making those payments for the states?

But the pension crisis on the state level is something that is far more alarming.

Two university professors recently calculated that the combined unfunded pension liability for all 50 U.S. states is 3.2 trillion dollars

Yes, you read that right.

3.2 trillion dollars.

So where will that 3.2 trillion dollars come from?

Nobody really knows.

Case Study: California

Many states are in massive financial trouble, but California is perhaps in the worst condition of all.

The economic crisis has hit the “golden state” particularly hard.

Businesses are shutting down at a stunning rate.  In the area around Sacramento, California there is now one closed business for every six that are still open.

Unemployment in California is absolutely exploding.  There are now 8 counties in the state of California that now have unemployment rates of over 20 percent.

In fact, the number of people now unemployed in the state of California is equal to the populations of Nevada, New Hampshire and Vermont combined.

The truth is that in this economic environment, not even teachers are safe.  Just recently, the state of California handed pink slips to nearly 22,000 teachers across the state.

Can you imagine firing 22,000 teachers?

But canning all of those hard working teachers barely even made a dent in California’s budget problems.

California Governor Arnold Schwarzenegger is promising to seek “terrible cuts” in an effort to bring the exploding debt of the government of California under control, but the truth is that it is hard to squeeze blood out of a rock.

Bob Herbert of the New York Times recently described California’s horrific budget crisis this way….

California has cut billions of dollars from its education system, including its renowned network of public colleges and universities. Many thousands of teachers have been let go. Budget officials travel the state with a glazed look in their eyes, having tried everything they can think of to balance the state budget. And still the deficits persist.

The truth is that California is bankrupt.  They can try to keep borrowing more money as fast as they can in an effort to push their problems off to another day, but in the end California is going to go belly up.

But the same thing could be said for the entire U.S. economy.  The total government, corporate and consumer debt of the United States has now reached 360 percent of GDP and is accelerating.  We have reached a point where there is simply no way out.  The only thing that can even delay the inevitable is to borrow even more money and to try to crank the debt spiral up one more time.

We have created an economic nightmare of epic proportions, and we have wrecked the future for our children and our grandchildren.

What a mess.

  • Ada

    Well, it kinda turns out paying people who can’t even support themselves to have more kids creates a drag on the economy.

    Who could have predicted that?

  • Gary

    There is plenty of money-you simply need to heavily tax the rich. No more corporate welfare. This is an easy problem to solve.

  • Greg

    America is in this situation because that was the plan for this nation. The actions that have been taken to create this chaos were clearly designed to bring about what we are experiencing and the question you must ask is “why were those decisions made?” Atheists are the most duped of all people and their refusal to see the spiritual aspect of the dilemma America is in leads them to pursue futile solutions. I suggest that those who deny the existence of God (i.e. the fools) allow themselves to look at this from the perspective of the majority who do believe in God and it may be more understandable. Stay with me on this, even if you put God in the realm of Santa Claus (but the question then is “why do you hate God and not Santa Claus?”).

    Our founding fathers DID believe in God but they did not worship the God of the Bible. They were mostly Masons and they believed that the world would be perfect when the Masonic Christ was ushered in. America was created to usher in their Masonic Christ and that truth is manifested prominently in DC architecture and even the Statue of Liberty was commemorative of that aspect of our nation. The role of this nation was to become a superpower and to pave the way for the New World Order. A part of that process was the eventual demise of this nation as a superpower so that the void would open the way for the Masonic Christ. The process that has been implemented is to create chaos and then to bring order out of that chaos – and of course the order that is brought in is the desired outcome that could not be achieved without chaos. This is why the first two world wars were planned and carried out and is also why WW III will soon be implemented. Americans are going to willfully accept the loss of our sovereignty and the merger of the US with Canada and Mexico, along with a new currency, because we will have no other choice. This merged nation will be one of the ten super nations that will be handed to the Masonic Christ once he is revealed. The world that has looked to America will seek new answers and will welcome the Masonic Christ with open arms when he promises to fix the problems that were created specifically for that purpose.

    So atheists need to look at the Bible and what it says will happen the same way I look at the mythology of evolution. That is the most preposterous nonsense ever to be presented to mankind and we now call it “science” and treat it as fact. While I know it is all fairy tales, I seek to understand what fools believe about mythology so that I can understand what motivates them, e.g. it is the primary belief behind the abortion and genocide movements (they are actually synonymous). If you will gain an understanding of the Bible, you will understand what is happening in our nation.

  • daveco

    Nobody wants to deal in simple math, simple engineering and simple common sense anymore.

    The article did touch on some math but not much, no engineering and no common sense.

    Over 33% of Americans have either lost there jobs or now work for half of what they worked for just 5 years ago. This has nothing to do with welfare! Only an idiot would point to that! So the government will have at least a 33% cut in taxes coming in.

    Detroit is a fantastic example were in the 50’s auto plants made money employing over 10,000 workers to build less than 300 auto’s per day! Now in detroit most plants have 1500 workers building around 1500 auto’s per day or a improvement of about 3000 percent.

    Common Sense
    We can make more auto’s, more food, more everything, including homes with less people than the 50’s yet we have more people unemployed, more people hungry, more people losing there homes.

    We are the problem! We voted for minimum wage, environmental, and litigation laws for the US and forgot the corporations are now global! DAH they moved all the jobs and wall street moved all the money to anywere that does not have minimum wage, environmental or litigation laws!


    Change our laws to be global in scope. We do not allow inports from any countries that do not follow our minimum wage, environmental and litigation laws. If we ban offshore drilling than we do not import oil from any country that does offshore drilling.

    Common Sense check,
    We are the people who vote and create laws. If we do not fight for our freedom and way of life every single day, we will wake up and no longer have it! We need to stop being idiots watching dancing with the stars and eating twinkies while the foreclosure notice goes on our door! We need to understand it is a global economy and any law we create on the federal level needs to take that into account!

  • Gary

    daveco-you are correct, especially on the math item. I am only making about 60% of my former wage and am extremely underemployed. Can buy much and help the economy.

  • elizabeth

    what can governments do the bankruptcy thing too

  • Malte


    You bring some humour into an otherwise grim scenario. Thank you.

  • Robert Douglas

    This blog is new to me and I really appreciate what I have found here. A question to the moderator: Is your mission being furthered by Theocratic trolls relentlessly referring to their ludicrous dogma? I think we know what Greg is going to contribute on any issue.

    • Admin


      I try to let everyone express their opinions here.

      I very much appreciate what Greg adds to the discussion and I do not understand why people want to shut him down.

      I hope that Greg and everyone else will continue to leave great comments, and may the very best ideas win out in the marketplace of ideas.

  • Insolvency is a withdrawal symptom when cheap oil is removed from the US economy.
    Giving more money to billionaires will only accelerate the crash. Unemployed people and people toiling away at low wages don’t pay taxes. Demonizing welfare costs when the bailouts and CEO pay dwarf them will not make a dent in the problem.

    Reading comments on this problem here and elsewhere and seeing religious nuttery and hatred of working people show there is no real debate or possible solutions forthcoming.

    The US and most of the western world are headed for a crash of historic proportions. Without energy there is no economy, and the oil supply is on a downward trend regardless of how much we drill. Alternatives cannot and will not be ramped up fast enough. It is best to prepare for a difficult future.

  • Greg

    Some observe but do not see. The world is awash in oil with several reserves in the US being as large as the Saudi Arabian fields. There is a different agenda going on.

    Regarding “alternative energy” and the proof that evil people dupe stupid people into their own destruction, consider this reality:
    The world is awash in oil, coal and other sources of abundant energy
    The foolish have been duped into believing that the true energy sources are going to destroy us
    The foolish have been duped into believing that turning food into fuel is somehow good
    The foolish have been duped into believing that it is somehow good to lock up our farmland so that we now must import the majority of our food supply
    The foolish are allowing the evil to lead us all into a world that is going to be hellish very soon

  • daveco

    There is no energy crisis, there never has been an energy crisis, there never will be an energy is our life time(until the sun blows up).

    Energy crisis is an orwellian phrase beat into our heads by propaganda!

    Energy can not be created nor destroyed(paraphrasing Einstien)!

    We have a oil supply problem, not even a shortage of oil! The supply is being controlled by a lot of people and governments for there advantage!

    Auto’s can and do run on natural gas, ethanol, electricity and we could run every car in this nation without gas and never miss a beat!

    Every auto plant in the world runs all the vehicles inside the plant hilos, personal carriers, fork lifts, automation with natural gas, propane, electricity, even ethanl, but none, I MEAN NONE even in China with gas. Why it is too EXPENSIVE! Even walmart uses electric hilos and forklifts.

    ALL trains are electric! Yes electric. We as a nation are propagandized fools who do not understand simple, math, simple engineering and common sense!

  • daveco

    Last thing I will say!

    All the problems we have today are simple problems that could be fixed with simple math, simple engineering and common sense.

    Turn off the tv, unplug the propaganda, and think.

    The problems we face today are nothing compared to what MILLIONS OF AMERICANS BEFORE US FACED AND WON! They had propaganda too.

    We have lots of resources such as the internet to get the message out. Things are going to hell but it is not because they have too. They are getting that way because we are all too busy being idiots who do not vote who do not read who do not think!!!!!!!!!

    We need to ask not what our country can do for us but what we can do for our country!

  • patricia

    some people on this forum got it right but they still missed the point. if you want the US to compete with china, than are you willing to work for 2 $ per day and work 14 hour days with no regulation. You mean the chinese babies that died because of tainted infant milk, or the dead dogs and cats who consumed melamine, or the citizens of panama that died from tainted chinese toothpaste. This is what you want the US to compete with? are you freakin stupid or just retarded???? between the 1940’s till the late 1970’s we built this country on strong wages, benefits and manufactoring. The wealth of a country is based on production not consumption. Its amazing to me the ignorance of some people on this forum. people have reached epic amounts of debt than ever seen in the history of this country. the problem is that we need a strong work force. i saw a comment about taking care of people with too many kids, well how about how much money the federal reserve forked out TO WALL STREET BANKS LIKE GOLDMAN SACHS AND AIG, TRILLIONS OF DOLLARS, WHILE THESE JACK OFFS ARE PAYING THEMSELVES LARGE BONUSED TO CONTINUE MAKING BETS ON TAXPAYER MONEY, AND THEN they send their lobbyist to ensure lawmakers vote their way. what about the contractors in iraq and afghanistan making more than our soldiers, jobs unfinished and overcharging for work not done. HALLIBURTON, MR CHENEY COMPANY, HAS MADE MORE MONEY IN THE LAST TEN YEARS THAN THE HISTORY OF THEIR COMPANY. COINCIDENCE??? War has become a large profiteering machine and no one gives a crap about it. they complain about people on welfare but have no problem spending 8 billion dollars per month on a war that has not stopped nor curbed terrorism, in fact terrorist have multiplied by our presence. this was report based on the department of defence for the last 2 years. we need to start shopping at local businesses, local farmers markets instead of buying our garlic from peru, or china. competition needs more small to medium size businesses that compete for our money not conglomerate corporations like enron who see no end to their greed. this is a class war, and the corporations have bought and paid for every politician democrat or republican. unless we wake up and stop using our credit cards and demand better wages and start producing again than we are screwed. you cannot have an economy that is based on consumption.

  • bro43

    There’s alot of economic inanity being spewed here. Please folks go to and educate yourselves on a reality based economic theory. Protectionism does not work, free trade does. Minimum wages do not work, voluntary association does. End the FED and end our governments ability to finance deficit spending. There should be no handouts, on Wall St or Main St. If you’re underfunded and cannot meet your financial responsibilities, you go bankrupt, “too big too fail” is a scare tactic. Although the American people are ridiculously indebted, the bulk of the economic problems are directly related to government intervention into the market and the FEDERAL RESERVE BANK system.

  • There’s no use bickering over who did what… or how we as a country should react. It’s far too late.

    We are well past the tipping point.
    Either the Feds will bail out the states – and trigger a wave of inflation not seen since the 1970s. Or they’ll just sit on their hands and allow them to go bankrupt. Either way, one of the most popular “safe income” investments known to man is about to go “kaput.” I talk more about it at my blog: The Great State Meltdown.

  • Don

    @Patricia – you are absolutely correct. The New Slavemasters always say that the regular people will benefit from free trade. In the vast majority of cases, only the wealthy benefit from free trade.

  • Thanks for leading with Detroit aka Ground Zero of the Economic Collapse of America.

  • Jeff

    Here’s an interesting thought about oil…’s rumored that the US has many ‘underground storage facilities’ located throughout the southern states……why?? It apparently started during the cold war and has continued ever since – because the US wants to be able to ‘use up’ the Middle East’s oil supply – and when that’s all gone, the rest of the world will need to buy crude oil from us….. In theory, this makes sense, but really now – how long is THAT going to take to use up all the oil in the Middle East?? 1 year?? 10,000 years?? How are we to know when??

    I think one way of ‘kickstarting’ this economy is tap the resources we already have…..we don’t need to buy crude oil from the Middle East to provide energy for the masses…..use what we have and make gasoline and all it’s derivatives affordable for the masses.

    Another way is to quit hiding alternative fuel ideas……I remember sometime ago a couple of UofW students created an electric car that recharged itself while you were driving – it was shown on the evening news once and POOF! it disappeared…..never to be heard of again…….why? The ‘Big 3’ didn’t want to lose out on selling gas guzzling vehicles.

    There is so much corruptness in our country today – and that truly saddens me. I’m proud to be an American and always will be – even though MY forefathers got the short end of the deal when the first settlers landed at Plymouth – I don’t moan and complain about it. And unfortunately, the corruptness will only continue in our government until the day comes that we actually toss out everyone from the House, Senate, and replace the ‘puppet’ with some new blood that will actually fight for what is right and not base it on money.

  • Keith


    There may be 3 Saudi Arabias under the polar icecap, but most of it is inaccessable due to the seasonal ice flows that would rip any drilling rig away from it’s well. Even assuming the technology can be developed to recover this oil, the investment to benefit ratio has to be good enough to justify the effort. Not to mention how much worse any blowout would be if seasonal iceflows prevented response ships from reaching the area.

    Even if you believe in the abiotic theory of oil (as I do), you’d still have to lower consumption to the flow rate of new oil from the bowels of the earth into existing fields. Much as a depleted reservoir of water would have to be allowed to refill from a river or creek.

    So it’s still a problem of diminishing returns. Which is all that peak oil is about.


    Higher wages in the US are not a problem as long as we have higher productivity as well. But fact is, that productivity is falling due to the educational mismanagement that’s been going on for 30+ years now.

    As a former college teacher, I’ve seen the results of that mismanagement first hand. In the last incoming class that I taught, 75% of the students didn’t know how to use a ruler. Twenty-five percent had NEVER EVEN SEEN a ruler before. If you’re no better educated or productive than a Chinese/Indian peasant, why should you be paid more than one?

    There are good, high-paying 3D graphics jobs in my city right now that are going unfilled because out of every 100 college gradutates in local 3D programs, only 1-2 are even qualified for starting positions.

    This isn’t a problem that can be solved in a year or even ten.