Sunday, March 20, 2016

WHERE DID ALL THE MONEY GO?

 Out of the fifty States, fifteen are in relatively dire financial condition. Their expenditures far outweigh their revenues. There is one State and one Territory very close to declaring bankruptcy and defaulting on their bonds and other commitments. Apparently, the banks and financial institutions are being very kind to Louisiana and Puerto Rico. This will not last long, as both are in the process of liquidating assets to pay for basic commitments such as salaries and pension contributions. Talk about too big to fail! How much will the U.S. Treasury be on the hook for if a State, or Territory, actually goes bankrupt?
States and Territories in trouble: Alabama, Arkansas, Florida, Illinois, Kansas, Louisiana, Maine, Michigan, Mississippi, New Jersey, North Carolina, Oklahoma, Texas, Wisconsin, Puerto Rico.

“In trouble” indicates that their expenditures far outweigh their revenues and there is no apparent relief in sight. In some cases, they are selling off State owned land, car and truck fleets, and State owned buildings; anything they can do without right now. The State of Louisiana and Bobby Jindal put forth a 2015/16 budget that showed a revenue stream of $9 Billion and a balancing expenditure rate of $9 Billion. As it turns out, the estimate on revenue was manipulated, and has fallen woefully short of that $9 Billion mark. Meanwhile, the expenditures, which are more accurately noted, have remained at the $9 Billion level. Louisiana’s new Democratic Governor has his work cut out for him. My guess is that something will happen at the Federal level to remediate the situation in Louisiana, and it will be done very, very quietly in the dead of night on a weekend.
Can you say, “BAILOUT”?
Based on the States and Territory listed above, it doesn’t take much a mathematician to realize this Country is flirting with over trillions of dollars in “bail-out” costs in tax-payer’s money. The defaults will range from current annual budgetary numbers to their long-term debt obligations from direct borrowing and Bonds. Unfortunately, our National economy is not strong enough to withstand that kind of hit. We are still recovering from the disaster of 2008. This situation is here now, and, more than ever, the United States needs a President, Congress, and fifty Governors who know how to balance a budget and turn deficits into surpluses. Oh, did I mention, one of them is running for President this year.
Note: out of one Territory and fourteen States, a Republican governs all but two.