Political Physics: Mortgaged To The Hilt With No End In Sight

Today President Obama is scheduled to sign into law the American Economic Recovery and Reinvestment Act. Obama hopes that the $787 billion act would create or save as many as 3.5 million jobs in the next two years. As many as 3.6 million people have lost jobs since the recession began in December 2007. More than half of them have been rendered unemployed in the last three months, which economic analysts say is unprecedented in decades.

Some Americans are breathing a sigh of relief, I feel as if I should be too but…

I was following the coverage of the California budget crisis on NPR all last week.  California is facing a $42 billion budget deficit and that has me worried for my friends who live in the Golden State.  But what worries me more is that California is not alone.

According to the Public Policy Institute of California, in 2006 (pre-economic recession that we are currently facing) there were 10 states in the United States where the debt exceeded $500 per person.  I know you’re thinking $500 bucks is not a lot, right?  Well let’s take a look.  The ten states are:

In 2006, $500 per person is a state as large as Texas meant that Texas was $11 billion in debt.  It seems a lot more significant.  Especially when you look at the general funds for most states.  The state’s general funds exclude special funds earmarked for particular purposes, such as highway trust funds and federal funds; they support most on-going broad-based state services and are available for appropriation to support any governmental activity.  Currently, several state’s annual expenditures either exceed or nearly exceed their general funds.  In California, the annual expenditures are $101 billion and the general fund is $102 billion.  That doesn’t leave much wiggle room.

But states are not alone.  In September, BusinessWeek reported that the financial crisis was rocking Wall Street and Main Street.  “It’s not just on Wall Street where dubious financial decisions are creating casualties. Municipalities, many of which made enormous financial promises when the economy was strong, are now confronting heavy fiscal burdens,” wrote Brian Burnsed.  Trenton, the City where I live and work, a small city – 7.5 square miles and less than 80000 people – is facing a $28 million budget deficit this fiscal year.  According to BusinessWeek, “when the last major bank crisis hit public coffers in the late 1980s, 33 municipalities declared bankruptcy” and that the current troubles are putting pressure on municipalities across the country who are forced to cover bond payments, pension payments, employee health insurance, etc.  And we all know that the total U.S. federal debt is about $10.76 trillion or about $37,703 per capita.

We are mortgaged to the hilt at almost every level of government – local, state and federal.  And I am just talking debt, not who owns our debt and the implications of that.

When I was in college I got into some trouble with credit cards and spent several years paying off debt.  Even today, after working very hard to get our fiscal house in order my husband and I are still struggling to pay off our sole credit card, which is our last remnant of unsecured debt.  But we recognized the issue, changed our lives accordingly and have been working to truly fix the problem ever since.

Can our country do the same?  Can we get our various fiscal houses in order?  Whether you are republican or democrat, for social programs or pro-tax cuts, we all need to be asking the question.  You can only live on borrowed time for so long.

So, although I am thankful that some people will receive some assistance as part of the new American Economic Recovery and Reinvestment Act, I am far from breathing a sigh of relief.

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flickr.com photo credit: Dan Simpson