People tend to follow news piecemeal--the story about spending in the state capital, the story from City Hall and the County Courthouse, the federal government, Greece (riotously right now), Portugal, Spain, Italy, the U.K. (get set for the post-election wake-up call); not to mention confirmed basket cases like Venezuela and Argentina.
But in various ways, all are part of a trend. All are facing a giant hangover from years of deficit spending, and worse, unsupportable spending commitments for the future. Much of it has to do with public pensions.
Andrew Biggs covers some of the problem in a very useful American Enterprise Institute papers, "The Market Value of Public-Sector Pension Deficits." it's only part of the picture, but a key one.
Says Bigg, an AEI resident scholar, "State pension funds ar underfunded by over $3 trillion; this is more than six times the $438 billion in underfunding the plans themselves report."
The cruel truth is that big government unions here and abroad exert insider influence over legislatures at every level of this country and in Washington, DC. Their members' salaries now exceed those of comparable workers in the private sector--the folks whose taxes pay the salaries of the public "servants". (Many public workers are wonderful, efficient, etc. So what? That's not the issue, though the unions would like to make it the issue in order to obscure the frightful fiscal realities.) When publicly elected executives and legislators have balked at raising salaries still further, unions twist their arms to provide better indirect benefits--such the as famous "cadillac health care" plans, longer vacations than the private sector workers enjoy, and, especially, cushy pensions that exceed those of the private sector.
Again, it would be great if the economies of the various states could manage all these commitments. I'm sure each pensioner, for example, feels he needs every cent of his payments and resents the implications that he is luxuriating. That is why the public workers are in the streets of Athens. They see the trees of their own lives and cannot see the forest of the common weal.
Pensions have to be brought under control. If they simply were brought back to where they were three or four years ago, many broke states would become solvent.
Raising taxes is not the answer. All that does is delay the day of reckoning. So do bailouts, such as President Obama's extraordinary payoff to the public unions last year.
There is not enough money. The private sector's engine of prosperity has been over-taxed (pun intended) and will break down if not repaired soon. Make it harder for aspiring entrepreneurs to make money and demonize profits--as Obama does--and you will find yourself with further reductions in revenue, deeper debts, etc.
The main difference between the US and Greece is that their profligacy has several years' head start on us.
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