David Goldman on 10 February notes what we are expecting, state government fiscal collapse leading to guess what?
Europe is a zombie economy. Its demographics portend bankruptcy for the public sector, but not anytime soon. It simply isn’t that interesting.
As long as governments shift the burden of volatility from the private financial sector to state budgets, state budgets will become the source of volatility. Far more worrying for the US economy, I said on the Feb. 5 Kudlow broadcast, is the $200 billion deficit of state governments. There will be a dozen California-style crises this year, exacerbated by public-sector employees’ unions who form the core of the Democratic party constituency. Obama will try to bail them out; the Republicans will resist; the unions will take states to the brink of bankruptcy and over it; and markets will repeat the mini-panic of the past few days.
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