US Federal deficit issues to impact US states as well

It is unimaginable how far this debt ceiling issue has gone. The deadline of August 2, 2011 is just a week away and still nothing. It is just like Europeans really. American econs criticised Europe for reacting late on Greece in 2010 and now are facing the same music.

Moody and S&P had raisd concerns that US could be downgraded if these debt ceiling/deficit issues continue. Just to further the problems, Moody’s has released this list of 5 states which are going to be adverself effected by this issue of US Federal deficit and debt.

The five states are:

  • Maryland,
  • New Mexico,
  • South Carolina,
  • Tennessee, and
  • the Commonwealth of Virginia.

What is the basis? These states are more closely linked with federal budget:

“While all states are indirectly linked to the U.S. government to some degree, we have identified the five Aaa-rated states that are most vulnerable to changes in the U.S. government rating,” said Nicholas Samuels, a Vice President in Moody’s State Ratings Team. These five states have above average exposure to several sovereign risk factors that Moody’s outlined in a July 13 special comment, “Implications of a U.S. Rating Action for Aaa-Rated U.S. Municipal Credits.” The risk factors are macroeconomic sensitivity, capital markets reliance, and dependence on federal revenues, offset by financial resources available to counteract those risks.

 Moody’s will perform additional analysis of the sovereign risk factors in the five affected states on a case-by-case basis, and examine additional mitigants to determine if their financial position and governance are strong enough to negate the impact of a potential U.S. downgrade. In the event the U.S. government’s Aaa rating is downgraded due to a default following a failure to raise the debt ceiling, Moody’s will not automatically downgrade these five state ratings but will proceed with case-by-case reviews.

Barring South Carolina, most states have above average Federal employees as % of laborforce. In case there are problems, there will be problems with their salaries etc.

NYT has a nice article where Virgina’s Governor complains that Federal govt is responsible for this:

“For nearly 75 years we have worked hard to earn the highest credit ratings from all three rating agencies,” Gov. Bob McDonnell of Virginia, a Republican, wrote this week to President Obama and members of Congress, urging them to raise the debt limit. “Now your failure to get the job done is hurting the businesses and citizens of our commonwealth.”

 Then Americans are muffled (as other are as well) why all this is being allowed:

Many state and local officials are still hoping that a deal will be reached, averting a situation in which federal payments to the states could start to be cut in August. But a number of states have begun preparing for the worst.

Ric Brown, Virginia’s secretary of finance, said that it was a difficult task, made much more difficult by the lack of concrete information coming from Washington. “What you’ve got at the federal level, let’s face it, is outright chaos,” he said in an interview. “It’s hard to make sense out of that.”

Maryland, the uncertainty over what will happen in Washington is complicating the state’s plans to sell bonds for school construction and to refinance some existing debt. The sale was pushed back to Monday after the state was warned that the debt ceiling debate could harm its credit rating.

Mayors are also watching the debate in Washington nervously. Several said in interviews that they were not worried in the short term. But some, including Mayor Ralph Becker of Salt Lake City, said they were worried about the general economic harm that a federal default would cause. “We all fear and see the specter, the dark clouds that would hide our beautiful blue skies and mountains,” he said. “It’s hanging over us.”

It is even hanging over us.

Americans first did not imagine Minesota state would shutdown, it did. The shutdown ended in 20 days, marking one of the longest government shutdowns (more details of the budget plan here).

This has obviously led to worries over US Federal govt as well. What was not even a probability has become a small probability. Policymakers are looking at possible scenarios if the ceiling is not revised upwards. Unbelievable events but all happening real time..

One Response to “US Federal deficit issues to impact US states as well”

  1. Rider I Says:

    How the US has historically used mineral rushes to get it out of Deficits and stop foreign economic take over.

    In the US’s historical past the Druids have used and impressed upon the US leadership to use mineral resources to stop economic warfare, along with military take over. Some simple examples of the economic warfare strategy of mineral rushes to spread the US out and create US wealth to get us out of a Deficit situation are Fort Sumter. Where a long time Druid camp had made noticeable their secret chambers ability to gain wealth from the area via mass pys do name cognition. Alaska was before or after Fort Sumter but was done by the US government the same way to help US citizens create tons and spread out the wealth in the US. Along with get us out of a deficit during that time. The reason for both of these was because Russia at the time was planning to invade the Area’s and take them from US. In which we had to do something to stop them from doing that. Along with that during the Cold War the US used production mineral rushes to keep our production and manufacturing here in the US. Which allowed companies to have down the road access to minerals which was much cheaper than the Soviet Empire almost monopoly on the worlds resources.

    Today we see a similar problem. The Communist Chinese MSS have used their militarized economy. Where they do such military things as fund terrorist and genocidal dictators to get cheap resources to keep their economy at the top of the surplus and everyone else who will not do such military acts as funding the atrocities do not get to compete internationally with very noncompetitive prices. We have seen many companies complain in the US how they can;’t get access to resources in the US for a competitive overhead. Nor can they get them from US private enterprises. So they just off shore to Communist China. Which I have cited on this website many articles that state that is what the SASAC wished to do. Which was create a resource monopoly bind so everyone had to just offshore to their country. Leaving the world without jobs and the Communist Chinese with the monopoly on rare earth resources.

    Along those lines, we have seen the militarized economy of the Communist Chinese use their MSS agents at a mass quantity to constantly use lobbying and IP espionage activities. So the US believes it is a good idea to allow them to take our resource national security issues from us. Even though they have been known to cheat, kill and bribe to maintain a monopoly for theirs. Therefore, we can see how the Russian’s who I do not have access to their activities at that time can be analogized to the Communist Chinese. As they both had a similar idea of using the mass to enslave to a single party then use very noncompetitive non individual liberty prices to take the US’s business from them so as to weaken our economy and force closure of bases, along with intelligence agencies and create a necessary need to allow the Communist Single Fascist party to come in and control the US’s economy via their resource monopoly.

    As such, as we have done historically the way out of the deficit and the way to stay competitive in the world market is to start a resource rush. However, unlike gold which is not as expensive as some rare earth resources. We need to create a resource supply that is not necessarily gold but a gold mine. Like we did during Fort Sumter, Alaska and various areas during the cold war. This then could be done via a simple strategy. The strategy could be to allow three mine permits per state. Which could be for rare earth resources. These mines could be smaller mines around a quarter mile each and producing around 66 million a mine. Therefore, we would see a major influx of US jobs and economy as the US companies ownership of mines should that we have minerals for companies to create good paying jobs. Thus then allowing for a proper root style economic rebuild naturally through economics instead of forced through a stimulus. That will just fall through as our high number of business keep defecting each year to Communist China’s resource monopoly.

    Rider I

    Competition builds more markets while monopolization destroy’s markets. Rider I 2011


    I think the Constant violation of the Communist Party of China deserves sanctions for arming Qaddafi when fighting against UN troops as:
    US seeks more from China on Libya arms

    I believe there is a Communist Secretary in every business and entity in Communist China. “The United States indicated Wednesday it is not satisfied with China’s explanation of a meeting in July between Chinese weapons makers and representatives of Libyan dictator Moammar Gadhafi seeking to buy arms in violation of U.N. sanctions.” Let’s see the Communist Party violates UN treaties with regards to Iran, North Korea, Al Queada, Hamas, then specifically sell’s weapons via a Party secretary entity of the Communist Party which is in every SOE watching over them and speaking to the party on first hand of business. Along with allowing nuclear material in areas of how terrorism like Pakistan and Iran. I think we should sanction them. Along with that they violate UN treaties with regards to funding and protecting genocidal dictators. The worst part is they just do it to get cheap resource contracts that nobody else can get. Along with that they sent a Communist disciplinary member to meet with Poland instead of a Diplomat, which the German Socialist Party did and So did the Soviet Empire.


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