There is increasing evidence that states like California and Michigan, which are running huge budget deficits, will need federal aid to keep their essential services operating. They could plummet an already battered federal budget billions of dollars further into a deficit.
The need for state bailout funds seems to be growing and growing quickly. According to MSNBC, "In Ohio, which has shed 100,000 jobs in the past year, Gov. Ted Strickland (D) and his budget team spend a lot of time delivering bad news to constituents and plotting ways to wring money from the federal government." The state's two-year budget deficit could rise to well over $7 billion.
In places like Ohio and Michigan, matters are only going to get worse. Big industrial states are extremely likely to lose more jobs and businesses as sectors from automotive to retailing may see some companies disappear completely.
The issue that becomes more troubling every day is whether there is a finite limit to what the federal government can spend to save the national economy. Of course there is, but no one knows that number, which means no one can predict which industries and municipalities will get capital.
With so many beggars, the new Congress and administration are going to run low on hand-outs.
Douglas A. McIntyre is an editor at 247wallst.com.
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