The United States is an enormous, diverse nation, and there's perhaps no better evidence of that than the U.S.'s current economic cycle.

The finances of many states have deteriorated to such a degree that they appear to be in recession, even though the nation as a whole may not be, a survey of 50 state fiscal directors concluded.

The states: budget deficits abound

The National Conference of State Legislatures' survey says that "arguing whether the national economy is in recession is almost beside the point" because the fiscal condition of some states has declined so much that they appear to be in a recession.

In all, 23 states, including hard-hit housing slump states Florida, California, and Nevada, expect to report budget deficits in the next fiscal year, fiscal 2009, with the aggregate revenue shortfall reaching $26 billion. Further, more than two-thirds of the states said they are concerned or pessimistic regarding their F2009 revenue outlook.

Historically, most states experience a decline in revenue as the U.S. economy contracts, as the economic slowdown results in lower retail sales, which lowers sales tax revenue -- a major source of revenue for many states. Job layoffs also decrease state income tax revenue. Further, state social service costs typically increase, as unemployment claims increase and applications for income/food/energy assistance rise.

Florida, California hard hit

Economist Peter Dawson told BloggingStocks Friday the NCSL data is in-line with the profile of this cycle's economic slowdown. "From the research we can see that the states under most stress are those that rank very high regarding mortgage default and housing foreclosure lists, with Florida and California being the most obvious examples," Dawson said. "These states are going to be under fiscal stress for a considerable period of time due to the size of their housing correction."

Moreover, Dawson said because of California's and Florida's size, "it will be very hard for the nation to grow at capacity until these states have started to grow." Hence, a return to robust economic conditions nationally, "could be a year to 18 months off, assuming growth resumes nationally by late 2008," he said.

I grew up in Miami. Yes, I was born and raised there and am under 40-years-old. One of the few. I love the city. I love the people. I love the Latin flavor of the town, its food and nightlife. I also enjoyed owning and selling a home there in the early 2000s.

Things are different now. Homeowners have been hit with the downside of a strong housing market and have seen prices snapback much greater than some other parts of the country. After seeing a pullback in net worth, Floridians have been tightening their belts this year in some creative and not-so-creative ways.

Today's Bloomberg has an article about how the changes in the Florida housing market are being dealt with by Dolphins fans. Floridians, and Miami residents in particular, are dining out less, seeing fewer movies, foregoing on travel plans, and in some extreme cases, drinking less expensive beer.

According to Bloomberg, Miami real estate prices fell 19.3% year-over-year in January, tied with Las Vegas for the largest drop among 20 metro areas. Some homeowners feeling the pinch are no longer drinking Guinness and Royal Extra beers, but instead buy something domestic and cheaper.

This change in net worth is real and is affecting consumption decisions. While it hurts everyone involved, the process of (trying!) to realign the split between assets and debts is ultimately a healthy one for our country and something, I believe, will help strengthen the U.S. dollar and regain respect for American ingenuity, strength and democratic values around the globe.

Zack Miller is the managing editor of IsraelNewsletter.com ,a former equity analyst for a leading multinational hedge fund, and a proud former Floridian.

With the U.S. economic landscape becoming more uncertain, it's prudent to add a defensive stock or two to your portfolio, and utility FPL Group, Inc. (NYSE: FPL) is worth an evaluation.

FPL Group boasts the fundamentals analysts like to see in a utility company: steady cash flow, above-par customer growth, adequate generating capacity, and favorable power market conditions. Further, analysts also like the cooperative regulatory environment in Florida, FPL's primary state, and the company's 2.3% dividend. With operations in 24 states, FPL has diversified operationally, but the focal point, for investors, is its Florida market: 4.4 million customers, and ample land for commercial and residential growth. The Reuters FY 2007/FY 2008 EPS consensus estimates for FPL are $3.46 to $3.88.

The risks? Analysts are keeping an eye on Florida's population growth and household formation for signs of any changes in long-term trends.

Stock Analysis: FPL Group is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from FPL's shares. Sell/Stop Loss if you were to purchase shares in this company: $48.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Population growth has slowed in the prior housing boom states of Arizona, Florida and Nevada, The Wall Street Journal reported Thursday [subscription required], citing U.S. Census Bureau data for the 12 months ended July 1, 2007.

Further, the U.S. Census Bureau's report continued to confirm a decades-long trend of U.S. population shift from the Northeast and Midwest to the West and South.

Florida, arguably the state that's been hardest hit by the housing slump, experienced the largest decline in population growth, The Journal reported. Florida's population increased by 35,301, or 1%, during the 12-month period, compared to an increase of 134,798 during the previous 12-month period.

Marketwatch published a story today about the State of Florida halting withdrawal from a $15 billion local government fund. Concerns surfaced over the past few weeks over losses in the fund related to exposure to subprime mortgages.

Bloomberg is reporting that condominium developers have continued building very quickly, despite the Florida real estate market's sell-off in the past year. This ignorance to the needs of the market forced the market into recession in October, becausethe Floridian economy has become very dependent on the strong housing market from 2002-2005. One expert in the article even went as far as to say that Florida is the "epicenter for all the problems that exist in the housing industry."

Bizarrely, 20,000 new condo units are being developed despite the recent sell-off in the market and lack of demand. I guess the developers missed Economics 101 -- when there is no demand, there's no reason to flood the market with supply. These ridiculous actions are only exaggerating the area's already-significant supply glut.

These events could force any companies with exposure to the Florida condo market to further write-down its book value. The ramifications of this entire debacle are becoming more and more clear, and once investors realize that a recession is developing in Florida, they will quickly become very leery to invest in companies based in Florida.

Even people who don't plan to either buy or sell a home are going to be hurt by the decline in the real estate market.

As the New York Times notes, growth in state tax revenues has slowed and in some cases dropped below projections this year. That's bad news in areas where property tax reform is a big political issue such as my homestate of New Jersey, which has the highest property taxes in the country.

New Jersey Gov. Jon Corzine, a former Goldman Sachs Group (NYSE: GS) chairman, has said that the state could face a $2.5 billion deficit by 2008. Among the ideas being considered to close the gap is a sale or lease of the Turnpike and the Lottery.

We New Jerseyeans are getting some property tax relief. A recently passed law will cut proprty taxes by 20 percent and cap tax increases at 4 percent. Still, the Associated Press points out that New Jersey taxes average $6,390, twice the national average.

I'm not expecting more relief from Trenton any time soon.

In fact, housing sales fell in February to their lowest rate in seven years, so people in other parts of the country shouldn't expect big tax cuts either.

States such as Arizona, Nevada, Florida and California, which especially benefited from the real estate boom, are expected to be hit especially hard by the slowdown in the real estate market, the Times said.

Remember, any short fall in the money that the states collect is going to have to come somewhere. Think about that when you file your taxes this year.

There is no housing bubble. That is a stupid term promoted by journalists and analysts fighting the last war like an old general. The stock market "bubble" burst sending the NASDAQ plummeting from 5000 to 1200. Anybody foresee housing for sale at an 80% discount let me know and I might be able to help you with that problem. It's not going to happen!

If and when certain markets collapse 20% to 30%, it should not be deemed a bubble. It will happen in some markets and has happened in over-built condo markets. But these units will be absorbed in the next few years. The greatest pain will be felt by the biggest speculators and the most overzealous people participating in unorthodox loan programs.

How many stocks move up and down that much in a year? Plenty! Think Google, or Merck, or Black and Decker. Even I, who have been trying to add some sanity to GOOG's valuation through numerous posts, never said GOOG was a bubble stock.

There is a need for more housing, period! As a current investor in four different housing projects -- three in Southern California and one in Phoenix --I can testify that all will sell at considerable profits. We have seen no let-up in demand. Each one is different: One is an infill project of 150 single family homes. Another is a new development of 200 homes in a growing community, a third is a mixed use project of 60 condominiums over retail stores and the fourth is a unique town home project surrounding a parking structure that is commercial adjacent.

The only problem we see is getting entitlements and building permits. This process has become excruciatingly painful in many parts of the country and just about everywhere in California. My home town of Santa Monica being one of the worst offenders, used to be referred to as "The People's Republic of Santa Monica." That was too long a nickname so some just started calling it "Soviet Monica." I love this community but there are times I think we are all over-indulgent meddlers.