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Thursday, June 24, 2010

The canary in the mine shaft!

This is something you should pay very careful attention to because it is a sign of a huge, mostly out of sight problem. Let's start with an article in the Los Angeles Times on Monday, 6/21/10.

"It's a good thing that the Burrises came when they did. A week later, the McCloud library closed for good, a casualty of the Siskiyou County's $3.7 million deficit. The rosiest scenario for the struggling library system here is an 83% budget cut, which would force the immediate closure of seven of the 11 1/2 libraries, but leave enough money to operate the rest --through December 2010." That is the canary.

Here is the mine shaft! Every state except New Hampshire is required by law to have a balanced budget every year. But almost every state has a current budget deficit. California, New York, Illinois and Illinois have huge deficits to fill. The first thing the states do to balance their budgets is do reduce payroll expenses. The second thing they do is halt payments to local counties and cities and pass the deficit down to the local level.

States, counties and cities cannot declare bankruptcy, nor can they issue their own currencies. They have just three options, fire people, raise taxes and borrow money from the bond market. If the State of New York had to shut down, 200,000 people would instantly become jobless. California's credit rating is so bad it is one step above Junk status so borrowing costs are huge.

The National government has a huge deficit and high unemployment, but local government entities have huge problems of their own, and no way to deal with them. So if you are a reader, you should start looking for alternatives to the local library. If you have kids in school, you should start looking into home schooling. But if you are a habitual speeder on the highway, this will be good news because there will be fewer highway patrolmen to penalize your behavior.

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