Federal Government Debt Limit -versus- Municipal Balanced Budget Dealines

And Federal Government Will Also Go to the Pawnbroker

August 2011

State and Local (Municipal) Governments have for some time struggled to produce balanced budgets within a constitutional deadline. At the Federal level, where there is no balanced budget requirement, the comparable event will be when the debt limit needs to be raised.

When States have budget problems they transfer spending (programs) to, withhold funding fron or outright take revenue from Counties, Cities and lesser government entities. Expect the Federal Government to do the same to States, and Counties, Cities, and so on down the Government line. It could be said the Federal Government already does this to States and Locals but it will become much more acute. Budget problems at the Municipal level (States, Counties, Cities and so on), and the problems inherent to the Muni Markets, are serious just on their own. The problems at the sovereign Federal Government will just make a bad situation worse at the sub-sovereign Municipal level.

It is also important to note that States and Locals are increasingly chosing to sell public assets to raise money. They can call them Public Private Partnerships... P3's. In a previous article I referred to this as "State and Locals Go To the Pawnbroker". The Federal Government will begin doing the same... selling Federal Government assets.