The US fiscal crisis just gets worse and worse. The CBPP's latest estimates are that the states will need $180 billion in new funding or additional cuts for fiscal 2010 (the 12 months running from this summer to summer of 2011).
However, this assumes the 2009 Federal stimulus as a baseline -- about $140 billion went to the states. This Federal aid is due to expire in December 2010. If that disappears, then all bets are off.
Why? Because there's nothing, absolutely nothing, driving the US recovery except Federal money. Fresh lending? Nonexistent. Debts? Still unpayable at 376% of GDP, still on the books of the banksters. Export markets? China's got those covered.
Simply, there is no new source of aggregate demand to replace the busted bubble or the massive loss of consumers' home equity and financial assets.
And there's nothing left to cut, because the states have already been cut to the bone. They need the $240 billion simply to stay on life-support. Any more cuts will transform this place into a slightly more expensive version of 1990s Russia -- a decrepit shambles of a former world power, blighted by a decaying infrastructure, mass misery, and the rule of thieving oligarchs bent on looting the country.
It doesn't have to be this way.
Just lopping off a quarter of our outrageously unnecessary trillion dollar war machine would free up enough money to bail out the states. But drone-bombing Afghani/Iraqi/Yemeni/pick-the-Central-Asian-country-of-your-choice villagers and subsidizing Goldman Sachs' bonus pool is just so much more important than having functioning schools, hospitals, or food for American kids, don't you agree?
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