Why Are States and Cities Going Out of Business?

In the video below, David Wessel argues forcefully that we are seeing four big issues.

  1. State and local revenue i.e. their tax base has been decimated by the downturn at the same time as many turn to government to keep their heads above water.
  2. State and local governments have made many promises that they cannot sustain in a normal revenue environment without trying to raise taxes.
  3. Healthcare costs are growing faster than the overall economy, making Medicaid an ever-increasing share of state budgets.
  4. Public pensions cannot be supported by the present revenue and tax base in many states and municipalities.

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