In the video below, David Wessel argues forcefully that we are seeing four big issues.
- 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.
- State and local governments have made many promises that they cannot sustain in a normal revenue environment without trying to raise taxes.
- Healthcare costs are growing faster than the overall economy, making Medicaid an ever-increasing share of state budgets.
- Public pensions cannot be supported by the present revenue and tax base in many states and municipalities.