It's No ******* Wonder that State Governments Can't Pay Their Bills

One Big Hole

The impending state budget crisis is something that has been covered in depth here. Just to remind everyone just how bad it's going to get, a picture that says a couple hundred billion dollars.

CIT goes into a pre-packaged bankruptcy.

The WSJ has a story up (HT to Calculated Risk) about the impending bankruptcy at CIT.

The company plans to file for bankruptcy in New York as soon as Sunday night or early Monday, said people familiar with the matter. CIT is poised to enter bankruptcy with enough creditor support to approve its reorganization plan and shorten its stay in Chapter 11 ...

... CIT asked bondholders to vote on a prepackaged bankruptcy plan, which would give most bondholders new debt it values at 70 cents on the dollar, and all the equity in a restructured company.

On the up side, it great that this thing is going into a prepackaged bankruptcy. We've seen this at GM and Chrysler. It allows them to emerge stronger. So in the long term the economy will be better off for this, but.....

As Keynes said, in the long term we are all dead.

Employment Shrinkage: Plus ca Change?

This last spring, I posted on how I thought that there were basically two recessions going on. That is that there were two sectors that made up a disproportionate share of the employment losses. From that post:

The Amazing Shrinking Labor Force

About a week ago, Econompic posted some nice charts about recent shrinkage in the labor force. As they noted, without labor force shrinkage, the unemployment situation would look a lot more dire, rising above 10% for the nation as a whole.

In the period between March and August of this year, 837,200 persons left the labor force. This has had the ironic effect of driving down the unemployment rate in many states. Basically, unemployment is still up, but not up as much as it would be if people hadn't exited the labor force. The "economic recovery" at hand is thus largely a function of people who have lost all hope and stopped even looking for work.

Welcome to "Economic Purgatory"

I really admire Paul Krugman. He's honest to a fault, and during his appearance on ABC's This Week that came out again. As he put it:

NELP: 1.5 Million to Exhaust Unemployment by December.

A little noticed report issued by the National Employment Law Project last Friday dropped something of a bombshell. By the end of this year 1.5 million Americans currently receiving unemployment benefits will have exhausted them.

A sobering analysis released today by the National Employment Law Project estimates that 540,000 Americans will exhaust their unemployment insurance benefits by the end of September, and a whopping 1.5 million will run out of coverage by the end of the year. NELP’s state-by-state analysis comes on the same day as the states announce their latest unemployment figures, and together they demonstrate the pressing need for more extensions.

We Are So Screwed

Earlier this week, Bondad, Daily Kos's resident economic analyst suggested that there is a Black Swan myth. That's to say that the economy is starting to get better, and that there aren't any potentially catastrophic combinations of economic events on the horizon.

The Coming $50 Billion State Unemployment Bill

$10.9 Billion.

That's the amount of money currently lent by Federal Department of Labor (DOL) to a group of 15 states whose unemployment insurance (UI) trust funds have run dry. And it's about to get a whole hell of a lot worse. By the end of the year that number will likely have have grown to 35 states. Total DOL emergency loans to states at that time? Nearly $50 billion dollars. The situation will be far worse for some states than others. The states appearing in red on the map below are those that will need DOL loans to keep unemployment benefits rolling.

13 States Now Have 10% Unemployment

A picture is worth a thousands words, and this map shows the loss of a couple of hundreds of thousands of jobs. This map shows the current unemployment in each of the 50 states, and in 13 of them, that rate is above 10%.

At least in part, this map shows the immediate impact of the shutdown of much of the US auto industry. With most GM and Chrysler plants idled beginning in early may, a large number of parts suppliers have followed suit. As a consequence, the industrial region around the Great Lakes has seen unemployment jump to heights not seen since the late 1970s.

California's Screwed, Arizona and Rhode Island are too

At this point, many people here are aware that a number of states have deep budget deficits that threaten to bring shutdowns as early as August. I think that throwing some numbers in really shows the depth of the problem as well.

This map shows the gap between expected 2009 state revenues and the budget for the year in percentage terms. California has a real problem, as do several other states.

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