Recent Stories with tag debt

Governor Gregoire

CNBC asked Governor Gregoire to respond to analyst Meredith Whitney's comparison of states to banks, pre-financial crisis. Here's what Whitney said in late September:

The similarities between the states and the banks are extreme to the extent that states have been spending dramatically and are leveraged dramatically. Municipal debt has doubled since 2000, spending has grown way faster than revenues.

Whitney said what reminded her most strongly of the banks' situation was the absence of "reliable data on state spending and debt."

Governor Gregoire chose to play off the phrasing, saying that, "We're in crisis mode. We the states are not in pre-crisis at all." That's no doubt true, but it evades Whitney's point that state spending and debt now represent a separate economic danger from the banks' credit meltdown, and that transparency is hard to come by. In fairness, Washington's credit rating is quite good, but with the caveats that a) if credit ratings were infallible, we wouldn't be in the crisis we're in, and b) things can change very quickly.

Gregoire noted that Washington has trade to rely on; unusually, we don't have a trade deficit with China. And state economists see mainly good news in that relationship for the future. Yet the state has to figure out how to avoid a $3 billion deficit over the next two years, and cuts have approached the bone. CNBC says:

In August, Gregoire announced plans for four- to- seven percent budget cuts across the board, as well as a phase-in of $51 million in cuts to state welfare aid. The cuts will disqualify nearly 2,500 families from child-care subsidies in October, and an additional 5,500 families from cash welfare benefits in February.... (more)