News / Economic Divide

US economy broken

Friday, 11 August 2017 9:44 AM [ Last Update: Friday, 11 August 2017 9:45 AM ]

Failed US States

Ill as Illinois

The worst financial nightmare in Illinois history. The 5th-most populous state is racing against the clock to pass a budget before being branded as junk.It's the third year in a row that the state hasn't had a full budget as lawmakers failed to pass a spending plan before the new fiscal year in October. Now Illinois has $15 billion in unpaid bills. It also has a net deficit of at least $130 billion, mostly in money owed to public employees for retirement. Moody's, the ratings agency, estimates the total at $251 billion.

So what has caused this unprecedented crisis? Many blame globalization, what the US itself had ironically initiated. Yet some experts believe the crisis has more than one cause, with political issues at the core. This crippling disagreement between the country's two main parties was bitterly acknowledged by Obama last year.

It appears that many years of waste, corruption, and entitlements have sent the state of Illinois on a downward spiral into total financial failure. And as Representative Peter Roskam put it, “Illinois is the fiscal model of what not to do".

Illinois not alone

Illinois is not the only state facing financial problems.Maryland, Kentucky, Massachusetts, and New Jersey are other four bottom states, according to the Mercatus Center at George Mason University. Their problems are on the one hand a result of the low amounts of cash they have. There other problem: their large debt obligations.

This year, at least 25 states are facing or have addressed revenue shortfalls. According to the National Association of State Budget Officers, more states expect mid-year revenue shortfalls than in any year since 2010. But why is it so, despite the so-called economic recovery in the US?

Wealthy but bankrupt

As more and more states are facing economic problems, there are fears that what happened to the city of Detroit, once a manufacturing hub in the US, might happen to other cities and states.

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