From the Chicago Tribune:
While Illinois continues its biggest borrowing spree in recent years, it is paying a steep premium for loans because of its failure to significantly address its financial crisis, observers say. In peddling another $900 million in Build America capital projects bonds on Wednesday, Illinois could face interest costs of about $9 million a year more than if the state were in better financial shape. The extra costs would total about $225 million over the life of the bonds. The annual hit may not seem like a huge sum compared with the state's $25 billion budget. But it's more than Gov. Pat Quinn's $8 million in cuts to the Department of Natural Resources, for example, or his $8 million in cuts for veterans programs.
The big oof came later though:
Illinois is the only U.S. state listed among 10 government entities most likely to default, coming as No. 8, right after Iraq, according to CMA DataVision. The rankings are based on the cost of insuring a state's debt against default.
The cuts are already starting. Can tax increases and deeper cuts really be far behind, or even avoided?
On the federal end, the "Bush tax cuts" (often erroneously qualified as only applying to "the rich") are soon to expire with no certainty on which cuts may get renewed and for how long:
Bush tax cuts up in the air
NEW YORK (CNNMoney.com) -- Odds are good that the middle-class will get to keep their tax cuts. The question now is for how long.
The 2001 and 2003 tax cuts expire in six months. President Obama had promised to make them permanent for the majority of Americans. But the reality of the federal budget's impending shortfalls is making that a hard promise to keep.
Indeed, some influential players in Washington have signaled that it's no longer a given that the tax cuts will be made permanent, at least not right away.
Budget and debt experts, however, have said repeatedly that the magnitude of changes needed to bring better balance to the U.S. fiscal situation will require changes both to the spending and tax sides of the ledger.
They acknowledge that an immediate increase in taxes could harm the economic recovery. They favor extending the cuts for a short period of time but not making them permanent. Any long-term extension would constrain lawmakers as they consider broader tax reform.
As worried as some seem about the state of our economy, there seems to be little acknowledgment (beyond the usual hypocritical partisan sniping) of how serious the debt issue may become. CNN recently had a quiz for its viewers on deficit related questions. It's available here. If you'd like to take it, skip the spoilers ahead for now:
Of the $13 trillion, $8.5 trillion represents the debt held by the public. By 2020, it is on track to more than double to $20.3 trillion. That assumes, among other things, that Congress extends the 2001 and 2003 tax cuts for the majority of Americans. - Source: Treasury, CBO
Over the next decade, the government is projected to add $9.76 trillion to its debt under President Obama's proposed budget, according to a CBO analysis. More than half of that amount -- an estimated $5.64 trillion -- will be due to the interest owed. - Source: CBO
Interest owed will account for 73% -- or $916 billion -- of the $1.25 trillion projected deficit for that year, according to the CBO analysis of the president's budget proposal. That $916 billion, combined with the more than $3 trillion projected that year for spending on Medicare, Medicaid and Social Security would eat up 95% of all federal tax receipts. So 95 cents of every tax dollar will be spoken for before lawmakers consider what to spend on everything else from education to infrastructure to defense.
Campaign season is heating up again. How much you want to bet that these problems take a back seat to rumor, innuendo, and blaming the other guys for it all whilst providing no coherent long term plan to actually deal with any of it? If I were a betting man, I'd put some money down on a lot of talk about tax increases and spending cuts that on their own (or even in combination) wouldn't make a serious dent.
When you're dealing with a government that gets away with calling roughly 3 trillion in IOUs a "trust fund" or constantly raiding those funds as they come in as an "investment" when tax payers end up having to pay the money back plus interest on the funds their tax money originally provided... we might be too comfortable with the government encouraging our delusions.