U.S. Economic/Financial News

LaRouche: Obama's Policies Have Bankrupted the U.S.

June 30 (EIRNS)—"President Obama's policies have driven the United States into bankruptcy," Lyndon LaRouche stated today, when asked about the budget crises facing most of the 50 states.

"The President is politically bankrupt. He had months in which to correct this situation, he did all the wrong things; all the things he shouldn't do, he did! Now, we've come to this point, of a pervasive bankruptcy of most of the states of the United States, a threatened breakdown of the living conditions of a people, the loss of our entire economy. This bum has made mistakes! He's now got to turn, he's got to abandon these policies, and recognize that history has proven him wrong! He's a fool, got to change his policies—now! He's been in too long."

June 30 was the end of the fiscal year in 46 states, and five of them—Arizona, California, Indiana, Mississippi, and Pennsylvania—had no budgets as of that date. is California is about to issue "IOUs" in lieu of payment, beginning July 2, for anything except state debts ($70 billion in bonds) and education, which are both protected by legislative mandate. Informed sources say that the IOUs have (secretly) already been printed, as fascist Gov. Arnold Schwarzenegger refused to allow the legislature to retain vital services in a partial budget extension. Arnie has said the pain has to be faced now.

Other states face similar disastrous consequences:

In Pennsylvania, the deadline for reaching a budget is midnight tonight, and not having a budget would be a repeat of its 1991 "suspended government" impasse, under far worse conditions of collapse. Democratic Gov. Ed Rendell is trying to squeeze $500 million more in budget cuts, and come up with new taxes. But there will be "payless paydays" beginning on July 17, unless funds are found; the Pennsylvania Hospital Association said today that 13,000 hospital workers will be axed if the cuts go through.

The Republican-controlled Senate passed a $27.3 billion budget in May, proposing 11-12% cuts in education, public welfare, libraries, parks, CHIP and other health programs, but no new taxes. The Senate plan was then voted down by the House Appropriations Committee. With declining revenues, the real shortfall for FY 2008-09 is $3.2 billion, and for FY 2009-10, another $3.2 billion. Rendell announced today that 10 banks and credit unions will give "bridge loans" to "creditworthy" state employees! But, will they have jobs? The mayors of Reading, Lancaster, York, Easton, and Bethlehem said that their cities will wind up under state receivership soon, unless they are granted the power to impose a 1% local sales tax, or other relief.

In Indiana, a last-minute budget was passed on the 30th, after two days of debate. If that had failed, as it had since June 11, some 31,000 state workers would have been put out of work at midnight, and several departments, such as Motor Vehicles, closed down. Indiana will probably dip heavily into its $1.2 billion surplus to cover expenses. The budget shortfall is over $1 billion, and revenues continue to fall.

In Arizona, lawmakers were still grappling with how to cover a $3 billion shortfall.

There has never been such a large collective deficit in the U.S. states—a total of $121 billion this year, according to the National Conference of State Legislatures.

State Unemployment Insurance Funds Will Go Bankrupt in 2010

June 28 (EIRNS)—Thirty of the United States' state-run unemployment insurance funds will run out of money during 2010, reports Rick McHugh of the National Employment Law Project. McHugh notes that the states could borrow an estimated $17 billion from the U.S. Treasury to keep the unemployment funds solvent; the other alternative is that the U.S. government would have to provide the money.

So far this year, 15 states' funds ran out of money, even with the so-called stimulus plan extending $7 billion for unemployment insurance. At the start of 2009, there were 3 million Americans who were receiving unemployment benefits; that number has doubled in five months.