The Single Biggest Issue Being Ignored in the U.S. Today? ... GOVERNMENTS' DEBT LEVELS ... Many Cities and States Are Broke and TRILLIONS of Dollars in Debt

Cities and states across America are in effect flat broke. They owe almost half as much as the $16 trillion the federal government ADMITS to owing.

{NOTE: Of course, the promises made which are unfunded by all governments run in excess of $100 trillion. In fact, the latest credible estimate that I saw for cities, states and the national government, including unfunded promises, was $238 trillion. But whether it's $100 trillion. $200 trillion, $238 trillion or even more, it represents a TAX mountain that is going to be extremely difficult, if not impossible, for future American taxpayers to climb.

Think of it this way. If interest rates rise to 4%, that's $4 trillion annually for each one hundred trillion in liabilities, and that doesn't pay back one single cent in principal. And by the way, we currently spend less than that $4 trillion nationally for EVERYTHING, defense included. Thus, a doubling or tripling of taxes collected will be necessary, and as you know, private sector growth is not exactly an Obama administration priority. It's a PLANET GOVERNMENT world.}

Still, these astronomical liabilities and obligations remain pretty much a mystery and unknown to the American people. Transparency and candor we don't have.

Our government elitists, accompanied by their public sector union allies, also play stupid and expensive games with respect to how their books are kept. If private businesses did likewise, their leaders would be jailed.

Yet the government knows best elitists continue to spend more money that we don't have, and to borrow more money that we shouldn't borrow, and make unfunded promises that can't be kept, and they continue to do all this without first even trying to get the citizens to approve a doubling or tripling of the current taxes paid.

The political game being shamefully endorsed by We the People is actually a very simple one. Dig the DEBT hole deeper and deeper, in other words, and leave it for future taxpayers and politicians to worry about.

But let's look directly at the "smaller" problems facing cities and states across America herein. We'll leave the much larger biggie of the federal government for another time.

Time has run out for "can kicking" and something has to give, and SOONER RATHER THAN LATER. The delay and ignore game is about over for our cities and states.

The Many Ways That Cities Cook Their Bond Books is subtitled 'The $3 trillion municipal debt market is rife with creative accounting:'

"It has been a busy few weeks for the Securities and Exchange Commission. In May, the SEC charged two cities—Harrisburg, Pa., and South Miami, Fla.—with securities fraud for allegedly deceiving investors in their municipal bonds.
This follows similar fraud charges against states, New Jersey in 2010 and Illinois in March, after SEC investigators uncovered what they called "material omissions" and "false statements" in bond documents related to those state's pension funds. . . .
The Harrisburg charges are part of a broader SEC effort to scrutinize state and local government issuers in the nation's $3 trillion municipal-bond market. "Anyone who follows municipal finance knows that budgets can sometimes be a work of fiction," says (a) consulting firm to local governments. "Harrisburg is the tip of the iceberg."

And a mighty iceberg it is. The 2012 State of the States report . . . found state and local governments are carrying more than $7 trillion in debt, an amount equal to nearly half the federal debt. Often, the report said, "States do not account to citizens in ways that are transparent, timely or accessible."

Consider the practices of Stockton, Calif., which last June became the nation's biggest city to file for bankruptcy. In 2011, Stockton's new financial managers issued a blistering critique of past accounting practices and acknowledged that the city's previous financials had hidden significant costs, including the real cost of employee compensation and retirement obligations. Bob Deis, the new city manager, declared that Stockton's financials bore "eerie similarities to a Ponzi scheme."
If so, the city's bondholders have been taken for a ride. In bankruptcy court earlier this year, a judge ruled that Stockton could suspend payments on its bonds even while continuing to fund its employee retirement system.
Similarly, when another California city, San Bernardino, went bust last year, some city officials alleged that it had been filing inaccurate financial records for nearly 16 years. . . . Meanwhile, the city has defaulted on bond payments, leaving investors in the lurch.
One area that has come under special scrutiny is pension-fund accounting, because states have latitude in choosing how to value their retirement debts. The SEC noted that Illinois used accounting that funds a larger percentage of an employee's pension costs near the end of his career, a method that increases the risks that the system could go bust. The SEC said Illinois didn't properly reveal the risks posed by this sophisticated accounting wrinkle.
The SEC accused New Jersey of failing to disclose to investors that it wasn't sticking to a plan to adequately fund its pension system. In this, the Garden State isn't alone. Many states underfund their pension systems, even by their own accounting standards.
A June 2012 study by the Pew Center on the States found that 29 states didn't make their annual required contribution for pensions in 2010, the last year for which data were available. It isn't clear how many of the more than 3,000 local government pension systems follow the same practice, although a survey this January by Pew of 61 large cities found nearly half didn't make their full contributions. . . .
Municipal investors have often ignored such questionable practices thanks to a generation of low default rates. Many also assume that even when a local government gets into financial trouble, bondholders are always first in line to be paid.
But officials in some troubled cities are pushing back against the notion that investors should get the best deal among creditors. . . .
Investors will hear more of this talk as municipalities face growing budget pressures. Recently, former New York Lt. Gov. Richard Ravitch warned the municipal bond industry that the promises governments have made to repay investors may not take precedent over other obligations. States and cities face "a unique challenge," he said, "in trying to maintain services and meet their retirement commitments to workers," emphasizing that this was "not necessarily a good message" for investors.
Under these circumstances muni-bond investors should be practicing a stronger form of "buyer beware." Yet even that is difficult if governments issue reports designed to disguise their true financial condition. If investors finally catch on to this, it might put an especially deep chill on the market for municipal securities. Less than forthcoming city and state governments will deserve the consequences."

Summing Up

Money is drying up across America. As a nation, our various governments are borrowed to the hilt and then some.

As a result, additional borrowings by cities, states and the federal government will become harder to get and more expensive to repay as well.

We're fast approaching the time when living within our means will be required of our governments, just as it has become a necessity for our citizens.

And that's a good thing, despite the painful, lengthy and necessary adjustment to a future of governmental fiscal sanity that eagerly awaits us.

That's my take.

Thanks. Bob.