Largest 15 US States are Spending Over 220% of Their Tax Revenue

The big news this week in terms of ginormous government transfer payments is, as usual, out of the Fed, as it embarks on an equally ambitious and ill-fated mission to buy $600 billion of US Treasury debt. Unsurprisingly, it’s not the only immense transfer of wealth taking place between governmental bodies. As spotlighted by Meredith Whitney, CEO of the Meredith Whitney Advisory Group, the feds are continuing to subtly bailout state governments at record levels and in an ongoing and unsustainable fashion which she describes in a recent WSJ opinion piece.

From The Wall Street Journal:

“What [...] investors fail to appreciate is that state bailouts have already begun. Over 20% of California’s debt issuance during 2009 and over 30% of its debt issuance in 2010 to date has been subsidized by the federal government in a program known as Build America Bonds. Under the program, the U.S. Treasury covers 35% of the interest paid by the bonds. Arguably, without this program the interest cost of bonds for some states would have reached prohibitive levels. California is not alone: Over 30% of Illinois’s debt and over 40% of Nevada’s debt issued since 2009 has also been subsidized with these bonds. These states might have already reached some type of tipping point had the federal program not been in place.

“Beyond debt subsidies, general federal government transfers to states now stand at the highest levels on record. Traditionally, state revenues were primarily comprised of sales, personal and corporate income taxes. Over the years, however, federal government transfers have subsidized business-as-usual state spending not covered by state tax collections. Today, more than 28% of state funding comes from federal government transfers, the highest contribution on record. (more)