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Most, if not all, US states are forbidden in their constitutions from running a deficit.
But sometimes they do or not? What for is the ability to issue bonds, if you are not allowed to run a deficit?

I'm asking because there were reports of budget shortfalls in several US states. If they can't run deficits, in case of a surprising drop in tax revenue, they have to cut immensely in their spending?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sun Jun 1st, 2008 at 02:05:41 PM EST
[ Parent ]
They can either:

  1.  Cut spending to met income
  2.  Raise taxes to met expenditures
  3.  Engage in 'Creative Accounting' - pretend income/expenditures balance


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Sun Jun 1st, 2008 at 02:54:53 PM EST
[ Parent ]
That provision routinely, in times of downturns, produces economic crises. These crises are often borne on the backs of those least able to afford it.  Cuts to welfare, medicade, education, mental health programs and other programs that aid the poor.  This is especially evident during Republican administrations.  They see these downturns as opportunities to roll back social programs.  If you don't want to do something, it is always handy if it is impossible.  If you want to do something, it is nice if you have no other choice.  We like to make things like that easy in the good ole USA.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 1st, 2008 at 10:04:42 PM EST
[ Parent ]
... accounting ... not a deficit on the primitive "pile of money" accounting of the USG.

IOW, where capital spending is funded by bonds, the interest payments and bond repayments to retire the bonds must be fully funded by revenues ... no rolling over debt, and no borrowing to meet current expenditure.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jun 2nd, 2008 at 01:37:54 AM EST
[ Parent ]

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