SE states’ debt burdens more favorable

March 31, 2010

The New York Times confirms another reason for the Southeast’s attractive growth potential and why increasing numbers of entrepreneurs are deciding to build their businesses in the region:  lower state debt burdens.  As the attached graph shows, the problem worsens dramatically when one considers many states’ unfunded pension liabilities.  (Click thumbnail for “top” 25 states for debt-to-GDP, “Overloaded with Debts Unseen”.)

Not only will such debt levels likely lead to growth-stalling tax increases on the businesses that operate in those states, but some of the states are also responding in “desperate ways” which could undermine investor confidence and result in a credit squeeze similar to that currently experienced by Greece (and perhaps someday by other PIGS.)

State Debt Woes Grow Too Big to Camouflage

By MARY WILLIAMS WALSH

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

Complete NYTimes article here

Original American Enterprise Institute white paper here

UPDATE (3/31/10, 3:08PM):

Having had a chance to digest the original white paper, we are even more pleased than before to report that only one state – NE – has a lower debt-to-GDP % than FL (5th), GA (4th), TN (2nd), NC (3rd), TX and VA (tied for 6th).

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