On 1 July, 46 of the 50 US states will begin a new fiscal year. The cumulative deficit of the 50 states is about $127.5 bln. State and local government borrowing reached a record 22% of US GDP this year, up from about 15% in 2000. Their outstanding debt is about $2.2 trillion, a 57% increase since 2000.
US states and local governments did the same thing that governments around the world have done. There was a general reluctance to tax citizens to fund the various programs that were provided by the state and local governments. Governments responded not by slashing the programs, but by borrowing to fund them. Governments accumulated debts and lengthened maturities.
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