Posted by JM Ashby
Just as virtually every Republican governor in the nation is looking to kill unions, cut education, cut Medicaid, or even cut corporate taxes again to somehow magically fix their budget problems, a new poll of municipal bond traders and investors on Wall Street shows that they believe such budget cuts will only send unemployment soaring and possibly lead cities and states to default.
WASHINGTON (Reuters) – Some of the United States' weakest local governments face a real risk of default in 2011 as well as waves of layoffs that could put upward pressure on the country's jobless rate, according to a Reuters poll.
The findings from the poll published on Sunday found a majority of Wall Street professionals including municipal bond traders and investors believe -- 14 out of 25 -- up to four multibillion-dollar municipal bond defaults will take place this year.
...Among the investors polled, 19 of 23 thought job cuts aimed at bringing budgets into line would put noticeable upward pressure on the national unemployment rate, which over the past two months has fallen sharply to 9.0 percent from 9.8 percent.
"If the states fire the employees necessary to cut their budgets, unemployment will get worse," said Marilyn Cohen, president of Envision Capital Management in Los Angeles.
Budget cuts do not take place in a vacuum. Even if you cut a program and fire employees, you're still paying for those employees in the form of unemployment checks and reduced tax revenue. The austerity measures recently imposed in the UK, which are similar to the kind of measures that Republicans want to implement here, have already shown us what to expect.
Why let facts get in the way though? The Tea Party demands a sacrificial lamb.