More Predictions of State-Budgets Based Economic Recession

Meredith Whitney was on CNBC earlier this week discussing more than her usual bailiwick of consumer credit. Instead, she dwelt on the coming budget crisis for US state and local governments.

In this recent post, I described how David Rosenberg also saw this issue as one which few people understand, but will be a key factor in US economic weakness next year.

Now it is clear that both forecasting this event.


A few days ago, Moody's put Illinois on a credit downgrade. According to CNBC's Rick Santelli, Illinois is now the worst-rated state after California.

Amidst all the attention paid to federal spending, the unemployment rate, and equity markets, the perilous economic condition of several large US states and many local governments has been overlooked by many pundits.

Meredith Whitney predicted that the effects of these problems will hit home next spring, when tax receipts come due, and fail to provide expected revenues for these many struggling governmental entities.