In June of 2010 we noted that well known financial sector analyst and the woman who blew the doors open on the 2008 mortgage crisis, Meredith Whitney, was forecasting that two million government employees would see their jobs cut over coming years because of fiscal problems.
Over 300,000 jobs have been cut in fiscal year 2011, and that number is about to increase 50% going into 2012:
Around 450,000 people who work for U.S. states, counties, cities, towns and villages could get pink slips in fiscal 2012, sharply up from the 300,000 positions shed this year, a report said on Monday.
The number of job cuts will rise mainly because the federal stimulus program is ending while the cost of Medicaid is “spiraling,” said the report by UBS Investment Research.
States got billions of extra dollars primarily for education and Medicaid from the stimulus plan. Medicaid is the state-federal health plan for the poor and disabled.
Maury Harris, a UBS economist, on a conference call said the deficits states and municipalities will have to close will climb to $155 billion in fiscal 2012 from about $108 billion in the current fiscal year.
So much for job creation. After hundreds of billions of dollars spent on government entitlement programs, it’s clear that government budgets are unsustainable.
First the cities and the states will go bankrupt (it’s clear that most are insolvent right now).
The Federal government will do their very best to bail them out.
But it won’t work.
Eventually, the Federal government, itself insolvent, will be recognized for what it is: bloated and bankrupt.
The real fun begins when the rest of the world finally responds to the US sovereign debt crisis by cutting off our international credit card, leading to the collapse of the largest credit bubble in the history of the world.