State And Local Governments Rebounding From Recession Woes, Promising New Job Creation And Increased Spending And Investment

Tuesday, January 08, 2013 08:49
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State And Local Governments Rebounding From Recession Woes, Promising New Job Creation And Increased Spending And Investment

State and local governments have rebounded from their troubles caused by the 2008 financial crisis, promising new job creation in 2013 along with increased spending and investment.

 
New spending and investment is expected to triple. Increases in all three areas are expected to bolster US economic growth, which is expected to accelerate as the year progresses.

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States and municipalities made up 12% of US gross domestic product (GDP) in 2011. 2013 will be the first year since 2009 that they will not be a drag on GDP.
 
State revenue will increase 3.9%, surpassing the peak reached before the recession.
 
A report by the National League of Cities released September 13 found that 57% of cities said
covering their financial needs was easier in 2012 over 2011.
 
The new budget deal will be positive for municipalities since it raised the top tax rates, making municipal bonds more attractive.
 
But Congress could still put a cap on the tax-exempt status of the bonds as it continues to negotiate spending cuts.
 
The federal government may also reduce aid to states as it comes closer to a budget deal.
 
And rising Medicare costs and under-funded pension plans continue to be a problem. All the more reason to continue to keep an eye on Congressional budget and spending cut negotations.

 

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