> I believe state and local governments are unable to run a deficit. That's true in at least many places, but they still can borrow from the future by issuing

> I believe state and local governments are unable to run a deficit. That's true in at least many places, but they still can borrow from the future by issuing bonds, or by pushing off massive costs like pensions. They underfund pensions now and let the next mayor/governor deal with it; this process repeats until they can't meet the cash flow needed to pay current pensions and are effectively bankrupt. Remember when Detroit went bankrupt: According to an article I read about it, there were at least two main causes: 1) Going back to at least the 1990s their pensions were overfunded because they would need that money to pay future pensions when the ratio of current workers to retirees would drop. Instead of saving the money, they distributed it to pensioners as a '13th month'. Detroit also invested in some financial engineering instrument sold to them by Wall Street that the city couldn't pay off.