It is an endless cycle until we see a "real" recovery. Unemployment continues to rise, salaries and hourly rates of those who still have a job are seeing their incomes drop, and States are continuing to spend more money then they receive. More and more Americans are on food stamps, yet bankers continue to receive billions in bonuses for a job well done. States are going to have to make a choice (they might select multiple options). They will either use inflation (debasing the currency) to pay back the debt in cheaper dollars, significantly raise taxes, or default on the debt. Debasing the currency seems to be a popular trend right now for the US; I think throughout 2010 we will start to see higher taxes along with it. I would think defaulting on the debt is the last thing a State wants to do, but we could see some of this over the next few years in high risk States like California, and New York. Below are a few related articles for your viewing...
http://manyeyes.alphaworks.ibm.com/manyeyes/visualizations/state-budget-deficit-map-2010-estima
http://www.saratogian.com/articles/2009/11/21/news/doc4b0768cb81be1584614972.txt
http://www.sdnn.com/sandiego/2009-11-19/politics-city-county-government/california-budget-politics-city-county-government/california-budget-crisis-diaries-new-guess-for-state-deficit-tops-20-billion/comment-page-1
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