The P90X workout, which is extremely tough but creates results, can be seen as the metaphor for the future of financial fitness.

The workout program, created by Tony Horton, has sold more than two million sets of its DVD series, at $119.85 per set. The selling point is that the workout is really, really hard. Some of the comments from those who do the program include: “When I first started the leg workouts, it made me want to puke in the middle”; “It’s awful. It doesn’t matter how many times you do it, it still makes you cry.” (Miami Herald, 5/18/10)

When will individuals and government leaders determine that in order to correct financial excesses (debt and spending), a painful but effective discipline is necessary? And who will be the Tony Horton of the program? One workout attendee, whose shirt was sopping-wet after the strenuous ordeal, proclaimed; “Tony is the man. Tony is the man”. Who will be “the man” (or woman) of financial fitness?

Charles Hess

North Dakota has the lowest unemployment rate in the country and one of the largest budget surpluses. In this economic and political environment, could this state-run bank model spread? Will this unique creation be seen as too “socialist” for the mainstream? What would be the impact on national, regional and community banks?

Eric Zavolinsky

Because of budget constraints, state and local governments are cutting back on road construction. As an example, Colorado Springs, the second-largest city in Colorado, has announced that it will not pay for any street paving, relying instead on a regional authority, which has said it can meet only about 10 percent of the need. In a similar vein, communities in various states (e.g., Maine, Michigan, Indiana, Pennsylvania, Vermont, etc.) have announced plans to convert paved roads back to gravel in order to save on maintenance costs. In hard hit Michigan, 38 counties converted 100 miles of roads since last year because of insufficient funds. If there is not another federal stimulus bill that contributes to state and local highway funds, tire, shock and suspension companies should do quite well, as potholes ravage cars.

Charles Hess

How long until American police departments seek to use unmanned aerial vehicles as part of routine police work, and what will be the public’s response on the privacy front? Nevermind, the U.S. can’t afford it…

Michael Hines

In the past, California school districts such as the one in Beverly Hills welcomed students from outside its locale, since the district accepting the students received a payment of $6,239.00 per student from the state. With recent cutbacks in state funds for education, Beverly Hills has told its roughly 400 out-of-district students to either rent an apartment in the boundaries of the district or find another place to go to school. (New York Times, 1/14/10)

A statement by one Beverly Hills parent seems relevant: “This is a community trying to take care of its own, and there is nothing wrong with that.” That thought reflects an emerging protectionist attitude being encouraged by a sense of scarcity.

Charles Hess

During legislative sessions in 2009, state legislatures cut $145.9 billion from their fiscal 2010 budgets. Despite these cuts, states still face a mid-year budget gap of $28.2 billion.  (Stateline.org, 2/21/09)

How bad are things for the states?

Things are so bad in Illinois that as of mid-December, the Illinois State Board of Education has sent the state comptroller more than 18,000 vouchers totaling $757 million and that number is just a drop in the $4.5 billion bucket of I.O.Us the state has handed out. (Beacon News, 1/4/10)

Things are so bad in Maine that the new budget proposal submitted by its governor is based on the assumption that congress will pass another $200 billion in stimulus programs and provide direct aid for the state to fund its Medicaid program.  Certainly other states must be hoping for the same as stimulus funds plugged about 30 to 40 percent of the budget gaps states were facing last year. (Stateline.org, 12/14/09;  CNN,11/11/09)

Things are so bad in North Carolina that it has borrowed $1.4 billion from the federal government since February 2008 to fund unemployment insurance claims.  During the last recession the state borrowed a total of $270 million.  Twenty-three other states have borrowed from the treasury to fund claims and they will all have to begin repayment, with interest, in 2011. (Charlotte Observer, 12/1/09)

Things are so bad in Arizona that on November 19, the state borrowed $700 million from Bank of America, the first time since the Depression that the state needed to turn to an outside borrower.  After less than two weeks, the money had all been allocated and the state had to borrow $73 million from its internal account to make a payment to the state’s schools.  Arizona claims it will replenish the accounts as tax collections come in.  (Arizona Republic, 12/2/09)

Tax collections are going to have to improve for the states to find their footing.  The nominal and inflation adjusted figures indicate that the first three quarters of 2009 marked the largest decline in state tax collections since the Census Bureau began tracking the data in 1962.  (Rockefeller Institute of Government, 1/10/10)

Together sales and income taxes make up roughly half of state and local tax revenue. With national unemployment still above 10 percent, states like Arizona are betting a lot on individuals increasing spending despite a difficult job market.  Anyone betting on 5 percent GDP growth is betting that these states get healthy…quickly.  Any takers?

Eric Zavolinsky