Tomorrow begins the new fiscal year for thousands of local entities—towns, counties, school districts, etc., and for 46 states (*), bringing budgets, debts, and claims which are impossible to meet. At the same time, citizens are being thrown into social breakdown. Begin by looking at the employment base, which is shrinking drastically. This means that local government revenue is dropping while government responsibility for the newly poor and desperate is increasing. Without a sudden Glass-Steagall policy shift, these local and state budgets are an exercise in killer-unpayability.

In 210 (or 55%) of the nation's 378 metropolitan areas, the official unemployment rate rose in May—a statistical reversal of a reported drop in unemployment in 90 percent of these areas the month earlier. Nationwide, the official rate of unemployment is 9.1 percent, fictional, but still bad; and in some locations, it is officially over 25 percent, e.g., Yuma, Arizona. For Afro-American youth, an unemployment rate of 40-80 percent is accurate in thousands of locations all across the country.

As unemployment grew since 2007, most states burned through any state unemployment compensation funds they may have had, then they took loans from the Federal government to continue to provide unemployment aid; now, they can neither pay nor service the loans. As of this week, 29 states and the territory of the Virgin Islands, have $41.2 billion in outstanding Federal unemployment loans, including $11 billion owed by California, $3.8 billion owed by Pennsylvania, and $3.2 billion owed by Michigan.

The reflex reaction from some new-timer governors, is just to cut the duration of unemployment benefits. Florida Gov. Rick Scott (R) on June 27 signed a measure to enforce the shortest duration of unemployment aid out of all 50 states. Starting Jan. 1, 2012, an enrolled out-of-work person can get no more than 23 weeks of unemployment aid, which is a reduction from the current 26 weeks, already inadequate.

Moreover, an insane proviso says that the duration of aid will be cut down to 12 weeks, if the unemployment rate in the state gets down to 5 percent or below—a fantasy-contingency likewise pushed for Michigan by Gov. Rick Snyder (R). Florida had a $2 billion unemployment compensation fund before the 2007 blow-out; then, it vaporized; the state borrowed $2 bil from the Fed. And now there is the unpayable state debt to the Fed on this.

Florida city leaders are expressing worry and dismay, at the safety net being shredded. Tallahassee Mayor John Marks is speaking out a lot, on the fact that cities are under pressure to find people jobs, but how?

Nationwide, the total of people on unemployment benefits reached a level of 11 million in 2010, but since then, as people are exhausting the time the aid is available, the number has dropped down to 7.5 million, as of the last quarter. The jobless are just being cast out.

Homelessness is also skyrocketing; families are living out of cars. Some localities are trying to cope. For example, a church network in southern Oregon is discussing setting up a rotating tent city, which will accommodate homeless families for a few months on the property of one church (using its water, toilet and electric facilities), and then be moved on to another church. In Portland, Oregon, a tent city for the homeless—Dignity Village—has been allowed since 2000, to remain on state land near the airport; in a recent fiscal year, Portland managed to budget $180,000 to replace tents with little wooden huts. Now some 60 homeless people take shelter at the Village, using portable toilets and sharing the one sink with piped-in water. Under the new FY 2012, Portland will extend approval for this, for two more six-month periods.

This is called "success" in terms of sanitation and security. Millions of homeless, or otherwise desperate people, have no such contingency arrangements. In this context, come the reports from Chicago, Philadelphia, and other areas of the flash-rob incidents, of marauding, violent hordes.

The increasingly pervasive demoralization and poor conditions are now even showing up in gross demographic readings on morbidity and mortality. Life expectancy for women has declined in 313 counties, out of the national 3,034 counties, over the 20 year period 1987 to 2007, and when measured since then, will show it worsening. These counties are concentrated in the poor regions of Alabama, Mississippi, Kentucky, West Virginia, Tennessee, Missouri and Oklahoma, where the life expectancy for women residents there fell by two years.

"We have talked about this trend as being the biggest decline in life expectancy since the Spanish flu epidemic of 1918 in the U.S.," said one of the researchers, Prof. Ali Mokdad, at University of Washington, which conducted the study in collaboration with the Centers for Disease Control.

Institutions that helped in the past, for example, school systems with nutrition-aid, after-school help, and other social safety net programs, are in turmoil. The number of workers (total payroll) for state and local functions of all kinds has been cut by 535,000 persons from only September, 2008 to May 2011, down from 19,800,000 to 19,265,000.

There are some 13,000 school districts in the United States, and for many of them, July 1 marks a turning point into chaos. For example, in Mississippi, the Picayune Municipal Separate School District on June 29, voted to be without an FY 2012 budget until they meet again July 12, because they can't figure out what to do.

The Picayune School District cannot meet the state requirement to have on hand an operating balance of 8% of their revenues. Their revenues are dropping. The state and Fed gave them $2 million less over the past two years. They don't want to fire more teachers or reduce wages more. They have to produce contracts for staff (which have a start on April 15, 2012 for 2012-2013).

This situation is typical. This is the Constitutional issue of the General Welfare, which can only be met by the activation of Federal powers, and Glass-Steagall.

* States with differing fiscal years: Alabama and Michigan (Oct. 1); New York (April 1) and Texas (Sept. 1).

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