State and local governments are struggling with their budgets as the economic slowdown shows up in lower revenues such as income taxes and property taxes. However the spending side of things shows what a disconnect has occured in public sector wages and benefits. We ran across the chart below on the blog site Pragmatic Capitalism (
http://www.pragcap.com/) and thought it was important to include in our blog:
One implication for investors would be to recognize the heightened risk this poses for tax exempt investing and therefore stay with very diversified high quality municipal bond holdings as the public sector has to wrestle with trying to reduce costs (including high wages and benefits) in an environment of reduced revenues.
