One of this bloggers favorite newsletters is one put together by John Mauldin. Not only does he have his own interesting economic insights, but he flags his readers to insights from others. His most recent newsletter focuses on a year-end review by Hoisington Investment Management. The area of the review that caught my eye were some of the remarks about the municipal fiscal mess we continue to face.
For starters, Hoisington notes that the rise in municipal bond yields significantly increased borrowing costs – which is not something good for already cash-strapped municipalities. That makes it more expense to fund capital projects that were planned, which could place some of those plans in peril. The firm notes that through history, state and local governments don’t undertake big projects when they have huge cyclical deficits. What’s not said here but is another consequence – the fewer capital projects underway, means fewer jobs for the employed and unemployed.