Last week I posted a piece regarding the dramatic rise in national debt. Alarming enough on its own, the national debt statistics only show part of the picture of government debt in the United States. Though the aggregated states and municipalities have not taken on as much debt as the national government, the numbers are still significant. Every state in the union currently carries a negative debt balance, but some are far worse than others.

When measured per capita, the states carrying the highest debt are Connecticut, Massachusetts, Hawaii, New Jersey and New York, holding between $2,000 and $5,000 of debt per citizen.

Not surprisingly, four of these states also top the list when state debt is divided by the Gross State Product, with ratios coming in between 6% and 8%. The only exception being New York, which is replaced on the list by Mississippi.

Measured in total dollars of debt, the most populous state, California shoots up the list to number 1. California also has the highest GSP, with over $1 Trillion in 2009. New York, New Jersey and Massachusetts also make this list, with Illinois rounding out the top 5.

The numbers rise dramatically when municipalities are added in, with over 7 times the amount of debt held by the states themselves. When local governments are added, the list of states with the largest amount of government debt also changes quite a bit, with North Carolina, Utah, Georgia and Indiana all making the top 5 along with California.

The numbers by themselves only tell part of the story. Recently, the news has been replete with stories concerning the woes of states’ and municipalities’ budget problems. Here the L.A. Times documents California’s budget difficulties.

Budget problems in state and local government are expected to further drag down the state’s recovery, Levy said. Even if they don’t get pink slips, state employees are earning less money because of furloughs and salary reductions, which reduces consumer spending in the state.

New Jersey Governor, Chris Christie has, of late, been making much noise about necessary budget reductions. His state is facing a budget crisis and the actions he is considering are unprecedented. Business Week reports:

All levels of government have to be looked at when considering whether public jobs or agencies should be operated by private companies, Christie said after signing an executive order creating a panel to study the issue.

“I would be doing this even if we weren’t in a fiscal emergency,” Christie told reporters today in Trenton. “This is a task force that I believe is incredibly important because of our current budget conditions.”

Detroit, Michigan is feeling the pinch as well. Scripps News covers some drastic measures the mayor is considering to meet the budget shortfalls. And if you’ve been through the abandoned neighborhoods in Detroit, seen the burned out buildings with your own eyes, this comes as welcome news.

Mayor Dave Bing is proposing to abandon large swaths of the city, move the few people remaining to more functional neighborhoods, tear down the buildings left behind and let what’s left become forests, pastures and farmland.

The consolidation, aside from eliminating square miles of eyesores, would cut the cost of services like police, fire, snow removal, water and sewage.

Recent reports of North Carolina, Alabama and Hawaii delaying income tax returns underline the situation as well. And it’s no wonder, when you look at the levels of state and municipal debt as they compare to the production in those states. Many states, along with their local governments are carrying a debt load several times what they produce.

When taken together the real picture begins to emerge. In 2009, government debt at all levels surpassed GDP by over $1.2 Trillion. And while several state and local governments are bringing their budgets more in line with reality, the national debt continues to expand at unprecedented rates. The Wall Street Journal reports:

When he released his new budget proposal on February 1, President Barack Obama asserted that the government “simply cannot continue to spend as if deficits don’t have consequences; as if waste doesn’t matter; as if the hard-earned tax dollars of the American people can be treated like Monopoly money; as if we can ignore this challenge for another generation.”

Already this year the federal government has taken on more than $200 billion additional debt. While President Obama notes that we can’t keep spending the way we have, the current budgets before congress propose to greatly increase spending and further increase the deficit. While state and local governments are feeling the pinch throughout the nation and cutting back spending, it doesn’t appear that the federal government plans to follow suit any time soon.

Carlton Smith is a Project Manager and Programmer living in Southeast Michigan. He is also the founder and Executive Editor of the web literary magazine Troubadour21.com. His blog can be found at UncleSol.net. Email Carlton at carlton@unclesol.net