GOP: State Budget Troubles Could Force Obama to Raise Taxes

It's a ticking time bomb for the Obama administration—the perilous fiscal condition of the states, which grows worse almost by the day. California's problems are getting considerable media attention, but other states also are having serious financial problems, leaving the administration with still another crisis. So far, the White House has rejected calls to bail out the states, but those calls are sure to intensify as tax revenues sharply decline. "The states and localities can't be allowed to fail," says a senior Republican strategist with close ties to Congress.

Officials in at least a dozen states, including Ohio, Illinois, Iowa, Maryland, Massachusetts, New York, and Virginia, are reporting new budget shortfalls. And California is facing a new $26 billion revenue gap after dealing with a budget crisis earlier this year. The GOP strategist predicts that the states' budget troubles will increase the pressure on President Obama to raise taxes because his administration needs money not only to help the states but also to finance his proposed overhaul of the healthcare system and other massive programs.

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