Even in a world where we’ve become numb to ever-larger numbers, the $2.9 trillion of outstanding muni debt sounds big.
It’s a quarter of the nation’s GDP. It’s nearly double the federal government’s deficit projected for 2011.
The size of the outstanding debt—up $85 billion in a year, and nearly $1 trillion in the past five —has become Exhibit A among those who worry the nation could soon see a wave of local and state government defaults.
Savvy investors are looking at the market a little differently. They acknowledge there are serious problems, and the situation could worsen in coming years as debt comes due and local government are forced to pay for the surging medical costs of their retirees. They even believe there could be substantial defaults.