States' Projected Budget Gap: $166 Billion. AIG Bailout to Cover Gambling Debts: $180 Billion. Portion that Went to Foreign Banks: $40 Billion.

Source: Washington's Blog

Arianna Huffington writes:

America's states are facing a projected cumulative budget gap of $166 billion for fiscal 2010. Even more budget gaps are expected for fiscal 2011. Total shortfalls through 2011 are estimated at $350 billion to $370 billion -- and could be even higher if unemployment continues to rise.

These are massive numbers. But when you remember that we spent $180 billion to bail out AIG ($12.9 billion of which went straight to Goldman), you realize that that alone would be more than enough to close the 2010 budget gap in every state in the union.

What Huffington fails to mention is that $40 billion of the AIG bailout money went to foreign banks. That is more than enough to cover the budget gap of California and several other states.

Both AIG and the foreign banks (and Goldman) were paid so they could recoup their bad gambling debts - bets on credit default swaps, which add nothing to the stability of the economy but actually destabilize the economy, and which help prematurely drive companies into bankruptcy.

So - literally - the federal government covered bad gambling debts and is letting the states go bankrupt.