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Signs of a Double-Dip Have Emerged: Meredith Whitney
CNBC.com | August 01, 2011 | 05:21 PM EDT

Analyst Meredith Whitney said she's seeingsigns of a double-dip as cities and towns continue to get squeezed by cuts in federal funding.

This is certain to get worse as Congress and President Obama try to work out a deal on the debt ceiling , she said.

"I never envisioned we would come to this point where Congress couldn’t agree on raising the debt ceiling or we’d be in this dire situation politically," the head of Meredith Whitney Advisory Group told CNBC Monday.

"OurGDP number on Friday was an indication that states and local governments, which make up 12 percent of GDP, are really pulling back," she added. "We’re certainly in a double dip on housing," which is putting "enormous pressure on the economy."

The states most tied to housing have had to cut social programs and raise taxes, which, in turn, pushes home values down even further, she said. Those states with "clean" balance sheets in areas she calls "the emerging markets of the United States" attract more business, have more tax surpluses and don’t have to raise taxes.

Some states are in bad shape because they relied so heavily on federal stimulus money, which ran out at the end of June, she said. Forty-six states have passed balanced budgets that include big cuts.

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