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That program proved so popular that it is expected to account for about one-third of state borrowing this year. The Treasury subsidizes the states in the program by paying the increase in the interest rates they pay on the taxable bonds, over and above what they usually would pay on tax-exempt debt.

The resulting huge buildup of debt recently prompted billionaire investor Warren Buffett, among others, to question whether an unsustainable bubble is developing in the state and local bond market akin to the one last decade in the mortgage market.

“There will be a terrible problem” five or 10 years from now, he predicted at a congressional hearing this month, “and then the question becomes, will the federal government [bail them out]?”

“The biggest threat to the economy is a mountain of sovereign debt that cannot possibly be paid,” said Bill Wilson, president of Americans for Limited Government. “As seen in Europe, when governments spend far beyond their means, bad things happen. And yet, Obama wants to sustain the states’ unsustainable spending levels.”

During the housing boom, he said, states came to expect and rely upon rapid increases in property values to finance ever more spending and borrowing. “It was a bubble in which state politicians made the same bad bet investors of mortgage-backed securities made — that property values would never come down,” he said.

“When the housing bubble popped in 2007, the drop in state revenues was entirely predictable,” he said. “Nonetheless, state spending still grew by about $100 billion in 2008 … The states simply refuse to cut the additional spending from the boom years.”

Harvard professor Linda J. Bilmes said the states cannot be blamed for the huge drop in revenues, jump in joblessness and other devastation caused by the housing and financial crisis, which has left them with substantial spending burdens and debts.

She said states already have slashed spending substantially despite the federal stimulus. Because of balanced-budget requirements, spending was slashed by 6.8 percent last fiscal year after a 4.3 percent overall cut in state spending the previous year, she said, and states have laid off 212,000 workers during the recession while furloughing many others.

The cuts in spending at the state and local level were large enough to essentially neutralize the stimulus effect of Mr. Obama’s spending bill on the economy last year, she said, urging Congress to come through with further aid this year to try to limit the effect of further state cuts on the weak economy.

But Ms. Bilmes did attribute one major part of the state spending dilemma to “past mismanagement”: overly generous health care and pension benefits for state employees that many states adopted to attract workers from the private sector. Now, with baby boomers retiring, states are having to pay out on those benefits, and that has become a significant drag on their budgets, she said, with state pension plans overall underfunded by at least $1 trillion.

In exchange for any further aid, she suggested Congress should require states to demonstrate that they have a plan to close the enormous deficits in their long-term pension obligations.