In reading about how the various states are dealing with near insolvency, and then collating their attempts with those of the federal government, two themes keep recurring. One, the poor states cannot print money and so for the most part must balance their budgets. Some try all sorts of accounting gimmicks and borrowing, but they more or less end up having to cut spending in order to survive another year. Two, there is some reluctance to raise taxes even higher, given that the upper-middle, job-creating classes tend to be mobile and as never before are fleeing to no-state-income-tax states like Nevada or Texas, or areas where there is less regulation, some tort reform, and lower costs.
In other words, if Washington could not print money, and if there were a stable and prosperous country like a no-tax Texas or Wyoming nearby, say in the English-speaking Caribbean, we would start seeing balanced budgets rather quickly.