When 48 states have a combined budget shortfall of $200 billion, you know there is something terribly wrong with their economics. But, according to one reporter, if the United States could focus on building out its alternative energy infrastructure, it could organically address its financial woes while boosting energy infrastructure related exchange-traded funds (ETFs).

According to David Fessler of Investment U, states were able to rely on the American Recovery and Reinvestment Act during 2009 and 2010 to help close budget gaps. But with only $40 billion remaining, states will have to start looking elsewhere. [Nuclear ETFs: Waiting to Exhale.]

In addition, the U.S. Senate failed to pass an extension to the Build America Bond program, which is the fastest growing segment of the $2.8 trillion municipal securities market, reports William Selway of Bloomberg. The program provides a 35 percent subsidy on interest cost from the U.S. Treasury.

John Hallacy of Bank of America Merrill Lynch said that failure to pass the bill would dampen investor interest, ultimately making it harder for states to close budget gaps.

On top of all that, states are also suffering from a contraction in state revenue, because of high unemployment throughout the United States. Not to mention, the unemployed continue to receive benefits that drain state coffers. [Solar ETFs: Is Now the Time?]

With a budget gap of $19 billion, California may be the epitome of the financial mess some states find themselves. But incredibly, “it still has no viable budget framework from which to operate.”

Much like countries are doing in Europe, many states will have to implement austerity measures to shrink budget deficits. Some analysts believe that the measures could shave off one full percentage point off of GDP.

Fessler thinks the solution lies in “industries that can truly create new jobs.” In particular, he writes about “developing areas like wind power, increasing solar installation, manufacturing more electric cars and shifting towards natural gas as a transitional fuel for cars.” [The Fate of Alternative Energy ETFs.]

Whether the United States can get its finances back on track is something we all need to be supremely concerned about.

For more information on the alternative energy industry, visit our alternative energy category.

  • PowerShares WilderHill Clean Energy (NYSEArca: PBW)
  • PowerShares Global Clean Energy (NYSEArca: PBD)
  • First Trust NASDAQ Clean Edge Green Energy (NYSEArca: QCLN)
  • iShares S&P Global Clean Energy Index (NYSEArca: ICLN)
  • Market Vectors Global Alternative Energy Fund (NYSEArca: GEX)
  • Claymore/MAC Global Solar (NYSEArca: TAN)
  • Market Vectors Solar Energy ETF (NYSEArca: KWT)
  • First Trust Global Wind Energy (NYSEArca: FAN)
  • PowerShares Global Wind Energy (NYSEArca: PWND)

Sumin Kim contributed to this article.

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