Almost half of all mortgage holders in Nevada now owe more than their house is worth. Mindboggling to think about. Basically what that means is if you want to sell your house, you've got to write a check to the bank on the day you close. Nationwide, the percentage of homeowners with mortgages underwater is 18.3%, with another 5% on the cusp.

The data aggregator First American CoreLogic put out a state-by-state breakdown today (no link yet, sorry), and at the top of the list are the usual suspects—Nevada (47.8%), Michigan (38.6%), Arizona (29.2%), Florida (29.2%), California (27.4%), Georgia (23.2%), Ohio (22.0%). Mostly we're talking about states that saw a big price boom and a lot of speculative buying, or states with dismal local economies.

What's in a way scarier, though, is that First American is also seeing a third group of states emerging—those where a lot of new people moved in and bought houses and simply didn't have much time to build equity before prices started falling. That partly accounts for why Georgia is so high up on the list, as well as growing problems in Texas (16.5%), Arkansas (16.3%) and Tennessee (15.0%). Other standard drivers of negative equity—a higher than average share of subprime loans and higher average loan-to-value ratio at origination—are also at play.

States with the smallest problems are New York (4.4%), Hawaii (5.6%), Pennsylvania (5.7%), Montana (6.9%), Alabama (7.4%) and Connecticut (7.4%). I should also mention that the survey covers about 80% of outstanding mortgages, and seven states didn't have enough data to come up with a percentage.

The one state that doesn't make any sense to me is New Hampshire, where 17.2% of mortgage holders are underwater. Maybe someone out there in America can explain what's going on in the Granite State.

Barbara!

General Motors would like some taxpayer cash—a bit more than $10 billion should do—to help it buy Chrysler. As a company spokesman told TIME: "We believe the Federal government should consider all of the tools available to it—some recently enacted—to support industries that are in distress and that are essential to the U.S. economy." (Update: The Detroit Free Press is reporting today that the Treasury Department said no dice, although of course the last word will be with Congress.)

Now all is fair in love, war and lobbying for government bailouts. But this attempt to align GM with the banks that have recently benefited from Washington's largesse is quite a stretch. We have a well-developed process for helping companies in distress fend off creditors and prepare themselves for a comeback if in fact they have a comeback in them. It's called Chapter 11 bankruptcy, and it is one of the most glorious creations of the American political system. Bankruptcy allows for a moderately orderly version of the creative destruction that makes capitalism dynamic. The willingness of American companies to make use of it is one of this country's great competitive advantages. It's one key reason why, while the next year or two will certainly be tough, we're extremely unlikely to land in a decade-long malaise like Japan in the 1990s.

Bankruptcy doesn't work so well for leveraged financial institutions like banks, because the mere existence of rumors that a previously healthy bank is headed for failure can be enough to drive it under. That's why we have a separate infrastructure for both preventing and dealing with bank failures, with the FDIC at its center. It was the lack of such an infrastructure for the "shadow banking system" of investment firms, hedge funds, derivatives and the like that has made the past year so scarily and unpredictably eventful. And it was the real fear of a systemic collapse--a run on the entire financial system--that sent Ben Bernanke and Hank Paulson scurrying to Capitol Hill in September to ask for $700-billion bank bailout.

It is true that, as Steven Pearlstein writes today, the half-baked way in which Paulson has sold and implemented the bailout has encouraged other industries to ask for similar help. I can't see any case for giving it to them, though. A GM bankruptcy would possibly pave the way for a rebirth of the company as a lower-cost, slate-wiped-clean entity with an actual chance of succeeding (I'm not making any guarantees here), and it wouldn't threaten the systemic collapse of anything. What it would threaten are jobs, dealers and suppliers, and pensions.

Those first two sets of threats are endemic to capitalism. I happen to work in a struggling industry. I feel like my job is threatened. I think what I do is important to the functioning of American society. I think it's possible to make a case--I'm not gonna make it, but Ezra Klein will--for taxpayer support of journalism. And there's definitely a case for temporary taxpayer help for workers whose industries have imploded. But there's really no case that I can conceive of for taxpayer subsidies for the shareholders of media companies or of auto manufacturers.

The issue of pensions is more complicated, because they are promises, and promises should be honored. GM, to its everlasting credit, has not been shortchanging its pension plan. The company's pension fund was actually overfunded by anywhere between $9 billion and $19 billion (depending on whom you were asking) at the start of the year, and while that's surely no longer the case, the way the fund's $100+ billion in assets were allocated (only 26% in equities) would indicate that it has probably survived the market's carnage better than most. So GM's retirees wouldn't suddenly be left in the cold if the company filed for Chapter 11. But even if they would, I think we'd be far off better dealing with that problem explicitly rather than bailing out the company's shareholders.

Political calculations are political calculations, and the Chrysler bailout of 1979 seems to have worked out okay, in that taxpayers got their money back. But we'll never know the counterfactual. It's possible that the U.S. auto companies would be much stronger and more competitive now if Chrysler had been allowed to go bankrupt. Managing our way through business failure is something we're extremely good at in this country. So why don't we take this opportunity to show what we're made of?

Andrew Samwick (inspired by today's Krugman column) says he told us so:

What we should have done back in January is to start planning for a future in which the consumers, finally, would sensibly retreat (not capitulate) from their debt-laced consumption rampage.  Some people [Samwick, that is] were suggesting the following in January:

"[W]e can plan well in advance. The federal government has a critical role in maintaining and developing public infrastructure, whether in transportation, telecommunications or energy transmission projects. A sensible capital budget would include a prioritized list of projects that need attention. Some would be slated for this year, some for 2009 and so on, over the useful lives of the projects. When economic growth falters, the government would be in a position to move some of the projects from later years into the present year."

Had we started this nine months ago, the projects could be coming on line now.  These would be capital projects that the country needs.

Instead, Congress approved and the President signed into law a tax rebate that, as Samwick puts it, boosted consumption and made Q2 GDP look deceptively good but left few if any lasting benefits. And now lots of people are jumping on the infrastructure bandwagon but we're faced with a choice of either rushing projects and probably doing a bad job with them or doing things right but not getting any economic oomph.

I think this is part of a bigger attitude problem that developed (for some pretty good reasons) as part of the Reagan revolution but now tends to stand in the way of intelligent governance. It's that new government spending is almost always seen as problematic while tax breaks--even selective ones that are really tantamount to government spending--are okay. This is a bipartisan phenomenon, although I guess the Democrats' participation in it has come mostly out of fear that they'll be attacked by Republicans as tax-and-spenders. But it ought to be perfectly possible to be a fiscally responsible, respectful-of-the-citizens'-money tax-and-spender. Just as the current occupant of the White House has shown that it's perfectly possible to be a fiscally irresponsible, disrespectful-of-the-citizens'-money tax-cutter.

My new column is up online and in the magazine with McCain and Obama on the cover, together for perhaps one last time. It begins:

In 2002 the inimitably audacious editorial writers at the Wall Street Journal brought to the nation's attention the existence of a vast and allegedly pernicious class of "lucky duckies" who pay no federal income tax because their incomes are in sub-$40,000 territory and they qualify for one or more of the many credits added to the tax code in recent decades.

Since then, thanks to tax changes proposed and signed into law by President Bush, this impoverished yet fortunate class has only grown--to 45.6 million households, or one-third of all income tax filers, according to the Tax Foundation, a right-leaning think tank with a reputation for getting its numbers right. If the various tax cuts and credits Barack Obama has proposed on the campaign trail are enacted, the group estimates, that figure will rise to 63 million, while John McCain's tax plans would bring the tally to 62 million. Either way, more than 40% of the population would stand to come out even or ahead on April 15.

What are we to make of this development? Some conservatives say it endangers the underpinnings of American democracy, echoing the 2002 Journal editorial: "Workers who pay little or no taxes can hardly be expected to care about tax relief for everybody else. They are also that much more detached from recognizing the costs of government." This argument is historically obtuse, considering that the federal income tax was initially designed to hit only a tiny minority of high earners and exempt the other 99% (it first became a mass tax during World War II). It's also misleading, in that lucky duckies still get hit with payroll taxes for Social Security and Medicare, federal excise taxes, state and local sales taxes and so on.

But the growth in the ranks of those who pay no income tax does raise an important question that both Obama and McCain failed to fully answer during the current campaign: How the heck are we going to finance our government? The question has been looming for a while because of the chronic deficits of the Bush years and the soon-to-escalate demands on Social Security and Medicare. It has gained urgency lately, with Washington committing vast sums to fighting financial panic and with more deficit-financed emergency aid surely on the way. Read more.

One final note: I really wish I had read Shawn Tully's new Fortune article on the HENRYs (high earners, not rich yet) before writing my column. Because then I could have worked in the HENRYs alongside the lucky ducks.