The state and city governments will simply raise taxes or create new ones to get the funds they need to survive. It is not politically acceptable to do that until there is no other choice. I would not be worried as long as the Fed is there to bail them out with their printing presses. Best idea is to stay diversified and have a percentage of your savings in all the major areas (bonds, stock, real estate, foreign markets). I believe now is the time to buy low maintenance rental properties in areas that have done well in the down market. There are lots of people that will not be able to buy a home for a long time due to forclosures and loss of capital. Home ownership no longer is the primary goal of the younger generation.
I have found over years of investing that most of the time the best thing to do is nothing when after reading/viewing these scare stories. Set long term goals and stick with them.
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