On Sunday, the CBS news show “60 Minutes” did a very interesting segment on the budget crisis facing so many state and local governments. What the segment essentially amounted to was truly an ominous outlook for the municipal bond market going forward.

The program interviewed renowned Wall Street banking analyst Meredith Whitney, who repeatedly has said that the fiscal problems faced by states likely are going to cause a “spate” of defaults among municipalities. According to Whitney, “you could see 50 sizeable defaults -- 50 to 100 sizeable defaults,” amounting to “hundreds of billions of dollars.” What this all translates into, of course, is big selling pressure in the muni bond sector.

In fact, one quick glance of the chart here of the iShares S&P Municipal Bond Fund ETF (MUB) tells you all you need to know about munis. This sector definitely is one to avoid going forward. Until we see more clarity in the space, munis are one asset class every income investor should be very wary of holding.

The other interesting interview in the “60 Minutes” segment was with New Jersey Gov. Chris Christie. Christie, in his characteristically blunt fashion, told “60 Minutes” that the problem with bloated state budgets is not income, but rather the insane amount of public pension benefits his state has promised. “It’s not an income problem from the state. It’s a benefit problem. And so we gotta change those benefits,” Christie said.

Unfortunately, not too many other governors have the kind of political will that Christie has when it comes to taking on state benefits. In fact, most governors cower at the thought of taking on any element of the public-union machines. Until this issue is addressed, we likely are going to see more of the same fiscal hardships plaguing states and municipalities throughout the country. This could lead to a full-blown fiscal day of reckoning for states, and that could mean some disastrous pressure on municipal bonds in 2011.