Ever since Meredith Whitney appeared on the CBS News broadcast "60 Minutes" and said that there would be "hundreds of billions of dollars' worth" of municipal bond defaults, everyone and their brother has been mocking her prediction.

The criticisms generally fall into three baskets: (1) she's a bank analyst, not a muni pro, (2) her research is bogus, and (3) she's a crazy woman married to a professional wrestler.

No one really argues with her numbers, per se. Instead, they say that because the economy will improve, tax revenue will rise, which can be augmented by tax increases. If things get really bad, the Fed or the Federal government will step in with loans or some kind of bond buy-back program. Therefore, muni bonds will be covered. Therefore, there is no cause for alarm. Therefore, Meredith Whitney is an alarmist.

We're six months out from her famous "60 Minutes" appearance and what do we know now that we didn't know then?

Well, we know what we've always known. Municipalities are almost entirely dependent on two sources of revenue: property taxes and sales taxes. That's where they get their money.

What we now know is this: "The amount of equity in American homes has plummeted from $14.9 trillion in the first quarter of 2006 to just $6.3 trillion at the end of 2010." If you're a glutton for punishment, you can read all the gory details here.

What that means is that the value of residential real estate has been cut by more than half in the last five years. So raising taxes on an asset that has plunged in value by more than 50% is probably not going to work. Indeed, an army of lawyers has gathered to help homeowners have their property tax assessments reduced. Raising property taxes (beyond cost-of-living adjustments) is off the table.

Meanwhile, sales tax receipts are no longer in free fall, but they're not growing. They're flat as a pancake. And with commerce moving to the Internet, more and more of those sales tax receipts are disappearing altogether. The malls that once filled the coffers of urban and suburban communities are turning into ghost towns.

Meanwhile, Fed Chairman Ben Bernanke has told anyone who will listen that he is not going to extend the Fed's purview to include the municipal debt market. Muni bond holders are on their own.

Which leaves the Federal government, which at last count had $59 trillion in unfunded liabilities to work out over the course of the next, oh, let's say 20 years. It's not going to bail out municipalities. It can't afford to.

Ms. Whitney's basic point about all this is as follows: "While over the past 10 years state and local government spending has grown by 65%, tax receipts have grown only by 32%."

The notion that taxes can be doubled at the muni level when the principal source of muni tax revenue has declined in value by more than half is obviously a non-starter. Made more so by the fact that sales tax revenue can't possibly grow fast enough to even begin to make up the difference.

The numbers don't lie. The muni bond market is headed for a big fall.