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Re: American States & Cities Broke.
Good long article by Ilargi on this general topic at the Automatic Earth.
States of disbelief
Good long article by Ilargi on this general topic at the Automatic Earth.
States of disbelief
Ilargi: I thought it might be a good time to take a look at the states within the States again. It's been close to a month, and what could already be foreseen in early September is indeed happening. That is, most states now have budget agreements, and that's about all the good news there is to report.
As for the rest of the news, a few months into the new fiscal year, with all these hard-fought budgets in their hands, all states that I could find already have sparklingly shining new deficits that they will claim could not have been foreseen by anyone. Tax revenues across the board are down 10-20-30%, and without looking at any details you just know the vast majority budgeted for maybe 5%.
Why? Well, there's political strategy, of course, which is a notoriously short-term. But most of all: They are all counting on a recovery! The hope that springs eternal forgives all foolishness in the short term. Which, conveniently, is the only term politicians understand and care about. Unfortunately, beyond the short term, and if that magical recovery doesn't show up, or even if it's a shallow one, it’ll be debt that springs eternal. Which will be a matter not for the present clique, but for their successors, whose empty promises will tempt their victims to vote for them instead.
A census estimate of a $350 billion combined shortfall seems a pittance compared to what Washington's been doling out recently, but it's easily enough to bankrupt a whole slew of states in the near future. 28% less in income taxes, 10% less in sales taxes, and neither an end nor a savior in sight.
We may be focused on Wall Street, the government and their proclaimed end to the recession, but where actual people live the misery is just getting started and nothing is being recovered, quite the contrary. Against the backdrop of a national health care debate primarily framed by arguments that seem to come straight out of some Monty Python skit, states are cutting budgets for care left, right and center and anywhere in between. Keeping up appearances at the expense of the weakest among you. That is the most predictable factor in all of it.
And if the president and the brightest minds in the country promise economic growth, why would a state governor not believe him -or pretend to- and budget accordingly?
If Tim Geithner says on Capitol Hill that no Plan B is needed for his plans, why would a simple state governor or representative draw up one?
Meanwhile, on the property tax front the rumble is taking off. How many people will lose their homes because they can't pay their property taxes? How many court cases will be fought in how many places?
The economy is being hollowed out from within, and there's nothing Obama can do about it, even if he wanted to. Of which there is no real evidence to date.
In all likelihood these are the issues that will come to haunt you first, before the effects of national policies become evident. However, by now we shouldn't underestimate the chance of sudden shifts in the system either. We’re moving towards an ever thinner edge of the knife.
Here's the story in bullets:
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As for the rest of the news, a few months into the new fiscal year, with all these hard-fought budgets in their hands, all states that I could find already have sparklingly shining new deficits that they will claim could not have been foreseen by anyone. Tax revenues across the board are down 10-20-30%, and without looking at any details you just know the vast majority budgeted for maybe 5%.
Why? Well, there's political strategy, of course, which is a notoriously short-term. But most of all: They are all counting on a recovery! The hope that springs eternal forgives all foolishness in the short term. Which, conveniently, is the only term politicians understand and care about. Unfortunately, beyond the short term, and if that magical recovery doesn't show up, or even if it's a shallow one, it’ll be debt that springs eternal. Which will be a matter not for the present clique, but for their successors, whose empty promises will tempt their victims to vote for them instead.
A census estimate of a $350 billion combined shortfall seems a pittance compared to what Washington's been doling out recently, but it's easily enough to bankrupt a whole slew of states in the near future. 28% less in income taxes, 10% less in sales taxes, and neither an end nor a savior in sight.
We may be focused on Wall Street, the government and their proclaimed end to the recession, but where actual people live the misery is just getting started and nothing is being recovered, quite the contrary. Against the backdrop of a national health care debate primarily framed by arguments that seem to come straight out of some Monty Python skit, states are cutting budgets for care left, right and center and anywhere in between. Keeping up appearances at the expense of the weakest among you. That is the most predictable factor in all of it.
And if the president and the brightest minds in the country promise economic growth, why would a state governor not believe him -or pretend to- and budget accordingly?
If Tim Geithner says on Capitol Hill that no Plan B is needed for his plans, why would a simple state governor or representative draw up one?
Meanwhile, on the property tax front the rumble is taking off. How many people will lose their homes because they can't pay their property taxes? How many court cases will be fought in how many places?
The economy is being hollowed out from within, and there's nothing Obama can do about it, even if he wanted to. Of which there is no real evidence to date.
In all likelihood these are the issues that will come to haunt you first, before the effects of national policies become evident. However, by now we shouldn't underestimate the chance of sudden shifts in the system either. We’re moving towards an ever thinner edge of the knife.
Here's the story in bullets:
.
.
.
.
.
.
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