Nice interactive chart on the Beige Book accompanies this realistic article on the precarious conditions of State finances:
"The stumbling U.S. economy is forcing states to slash spending and cut jobs in order to close a projected $40 billion shortfall in the current fiscal year.
That gap — identified Wednesday in a survey by the National Conference of State Legislatures — is more than triple the size of the previous year’s. It is the result of broad economic weakness at the state and local levels that could cause pain throughout this year and into 2010. Sales-tax collections, for example, have been hurt by the housing slump and high gasoline prices, which are prompting cutbacks in consumer spending. Personal income-tax collections have been hit by rising unemployment, while corporate income-tax collections have been eroded by falling profits…
Several state-university systems are being forced to raise tuition and tighten their belts…States are also reducing their payrolls and programs. Vermont is cutting about 400 jobs through attrition, while Tennessee is using buyouts and possibly layoffs to eliminate about 3,000 government jobs. Social services have been hit hard. Ten states have made targeted cuts in Medicaid, while three have cut contributions to the Temporary Assistance for Needy Families program."
Of course, it all comes back to Real Estate. Declining housing sales cuts into transfer taxes, Construction spending is down, and employment is way off. The cascading effect of less sales means fewer durable goods sales, home improvement expenditures, etc. As virtuous as the cycle was no the way up, its now that vicious on the way down.
States Slammed by Tax Shortfalls
CONOR DOUGHERTY, AMY MERRICK and ANTON TROIANOVSKI
WSJ, July 24, 2008
Investor Marc Faber, publisher of the Gloom, Boom & Doom Report, talks about the future of Fannie Mae and Freddie Mac, the global economy, and the outlook for stocks and commodities. Faber said Freddie Mac and Fannie Mae should close down their business or split into private companies and not get government aid.
00:00 "The world is in recession already."
01:35 Earnings to "decelerate"; technology stocks
02:59 Need to close down or split Fannie, Freddie
05:11 Concerns about technology stocks
05:41 S&P 500 forecast; outlook for interest rates
07:50 "The Fed is totally ineffective."
08:39 Outlook for oil prices, commodity markets
10:35 Credit crunch, impact on economy
11:24 Overseas interest in U.S. assets; China
13:46 U.S. resource companies "attractive" to Asia
14:47 Worst case: "colossal bust with inflation"
Faber Says Fannie, Freddie Should Split Up, Not Get Aid
Bloomberg, July 23, 2008 07:22 EDT
I’m not sure this really explains what happened.
Any night I’ve been out in the city — last night was Porter House, and Monday was Kellari Taverna — Wall Street appeared to be enjoying a hearty supper and a glass of wine, but I didn’t see any evidence of drunken behavior.
Of course, if your entire world view is predicated on the belief that tax cuts cure all ills, and that any sort of regulatory supervision — even of FDIC insured banks by the Federal Reserve — is an evil to be avoided, well, then, it might look like drunkenness to you.
To everyone else, it merely looks like an incompetent administration executing an ill thought out philosophy, and poorly at that.