Wikinvest Wire

Snow, newspapers, outages, and deficits

Monday, February 16, 2009

It's been an odd few days around here, what with multiple snow storms, a power outage, the President's Day holiday (which no one told me about until today), a website outage, and other things disrupting the normal routine.

When retrieving the morning paper today, only the Saturday edition was there, which was the first tip-off that today was a holiday. It's not clear whether the Saturday paper was delivered today or was buried in the snow only to reveal itself after yesterday's rain.

No matter.

There's more snow falling today, so it was good to get something to read in case tomorrow is a repeat of Saturday.

One chart in the weekend edition of the Wall Street Journal was a real eye-grabber and it is reproduced below. I'm sure this is just one of the first of what will be many, many charts that have a similar dislocation.

The story in question is about the soaring U.S. Federal budget deficit which comes at a time that must make California legislators wonder what all the fuss is about regarding the $42 billion budget shortfall here in the Golden State.

Washington legislators have a projected budget deficit of almost 50 times the one in California and it just keeps getting bigger with no one seeming to mind all that much.

It probably doesn't seem fair to the folks in Sacramento.

It's hard to imagine that President Obama or anyone else in Congress is really serious about fiscal responsibility - they'll probably have their summit, issue platitudes about the long-term knowing that the long-term never really gets here, and then just watch things spin further out of control.

With a $787 billion stimulus package in hand, President Barack Obama will pivot quickly to address a budget deficit that could now approach $2 trillion this year.

He has scheduled a "fiscal-responsibility summit" on Feb. 23 and will unveil a budget blueprint three days later, crafted to put pressure on politicians to address the country's surging long-term debt crisis.
IMAGE Speaking Friday to business leaders at the White House, the president defended the surge of spending in the stimulus plan, but he made sure to add: "It's important for us to think in the midterm and long term. And over that midterm and long term, we're going to have to have fiscal discipline. We are not going to be able to perpetually finance the levels of debt that the federal government is currently carrying."
...
The president met with 44 fiscally conservative "Blue Dog" Democrats this week and gave a nod to legislation that would set up commissions to deal with long-term deficit strains. The commissions would then present plans to Congress for an up-or-down vote.

"We feel like we've found a partner in the White House," said Rep. Charlie Melancon (D., La.), a Blue Dog co-chairman.
...
Projections for 2009 deficit range from Goldman Sachs's $1.43 trillion to $1.9 trillion from economic firm Strategas Research Partners. At 13.5% of GDP, a $1.9 trillion shortfall would more than double the peacetime record during Ronald Reagan's presidency, and approach the mark set in 1942 as the U.S. joined World War II.
Reagan never did get to the long-term either - the part about fiscal discipline, that is.

ooo

1 comments:

Nostradamus, apparently said...

I just read that Kansas is out of money. They've stopped processing income tax refunds and don't have money for this Friday's payroll.

California is, of course, in deep do-do.

Oregon, like most states, is in trouble and facing a huge shortfall of almost $1 Billion this biennium.

The shortfall dwarfs the "rainy day fund" of $350 million, property tax revenues are down substantially and it's hard to get income tax increases from people who are unemployed.

Federal stimulus money to Oregon was just cut in half and won't get here in time anyway.

The only choice is to cut expenses which means laying off state workers, making matters even worse.

It's like a death spiral that gets tighter and tighter each turn.

My guess is that almost every state, except possibly Montana and Wyoming, is in deep trouble.

The Feds can print money but the states can't. So, either the states will default or the Feds will have to step in with even more Federal funds, making the Federal deficit even larger.

This could make the bank or car bail outs look trivial. Of course, these so-called bail outs are all done with pretend money.

At some point, you start wondering where this ends. When will people begin to question the soundness of the Greenback? "Full faith and credit" aren't as impressive today as they were a while ago.

My mind wanders to a Beatles song, Revolution...

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