The US Economy: Sinking Fast or Already Sunk?
Where has all the money gone?
In 2008, there were a number of bailouts on many levels with a specific intent of stabilizing the US economy.
Unfortunately, foreclosures continue, States face bankruptcy and municipal governments and councilors everywhere face unsavoury choices like how many schools to close or teachers to lay off, how many police or firefighters to fire, or how many pensions to pilfer.
All of this will likely lead to a municipal bond crash somewhere in 2011, as 44 of the 50 states in the US anticipate a large shortfall in 2011 and 2012 and few of them speak about corporate tax increases in lieu of personal tax increases (which are ubiquitous) and drastic reductions in spending, particularly on social services (health, welfare, education, infrastructure).
The United States of America should now be known as the Ultimate State of Anarchy.
What’s the impact for Canada?
Well, our government is at least 20 years behind the times as they still believe that slashing sources of income from foreign nationals – ie. cutting corporate income tax – will somehow result in waves of cash coming back in the form of investment, research and jobs.
In defending their actions, they’re lying to the Canadian public.
Since the Reagan years, Conservatives everywhere have been defending corporate tax cuts as a way to encourage money to ‘trickle down’ to the masses. If you consider getting pissed on by the world’s ruling class ‘trickle down’, then it worked. The disparity between the wealthy and the poor – with the complete elimination of the middle class – is nearly absolute today.
All of these actions designed to ‘balance budgets’ are intentional strategies to marginalize the value of property, eradicate public say into where funds should be spent and continue the process of handing over billions of taxpayer dollars to the world’s A-list.
- If the governor proposes a $1 billion cut and the Legislature approves it, the mayor estimated the city would be forced to cut 15,000 teachers, most of which would be accomplished through layoffs. That’s on top of plans, outlined by the mayor in November, to cut 6,166 teachers in the fiscal year beginning July 1.
- In total, the administration is facing the specter of losing 21,000 teachers in the coming months, most through layoffs. An aide to the mayor warned that these numbers would probably change as negotiations with lawmakers over the state and city budgets begin in earnest in the coming weeks.
- The city’s Department of Education currently employs roughly 75,000 teachers.
- The Illinois Institute of Government and Public Affairs (IGPA) at the University of Illinois stated that it would be “hard to overstate the depth of the fiscal hole the state is in.” The current budget deficit is $13 billion, and is expected to rise to $15 billion by the time negotiations begin in the spring for fiscal year 2012. The IGPA report notes that in a December survey of state budget gaps, it was found that the deficit in Illinois “accounted for about half the total of state deficits nationally and was nearly twice as large as the deficit in California, the second largest.”
- The Democratic-controlled Illinois General Assembly passed a tax bill early January 12 that significantly raises the individual income tax rate. A highly regressive flat tax that will weigh most heavily on the working class, the rate is to be raised 67 percent, from 3 percent to 5 percent.
- In the FY2011 budget, Quinn planned to reduce $509 million in spending plans for a variety of state agencies, with the largest reduction, $313 million, is primarily targeted to programs that serve the mentally ill and developmentally disabled through the Department of Human Services. State employee layoffs are not part of the plan due to a deal earlier this year in which the AFSCME agreed to defer part of its scheduled pay raises in exchange for a guarantee of no layoffs or facility closures through June 30, 2011.
- Possible complete sale of state parks and libraries to the private sector or to developers
- Housing prices, and consequently property taxes, are not anticipated to rise for years because of excess stock. Gaming revenue will remain flat for the foreseeable future, and the growth of gambling in other states and online could further erode it, experts predict.
- Meanwhile, the state’s population of children and seniors is expected to grow, resulting in higher education and health care costs. Add that to the strong anti-tax sentiment and constitutional prohibition of an income tax, and the budget outlook is grim.