What Uncle Sam giveth, the states will take away.
The balance sheets of the various and several states are in their worst shape in sixty (60) years. Almost every state is facing it's worst budget deficit ever.
The worst is of course California which has a $24 billion budget deficit. Years of overspending and overborrowing have left California with few choices. Raise taxes or cut spending.The problem is that California taxpayers have had enough leaving the Legislature no choice but to look to it's own sacred cows, the teachers and the prison guards. Schwarzenegger is proposing to close as many as 200 state parks and release as many as 200,000 prisoners.
Many states are getting creative with ways to raise revenue seeking to increase taxes on soda and other junk food. While presenting arguable corollary public health benefits, they are in fact highly regressive hitting the poor and lower middle class much harder than most.
The real danger is that state tax increases will take the steam out of any serious recovery. Even without the lapse in Bush's tax cuts in 2011, serious state increases in income and other taxes will take money out of the private sector. As to Bush's tax cuts lapsing, that might promote short term growth in a perverse way as earners and investors try to take as much income as possible before they lapse. Many economists predicted a similar effect from Clinton's 1993 tax increase which NEVER materialized because his increases were made retroactive. 1992 income earned while Bush hypothetically could have been reelected was taxed at the new and higher 1993 rates.
Most disturbing because it is most distorting are the Federal Stimulus funds flowing to the states. Instead of using them to repair and restore infrastructure, many states are using them to pay for current bills. Rather than face the music and impose the necessary fiscal discipline, too many states and localities are using the Federal funds to postpone their eventual day of reckoning and making that day even more painful than it otherwise would have been. Everyone knows that those Federal funds cannot continue and yet too many state legislatures are behaving as though those funds will be a permanent part of their revenue stream; e.g. N.Y. , Mass., California, N.J., Pa., S.Carolina, Arizona and even Fla.
Re: What Uncle Sam giveth, the states will take away.
some interesting corroboration ....
(snip)"Stimulus Grants
The federal government's fiscal stimulus includes $5 billion for states where more families receive welfare or spending increases on employment subsidies or short-term emergency assistance. That provision sparked concerns from the Heritage Foundation and other conservative groups that President Barack Obama was undoing the provisions of the 1996 law intended to encourage states to get people off welfare and onto payrolls.
So far, only California and Ohio have received stimulus grants, but 38 other states and territories said they plan to apply, said Jeffrey Kelley, spokesman for the Department of Health and Human Services' Administration for Children and Families.
The lag in the increase in welfare cases during the worst recession in a generation is curious to some some scholars. "In many respects, the mystery that had been operating until now had been how can there be such a rapid increase in unemployment and long-term unemployment and not show up in the welfare [system]?" says Mark H. Greenberg, director of Georgetown University's Center on Poverty, Inequality and Public Policy.
The extension of unemployment benefits by Congress -- for as long as 59 weeks in some states -- may be one reason.
"To some extent unemployment [compensation] is doing what we hoped it would do, which is being the first safety net for unemployed workers," says Don Winstead, the deputy secretary of Florida's Department of Children and Families. Without those extensions, he added, the number of families on welfare in Florida would have risen even more than it has: up 14% in June versus a year ago."(snip)
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Of course, the important ingredient that this article left out was the fact that a number of state unemployment insurance funds are already bankrupt ... with continued funding for unemployment checks being obtained via states borrowing from the federal gov't, states borrowing from their own general funds ( which effectively passes today's costs of unemployment checks forward to future state taxpayers via the issuance of new Muni Bonds) etc.
The article also only touches on the issue of 'sequential' gov't benefit programs ... with unemployed people first bankrupting the state's unemployment fund while receiving 59 weeks worth of unemployment checks ... and THEN beginning to bankrupt the state's general funds by signing up for welfare / food stamps / medicaid after the unemployment benefits are exhausted ! We are just now beginning to see this area develop into a major problem ...
(snip)"Twenty-three of the 30 largest states, which account for more than 88% of the nation's total population, see welfare caseloads above year-ago levels, according to a survey conducted by The Wall Street Journal and the National Conference of State Legislatures. As more people run out of unemployment compensation, many are turning to welfare as a stopgap.
The biggest increases are in states with some of the worst jobless rates. Oregon's count was up 27% in May from a year earlier; South Carolina's climbed 23% and California's 10% between March 2009 and March 2008. A few big states that had seen declining welfare caseloads just a few months ago now are seeing increases: New York is up 1.2%, Illinois 3% and Wisconsin 3.9%. Welfare rolls in a few big states, Michigan and New Jersey among them, still are declining."(snip)
(snip)"This is the first real test," said Liz Schott, a welfare analyst at the Center on Budget and Policy Priorities, a liberal Washington think tank. "We always said, how is it going to perform? How is TANF going to perform in an economic downturn?"
One clue, she says, can be found in a different measure. Although the TANF program seems to be accommodating increased need, it is doing so at a slower rate than another government initiative: the food-stamp program. The number of food-stamp recipients has risen in every state and was 19% higher in March than a year ago, a much bigger increase than the number of welfare cases.
Food-stamp eligibility is significantly easier than the criteria for receiving welfare, so food-stamp assistance tends to rise first. The food-stamp program covers a much larger pool of people who have trouble making ends meet but make more money than the allowable limits under TANF.
In general, a family of four must have a monthly income of less than $2,297 to qualify for food stamps. Welfare, on the other hand, is designed as a last resort."(snip)
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But aside from the issue of rapidly rising costs to states for unemployment benefits / medicaid benefits / food stamp benefits / welfare benefits etc. there is also the issue that incoming tax revenues under existing tax rates are falling steeply.
(snip)"Over all, personal income tax collections are down by about 6.6 percent compared with last year, according to a survey by Mr. Pattison’s group and the National Governors Association. Sales tax collections are down by 3.2 percent, the survey found, and corporate income tax revenues by 15.2 percent."(snip)
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Amazingly, despite the rapid growth of unemployment and social welfare benefit spending, and despite rapidly declining tax revenue receipts, without exception every state with a budget deficit seems to be calling for tax increases of all kinds as their first 'remedy' to fill their budget gap. In states where tax increases have met with insurmountable opposition (i.e. California's special election, New York's 'hijacking' of the state senate, etc. ), spending cuts are finally getting a little bit of discussion. So far, proposed spending cuts have raised the ire of public service workers' unions instilling re-election fears in any politician who might have the 'gall' to fire teachers or reduce weekly working hours for gov't office staff.
Ultimately, we have not yet begun to see the massive state and local tax increases which will be necessary to stave off state bankruptcies in FY 2010, when the 'tab' for welfare / medicaid / food stamps really starts coming due.
Quote:
Everyone knows that those Federal funds cannot continue and yet too many state legislatures are behaving as though those funds will be a permanent part of their revenue stream;
Maybe they know something that you don't !!! For example, the 'tin foil hat' crowd is of the clear opinion that federal funds to particular states WILL continue indefinitely ... with the federal taxpayers of thrifty ( some would say stingy re social welfare cost ) states like Texas thus being obligated to help fund the spendthrift ( some would say overly generous re social welfare cost ) states like California.
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Re: What Uncle Sam giveth, the states will take away.
It is an unhappy time for California, but luckily the impending implosion of their state will allow the rest of the country a preview of what's to come. There are so many things wrong with the California strategy, and as it begins to descend into chaos they will be listed with ease.
Every non-vital state service should have been suspended in California about 6 months ago. Pools /parks /lifeguards at the beach - done. The rules of the game are changing and maybe if it wasn't such a nice place to be a bum, they would have less expenses from the hippies and hobos and illegal immigrant.
Every criminal in jail who is not American should be released and deported immediately without any appeal. Don't even give them lunch just send them back right away, by the cheapest means. Putting an illegal immigrant in jail is like trying to reform an abusive boyfriend. It's a waste of time, they never change, and in the end they will leave anyway.
You can't play with public health and hospitals because of the recent plagues, so leave those alone. Everything else needs to get cut and yes employees will get fired and temporarily that will be worse, but it beats a tax increase that just might be the kiss of death for the US credit rating and American capitalism as we know it.
From now the department of transportation and whatever should close at noon, stop buying paper (move to paperless office which is better anyway), stop buying office supplies (which you know damn well are just stolen by state employees). Not one new computer, desk, nothing. Cancel social programs. Cancel schools 1 day per week. Make kids over 12 stay home on friday and self study.
And send in the army because a lot of people are gonna get desperate real fast, and police officers are frankly too expensive. If they wait to start bouncing welfare cheques and pay cheques to prison guards then you'll see the real day of reckoning.
Re: What Uncle Sam giveth, the states will take away.
The states, by and large, reflect the spending habits of its residents.
Some states are a bit worse off than others. For example NYS has lost a huge chunk of its income from the Wall Street financiers. Probably also Chicago with its CBOT. If we had found something newly deleterious in (say) coal or cotton, and stopped using it, another set of states would be more seriously impacted. That said, NYS has some seriously poor spending/taxing habits. But it's residents seem to allow it.
Re: What Uncle Sam giveth, the states will take away.
I TOLD YOU SO !
the latest study of who is getting what under Obama's nonstimulating stimulus package shows that the country's 100 largest metropolitan areas with 2/3 of the population; the most traffic and oldest roads and bridges are NOT getting even a proportionate share of the federal transportation stimulus money. On a per capita basis , some cities are getting less than half as many rural counties. Most of the most acute transportation needs are located in the very cities that are being shortchanged.
Re: What Uncle Sam giveth, the states will take away.
Lots of construction around here -- example, 20 miles of the NYS Thruway (built in 1954) were taken down to bare dirt and built up again (still underway). Several bridges are being rebuilt with some complete reconstruction. Probably 2 to 3 times the normal amount of construction we see during this season.
My question is where is that money going after the construction people see it?
You need to compare the amount of dollars in active proposals because construction of much larger areas takes longer to prepare designs and then to contract out. also maybe there aren't enough large crews/equipment available due to being farmed out to other areas where the executed contracts went out first. Lots of explanations other than that you are right.
Re: What Uncle Sam giveth, the states will take away.
Actually, your timing is impeccable. USA Today just released a study in regard to how 'stimulus' spending is being allocated. It would appear that objective need (i.e. poor condition of roads / bridges etc.) is a minor consideration at best.
(snip)"Billions in aid go to areas that backed Obama in '08
WASHINGTON — Billions of dollars in federal aid delivered directly to the local level to help revive the economy have gone overwhelmingly to places that supported President Obama in last year's presidential election.
That aid — about $17 billion — is the first piece of the administration's massive stimulus package that can be tracked locally. Much of it has followed a well-worn path to places that regularly collect a bigger share of federal grants and contracts, guided by formulas that have been in place for decades and leave little room for manipulation.
"There's no politics at work when it comes to spending for the recovery," White House spokesman Robert Gibbs says.
Counties that supported Obama last year have reaped twice as much money per person from the administration's $787 billion economic stimulus package as those that voted for his Republican rival, Sen. John McCain, a USA TODAY analysis of government disclosure and accounting records shows. That money includes aid to repair military bases, improve public housing and help students pay for college.
The reports show the 872 counties that supported Obama received about $69 per person, on average. The 2,234 that supported McCain received about $34. "(snip)
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Re: What Uncle Sam giveth, the states will take away.
I wonder if this is because of the usual....congressmen who indirectly buy their votes by funnelling government money into local projects. Also the more 'power' said congressmen have, the more they are able to take from the common pot. However, Upstate NY has traditionally been conservative, and only because of problems in the last administration may it have changed temporarily.