Brace Yourself for a Decade of Higher Taxes
(snip)"European finance ministers Tuesday gave Greece a month to show it's making budget cuts to stop its debt crisis from spreading to other nations. A potentially larger debt crisis, however, is brewing at home.
States and local governments including California face massive budget shortfalls. President Obama has told California not to expect a bailout. But our guest, Dan McCrum, Lex columnist at the Financial Times, says it's only a matter of time. "This year we're starting to see some big budget shortfalls. And ultimately they're going to go cap in hand to Washington," McCrum says.
Bailout hazards. Expect fireworks, when states ask Washington for financial rescues. If Washington says no to municipalities after saying yes to Wall Street and big banks, "that's going to play very difficult politically," McCrum says.
Higher taxes. In fact, local governments have been raising debt in the municipal bond market -- roughly 10X Greece's debt market -- for decades. But with the recession battering tax receipts and the federal stimulus waning, higher local taxes now are inevitable.
"The taxpayer is going to have to dip his hand in his pocket quite deep for the next 10 years," McCrum tells Henry in the accompanying clip.
Public versus private sectors. Meanwhile, the gap between public versus private employees is only widening. Comparing data from the Bureau of Labor Statistics, federal salaries and benefits are roughly double the U.S. average. It won't be long before strapped taxpayers start vocalizing discontent about public employee's huge pension packages, to the dismay of public sector unions. "There's going to be a big fight," McCrum warns."(snip)
^^^ this link also contains a highly informative video clip
Re: Brace Yourself for a Decade of Higher Taxes
more from ...
(snip)"But now the problem of mounting national debt is worse than it ever has been before with -- potentially dire consequences for taxpayers, according to a report by the nonpartisan Peterson-Pew Commission on Budget Reform.
"It keeps me awake at night, looking at all that red ink," said President Obama in Nashua, N.H., on Feb. 2. "Most of it is structural and we inherited it. The only way that we are going to fix it is if both parties come together and start making some tough decisions about our long-term priorities."
Obama will sign an executive order tomorrow that establishes a bipartisan National Commission on Fiscal Responsibility and Reform to make recommendations on how to reduce the country's debt.
Over the past year alone, the amount the U.S. government owes its lenders has grown to more than half the country's entire economic output, or gross domestic product.
Even more alarming, experts say, is that those figures will climb to an unprecedented 200 percent of GDP by 2038 without a dramatic shift in course.
"Within 12 years…the largest item in the federal budget will be interest payments on the national debt," said former U.S. Comptroller General David Walker. "[They are] payments for which we get nothing."
Economic forecasters say future generations of Americans could have a substantially lower standard of living than their predecessors' for the first time in the country's history if the debt is not brought under control. "(snip)
(snip)""The American people today are not remotely prepared for the changes that are necessary," said former Congressional Budget Office director Rudolph Penner.
He says Americans who have been accustomed to buying on credit and living beyond their means at home may soon face a painful reality as the government tightens its belt further.
"They aren't hearing about the drastic changes needed, and they certainly didn't hear about it in the President's budget," Penner said
President Obama's $3.8 trillion budget request for 2011 represents an increase in government spending by more than $100 billion over last year, yet projects slight decrease in the budget deficit over the year before to $1.267 trillion. "(snip)
(snip)"