Have a safe and relaxing Thanksgiving.
Archive for November, 2009
At 6:15am this morning I opened the Senate website, located the health care reform bill that will be voted on tonight, and began reading it. I gave up about five minutes ago…
There’s not a chance that a single senator read the entir3e bill, and the odds are nil that they have a comprehensive idea about everything contained in it.
I completed the Evelyn Wood speed reading course back in the 70′s as a mandatory requirement for my job; I read reams of documents each week pertaining to Congressional reports, etc. I’m confident that if she were alive today she too would be hard pressed to wade through the 2,074 pages of mind-numbing language in much less than a week and would find it virtually impossible to offer a comprehensive overview of what she read.
The rush to judgment on getting this issue passed into law makes no sense, and anyone doubting it should take a look at the document that will be available on the Senate website until the voting commences this evening.
Regardless of the level of government in which they’re serving, politicians are contemplating options for raising taxes in every conceivable way. The results of their actions will be a laboriously slow economic recovery because consumers simply won’t have much, if any, discretionary cash for years to come. And those who do have a few extra bucks are saving it rather than spending it things they don’t need or assume will become even less expensive as retailers are forced to continue dropping prices.
2010 is going to be a painful year on all fronts, but it doesn’t end there; that’s just the beginning of the big payback that many economists estimate will last for 10 years, a full decade.
Looking to the future, fiscal 2011 begins next July and the outlook for that timeframe doesn’t get any brighter. Estimates by The Center on Budget and Policy Priorities strongly suggest that the fiscal shortfall will be $80 billion. This number was calculated using data from 35 states that have already completed their fiscal estimates. The center also projects that states could reflect a collective budget gap of $120 billion as far out as 2012. To put this in perspective, the maximum annual budget shortfall during the 2002-05 recession years topped out at $80 billion in 2004.
Are there any viable ideas about how these government entities can go about shoring up their shortfalls? The first thing coming to mind is simply by reducing spending. But this quickly becomes a two-edged sword. Significant cost-cutting is truly challenging when you’re already in a financial abyss. Most local governments are now faced with having to make comprehensive cuts to presumed essential services, ones that voters said they opposed. Reducing weekly hours and mandating non-paid holidays are issues voters and even the employees can tolerate. But completely shutting down services such as police stations, firehouses or emergency care facilities and the sign-carrying picketers will emerge overnight.
So, given limited range of choices facing the states, the most likely remaining option is raising taxes, and this can usually be voted on, approved and implemented in a matter of weeks. And the Feds will probably jump onboard as well. A financial think tank focusing on the federal government deficit has made a rough calculation using 3% of the Gross Domestic Product tax increase. It comes to an average tax increase of more than $4,200 per each legal, tax paying person in the country.
At the moment the most perceptible assumption is that each of us is going to pay more tax to every level of government, from state and federal income tax to property and sales tax at grocery and department stores. If we consume it we’re going to pay higher tax on it.
Since Thanksgiving is barely a week away and the Christmas holiday season begins the morning after, it seems that we now have three practicable holiday options: 1) shop like mad this season before the tax man cometh, 2) print and send computer generated holiday greeting cards in lieu of gifts that most intended recipients can live without, or 3) bank the money you would have spent gift shopping because you’re going to need it when tax time rolls around next year. If you’re leaning toward option number three, odds are your friends and relatives are struggling with the same dilemma. Maybe adding one more holiday option is a good idea; just give each of them a call.