World economic "experts" and political leaders are now constantly throwing out the terms, "unprecedented", "one hundred year crisis", "uncharted territory" to try to describe, or put a label on, this never before seen global calamity. The dreaded "R" word, recession, so long deemed unthinkable, has finally passed through their lips. Bottom line, no humanist on earth is sure where all this is leading, how bad it's going to get, nor when it will end. Predictions fly about like leaves in a tornado, from the overly optimistic "pie in the sky" to apocalyptic "doom & gloom". What you believe depends on who you believe.
All who read this blog know I reference and ascribe to the Biblical prophecy which details our present condition as the "Ending of the Age of the Gentiles". Even Jewish adherents of the Tanakh (Old Testament) know these prophecies from the books of Daniel, Ezekiel, Micah & other prophets for thousands of years. Bible prophecy is not a myth, or maybe it might happen, but the future foretold. Whether or not you believe something doesn't make it true or false. Its authenticity is solely based upon the reliability of the originator. If our Creator isn't the originator of the Holy Scriptures, then all bets are off. We're just some happenstance of chance, mankind has no destiny, and our future is only oblivion. The only safe option is Yeshua the Christ. You decide...
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Facing Deficits, States Get Out Sharper Knives
LOS ANGELES — Two short months ago lawmakers in California struggled to close a $15 billion hole in the state budget. It was among the biggest deficits in state history. Now the state faces an additional $11 billion shortfall and may be unable to pay its bills this spring.
The astonishing decline in revenues is without modern precedent here, but California is hardly alone. A majority of states — many with budgets already full of deep cuts and dependent on raiding rainy-day funds or tax increases — are scrambling to find ways to get through the rest of the year without hacking apart vital services or raising taxes.
Some governors, including Arnold Schwarzenegger in California and David A. Paterson in New York, have called special legislative sessions to deal with the crisis.
Others are demanding hiring freezes and across-the-board cuts. A few states are finding their unemployment insurance funds running dry, just as the ranks of out-of-work residents spike.
The plunging revenues — the result of an unusual assemblage of personal, sales, capital gains and corporate taxes falling significantly — have poked holes in budgets that are just weeks and months old and that came about only after difficult legislative sessions.
“The fiscal landscape,” said H. D. Palmer, a spokesman for the California Department of Finance, “is fundamentally altered from where it was six weeks ago.”
In Michigan, to reduce overtime costs, fewer streets will be salted this winter. In Ohio, where the unemployment rate is above 7 percent, the state may need a federal loan for the first time in 26 years to cover unemployment costs. In Nevada, which is almost totally dependent on sales taxes and gambling revenues, a health administrator said the state may be unable to pay claims in a few months.
In California, Mr. Schwarzenegger, a Republican, and state legislators are preparing to do battle over a proposed 1.5-cent sales tax increase, while in New York, Mr. Paterson, a Democrat, has proposed $5.2 billion worth of savings, principally cuts to Medicaid and education.
Even states where until recent months natural resource production has provided a buffer — and fat surpluses — are experiencing a sudden reversal of fortunes as oil prices have declined.
“Frankly, I thought 2001 was really awful,” said Scott D. Pattison, the executive director of the National Association of State Budget Officers, referring to the last big economic downturn. “It is even worse now.”
He added, “This fiscal year will be really bad, and what is unfortunate is that I can’t see how 2010 won’t be bad too.”
In keeping with recent economic trends, the states with the worst problems are those where housing booms morphed into a large-scale mortgage crisis over the last two years.
The current-year budget gap in Rhode Island represents over 11 percent of the state’s entire general fund, in large part because of the high number of subprime loans. The story is similar in Arizona, California, Florida and Nevada.
In addition, the crisis in the financial markets had immediate and widespread impact on state budgets. States have lost revenues from capital gains taxes and bonuses that have evaporated, and growing job losses have reduced state income taxes while draining unemployment funds.
“What we are seeing is when fewer people are working there is less income tax and less spending,” said Keith Dailey, a spokesman for Gov. Ted Strickland of Ohio, a Democrat.
Americans have also stopped shopping, which has hurt states that are heavily reliant on sales taxes, like Florida and Arizona. States that rely on tourism, like Nevada and Hawaii, have also been hurt by less consumer spending.
Further, the national credit crunch makes it harder for businesses to get loans, which trickles back into losses to states. When California was temporarily unable to gain access to the credit markets in the days leading up to the federal bailout package, state budget directors across the country noted the moment with horror.
The state’s brief inability to pay bills because it could not get credit — California, like many states, regularly borrows money when it is short of cash in anticipation of revenue flowing in later — has since been largely interpreted as an outgrowth of the much larger national and international credit crisis. Still, some budget experts said the problem could be a harbinger: cities and counties with poor credit ratings could be cut off in the coming year, and there could be higher costs for issuing bonds.
“Just the fact that this was an issue at all is a big concern for every state,” Mr. Pattison said. “Long-term bonds may be at risk. And I think states are going to have to accept that cost of debt is going to be higher.”
In most states, budget directors and legislators have said that tax increases are not likely. A notable exception is California, where Mr. Schwarzenegger is seeking a 1.5-point increase to the state’s 6.25-percent sales tax, although he is unlikely to get the necessary approval of Republican legislators.
In Oregon, moreover, Gov. Ted Kulongoski, a Democrat, has proposed a $1 billion economic stimulus plan centered on infrastructure improvements, which he envisions would be paid for by raising the state’s gas tax by 2 cents per gallon and increasing a host of vehicle fees.
When regular legislative sessions resume in many states in January, other states will be more likely to look to rainy-day funds, when they are available, and deeper cuts to services, most notably to K-12 education, which is generally a last-resort option among lawmakers.
“Most states have tried to protect K-12 and even higher ed,” said Raymond Scheppach, the executive director of the National Governors Association, “but I think they are both going to be on the block.”
Many states are expected to go to a second round of earlier cuts.
“We’ve cut universities, we’ve cut our infrastructure spending, we’ve prorated schools and asked employees for concessions twice,” said Leslee Fritz, the spokeswoman for the Michigan State Budget Office. “All the different options out there we have already done more than once.”
States are also looking to create large-scale infrastructure projects and other construction works as a means of stimulating the local economy.
The Washington governor, Christine Gregoire, a Democrat, is asking the federal government for hundreds of millions of dollars more for state and federal construction projects.
Ohio officials have already passed a stimulus package of $1.5 billion in bonds, to be used largely for public works, advanced and renewable energy projects, and the biomedical industry.
“States don’t have a lot of economic stimulus tools,” said Mr. Pattison of the budget officers’ association, “but they have infrastructure.”
Fewer than a dozen states have remained in the black this fiscal year, according to the Center on Budget and Policy Priorities, a liberal-leaning economic research group in Washington that tracks state budgets, and they are largely those in the West with oil and mineral resources at the ready.
“The oil-producing states were doing very well with oil at $120 a barrel,” said Iris Lav, the deputy director of the center. “They may not do as well now.”
More generally, Ms. Lav said, state budgets are “moving from the damaged to the devastated.”___________________________________________________________________
A Strain on State Budgets
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Japanese Prime Minister Taro Aso announced the IMF loan offer before joining Group of 20 world leaders in Washington to discuss how to tackle the economic turmoil. Japan has almost $1 trillion of foreign currency reserves it can draw upon to support the IMF.
The IMF recently provided emergency loans to Iceland, Hungary and Ukraine worth more than $30 billion to support their ailing financial systems.
Mr. Aso also called for reforming the IMF's governing structure to better reflect the importance of emerging economies.
A spokesman for Mr. Aso said the Japanese prime minister is urging world leaders to learn from Japan's efforts to recover from its own financial crisis of the 1990s.
Spokesman Kazuo Kodak said Mr. Aso believes banks should be required to fully disclose their bad loans and should be given help to remove those loans from their balance sheets.
In another development, the finance ministers of Japan, China and South Korea have agreed that their countries should play what they call a 'pivotal role' in stabilizing Asia's economy. The ministers met Friday on the sidelines of the G-20 summit in Washington.
The finance chiefs said in a joint statement that they will consider increasing the size of currency swap arrangements among their nations. South Korea is seeking to gain access to more dollars after its currency, the won, recently came under heavy selling pressure.
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