Thursday, July 15, 2010

The Obama Tsunami

Mish says to prepare for an economic tsunami as states go belly-up and consumers hunker down, preparing for the inevitable tax hikes. They'll include carbon cap-n-trade, the expiration of Emperor Chimpy McBushitler's tax cuts, a possible VAT tax, new health care taxes and dramatically increased entitlement bills.

• Illinois let $5 billion of bills go unpaid.
• Minnesota is delaying corporate and sales-tax refunds, postponing school and medical aid and setting up a $600 million bank line of credit.
• New Jersey is planning to refinance about $250 million of general-obligation bonds to push $202.5 million of debt-service costs into future fiscal years.
• Illinois, is selling $900 million of bonds for capital projects this week.
• 22 states put staff on temporary leave.
• Arizona sold its House of Representatives and Senate buildings.
• California solicited bids for 11 of its office complexes.
• Delaware saved $29,000 by eliminating flowers at the state psychiatric hospital and health department.
• California Governor Arnold Schwarzenegger, facing a $19 billion budget deficit for the year that began this month, is trying to force 200,000 state workers onto minimum wages temporarily.

All of those half-assed measures assume the economy is going to get better later this year. Instead I suggest states should expect a Second-Half Housing and Durable Goods Crash.

California alone is $19 billion in the hole and that is after California enacted a temporary 1 percentage point increase in the sales tax rate (expected to generate about $4.5 billion in fiscal 2010) and after it accelerated income tax collection.
It is also after patching a $24 billion hole earlier in the year.

Literally no state is remotely prepared for the second-half tsunami coming down the pike.

Aren't these Democrat policies great? Like open borders, limitless welfare and public sector unions that control government spending priorities?

Oh, and trial lawyers. Can't forget the trial lawyers!

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