Last night, in: "
Wall St. on the Fed: 'It's a joke. Everyone picks their pockets,'" I highlighted the disparity between Wall Street (in receipt of no less than $4.7 trillion via TARP payments, AIG bailouts, FDIC guarantees, and a myriad of other programs) and Main Street (where our government has ponied up roughly $500 billion and some tax cuts, with much of those outlays scheduled over an extended period of time, for distribution in 2010 and 2011).
In that diary, I focused upon Arianna Huffington's qualitative review of just a handful of the draconian budget cuts that the citizens living in the majority of our 50 states would have to endure (See: "States Forced to Cut Services to the Bone: The Opportunity Cost of the Bank Bailout") as a result of our economy's downturn, very simply due to the fact that while our federal government has responded substantially, the truth is it's nowhere near enough.
In the diary I posted just prior to last night's diary, I also covered the reality that one cannot dismiss unemployment--or more accurately: "a jobless recovery"--as being something that matter-of-factly continues to rise for 12 to 24, or more, months
after the "recovery" begins, and then stays at unacceptably highly levels for, possibly, many years after the "experts" call an "end" to a recession. The too-infrequently-stated-truth is that it's a given fact that as long as unemployment is increasing (and as long as it stays at unacceptably high levels), the housing market will continue to experience record levels of foreclosures, for many months, if not years, concurrent with that increasing joblessness, too. (See: "
How Fake Is The 'Recovery?'" Also see, "
Economists React: Housing `News Sounds Better Than It Looks.'" And this: "
'Shadow' inventory lurks over U.S. housing recovery;" as well as this: "
Unemployment spreads distress in U.S. home loans.")
What's changed, IMHO, in the past few days is that--above and beyond the cacaphony of pundits' calls of an imminent economic "recovery"--we're also starting to see the "D-word" appearing in the MSM headlines more than we have in the past few months, in stories such as this milestone: "U.S. Recession Worst Since Great Depression, Revised Data Show," and this, just over the past 24 hours: "Tax Revenues Post Biggest Drop Since The Depression."
There's this surreal disconnect occurring all around us. And, as I reported last night, many notable people are asking: "What's wrong with this picture?"
We're hearing two, diametrically opposing sets of "facts."
While many would have us believe that we'll just magically forge ahead while folks starve to death and die homeless all around us, the truth is that when near-record amounts of folks aren't working--especially for an extended period of time--this has a devastating effect upon everything around us within our society...so much so, that these effects are manifesting themselves in the news we're reading, even today.
I've already covered how dramatically increasing unemployment directly affects foreclosure rates.
But, it has a debilitating impact upon our states' and municipalities' abilities to provide basic services, too. (Also see Arianna Huffington's other powerful story links on this subject, above.)
Tax Revenues Post Biggest Drop Since The Depression
Huffington Post 8/3/09
WASHINGTON -- The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation's plate and struggling to find money to pay the tab.
The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.
Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.
The last time the government's revenues were this bleak, the year was 1932 in the midst of the Depression.
You see, when people aren't working they're not spending either, so in addition to payroll and income tax reveneues going off a cliff, diminishing sales tax revenues are right there alongside taking a dive, as well. From Tuesday's NY Times: "States in Distress."
States in Distress
New York Times Editorial
Published Online: August 3, 2009 In Print: August 4, 2009
By now, most states have balanced their budgets for the fiscal year that began on July 1. To do so, they had to fill the deepest budget holes in modern memory -- shortfalls totaling nearly $143 billion.
Yet, their problems are far from over. Already 10 states and the District of Columbia are coming up short for this year by $4 billion. And 33 states currently foresee deficits for next year, mainly because high unemployment is expected to depress tax revenues even as it increases demand for state aid. The coming deficits -- estimated at $160 billion to $180 billion -- are likely even if economic growth resumes, because hiring is not expected to pick up until well into a recovery.
Continued fiscal stress on the states will severely impair Americans' ability to withstand the downturn...
--SNIP--
...For next year, roughly $40 billion in federal stimulus will be available for state fiscal relief. But the states' own emergency funds will be largely depleted and, obviously, one-time fixes will be tapped out. Spending cuts on the scale of those enacted this year would be brutalizing. Cuts have already fallen heavily on services for low-income families, the elderly and the disabled, on early education and child care, and on public schools, colleges and universities. Most states also have cut their public work forces, impeding access to services and harming the economy by reducing income and consumer spending.
Ever deeper spending cuts risk long-term damage to institutions like social service agencies, school, health care networks, parks and cultural forums. As employees leave and downsizing, neglect and disrepair become the norm, it gets increasingly difficult to rebuild....
As any economist will tell you, without consumer spending increasing, any talk of a "recovery" is hollow, at best: "American Incomes Head Down, Threatening Recovery in Spending."
American Incomes Head Down, Threatening Recovery in Spending
By Shobhana Chandra
Aug. 4 (Bloomberg) -- Household income in the U.S. is weakening as the influence of the government's stimulus plan fades, prompting economists, Federal Reserve officials and a Nobel laureate to warn that consumer spending may stumble.
"Consumers have started to change their behavior and they are going to save more," said Richard Berner, co-head of global economics at Morgan Stanley in New York and a former researcher at the Fed. "You have pressure on wages, you have employment still declining."
Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released today. The Obama administration's tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression.
The truth is, ongoing, massive unemployment threatens to brutalize the very foundations of our social order: "Guard troops may be needed in troubled Ala. county." This appears to be playing out before us, already...
Guard troops may be needed in troubled Ala. county
By JAY REEVES, Associated Press Writer Jay Reeves, Associated Press Writer
Tue Aug 4, 2:46 pm ET
BIRMINGHAM, Ala. - The sheriff in Alabama's most populous county may call for the National Guard to help maintain order, a spokesman said Tuesday, after a judge cleared the way for cuts in the sheriff's budget and hopes dimmed for a quick end to a budget crisis.
Circuit Judge Joseph L. Boohaker ruled that leaders in Jefferson County -- now trying to head off a municipal bankruptcy filing of historic proportions -- could go ahead with plans to slash $4.1 million from the budget of Sheriff Mike Hale, who had filed a lawsuit that temporarily blocked spending cuts for his office.
About 1,000 county workers already are on unpaid leave because courts threw out a key county tax, and Hale has warned that reductions to his budget would mean fewer patrols by deputies and decreased courthouse security.
A spokesman for Hale, Randy Christian, said the sheriff told Gov. Bob Riley after the ruling that state assistance may be needed to perform basic law enforcement tasks once the department's current funding is exhausted in early September.
"We will certainly be looking at calling in the National Guard," said Christian.
IMHO, as even our MSM is now slowly beginning to acknowledge that we're all in the same boat, the truth is that Birmingham, AL--and the county surrounding it--is just the tip of a very big iceberg.
Even Ben Bernanke knows these truths! "Unemployment could undercut U.S. recovery: Bernanke."
So, could someone please show me where it's stated in an academic text that the destruction of the very cloth of our society is--like unemployment--a lagging indicator of our economic recovery?
Once I have a reference (and a diary link) for that I'll feel a hell of a lot better because I'll have some evidence to share with you which indicates that our recovery really is just around the corner.
But, in the meantime, shout it loud and clear to Washingiton: "Stimulus Works, Give Us More!"
Stimulus Works, Give Us More!
Monday 03 August 2009
by: Dean Baker, t r u t h o u t | Perspective
...But to say that the stimulus has made things better is not to say that it has made things good. We are looking at an unemployment rate that is virtually certain to cross 10 percent in the next few months and likely to remain above 10 percent into 2011, and possibly longer, without a further boost to the economy. While most of the stimulus has not yet been spent, we are already spending out the money at close to the maximum rate, and it is the rate of spending that matters.
To see this point, suppose a worker's pay is increased by $500 a month. Mostly likely this worker will increase her monthly consumption in the fist few months after getting her raise. She may keep this raise for several years, but after her consumption originally increases, it remains fixed at the higher level as long as her pay stays at the new higher level.
In the same vein, the stimulus was already kicking an extra $30 to $40 billion a month into the economy in the second quarter. There will be little additional boost from the stimulus in future quarters.
This is very bad news, because the economy has almost zero upward momentum. The continuing decline in jobs and hours, and falling real wages, will depress consumption. Investment is depressed by huge overcapacity. The same holds for housing, with the vacancy rate still at a record high. And, of course, the stimulus was not large enough to fully stem off a massive round of budget cuts by state and local governments across the country.
The stimulus has eased the crisis, but voters will be expecting more, and it's hard to see how they'll get it without more government action to boost demand.
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**COMPLETELY O-T**...
Not wanting to leave you walking away from this diary on a "doom and gloom" note, I'm going to go completely off-topic and tell you about a really outstanding piece of breaking news that has just started to run on the wires as I was writing this: "Obama to Chair UN Nuclear Non-Proliferation Meeting."
Obama to Chair UN Nuclear Non-Proliferation Meeting
Agence France Presse
US President Barack Obama will chair a high-level meeting of the UN Security Council on nuclear non-proliferation and nuclear disarmament next month, the US ambassador to the UN said Tuesday.
Ambassador Susan Rice said in a statement that Obama would preside over the special meeting on September 24, a day after he is due to address the UN General Assembly session.
"The Security Council has an essential role in preventing the spread and use of nuclear weapons and is also the world's principal multilateral instrument for global security cooperation," the statement said.
"The session will be focused on nuclear nonproliferation and nuclear disarmament broadly and not on any specific countries. Over the next several weeks, we will work closely with members of the Security Council to prepare for this important meeting," it added.
Peace!