Read or listen to the news, and you are going to walk away thinking the worst is behind us and that the economy is rebounding. There’s been talk about same store sales from McDonald’s to Tiffany’s increasing significantly over the previous year, and even the Land of Enchantment has had “nice” surprises announced:
Figures released by both the Department of Finance and Administration and the Legislative Finance Council say the states revenue is up for the current fiscal year by about $56 million and say next years budget shortfall is predicted to be nearly $40 million less that earlier estimates.
Lawmakers say the latest revenue numbers are reason enough for what they call cautious optimism although they say revenues aren’t enough to fix the state’s significant shortfall.
Okay, reality check here folks. All of this “good” news really depends on what you are using as a baseline comparison. If you are comparing this year’s losses to last year’s losses then yeah, we’re losing less, or in budget shortfall terms, our budget shortfall is less than it was. But, this is by no means cause for celebration. Don’t kid yourselves, not only is the economic picture not rosy, it continues to be downright scary:
States are reporting billions in midyear budget shortfalls, and the crunch is likely to continue for at least several more years, a new report says.
Fifteen states are facing combined budget gaps midway through their 2011 fiscal year totaling $26.7 billion, according to a National Conference of State Legislatures report to be released Wednesday. The other 35 states say they are on target with their budgets. At this time last year, 36 states reported a combined $28.2 billion shortfall.
State government spending has begun to rise after falling sharply during the recession, in part because tax revenues are slowly on the mend as the economy recovers. Even so, revenues remain far below pre-recession levels, and many states face pressure to cut programs and raise taxes to cover yawning gaps in their budgets.
Yes, the shortfall is $1.5 Billion less than last year, but that is still a $26.7 billion budget deficit at the state level. And yes, same store sales are better than last year, but unemployment also continues to rise:
The number of unemployed persons was 15.1 million in November. The unemployment rate edged up to 9.8 percent; it was 9.6 percent in each of the prior 3 months.
So, what’s the point here? Am I simply trying to be a downer during this holiday season? No, my concern is that those now tasked with cutting the size of government to bring it back in line with economic realities are going to listen to the hype and ignore the facts. By this I mean, they are going to think that we’re on the road to recovery, and therefore, we need to only make temporary cuts. When the truth is that we need to radically cut programs because this road to recovery is going to be paved with losses for a long time still.
The U.S. dollar will be a safe investment for the next six to 12 months because global markets are focused on the euro zone’s troubles but America’s fiscal health is worse than Europe’s, an adviser to the Chinese central bank said on Wednesday.
Economic woes are NOT a thing of the past.