Tuesday, June 3, 2008

Local Governments Pulling Back

This is part of the bigger reason why the economy I think is headed south. The tornadoes spawned from the credit crises hurricane may well do more actual economic damage. It is a complete domino affect and the plankton theory (if you don't know what this is Google it) at its core. Economically the worse may very well be after the election regardless of who is elected. Thanks goes to Nathan.


State and city governments have yet to shrink the economy; indeed, they have even managed to prop it up. They have quietly maintained their spending at pre-crisis levels even as they warn of numerous cutbacks forced on them by declining tax revenues. The cutbacks, however, are written into budgets for a fiscal year that begins on July 1, a month away.

Big amount of dollars spent.

That share is gigantic. At $1.8 trillion annually in a $14 trillion economy, the states and municipalities spend almost twice as much as the federal government, including the cost of the Iraq war.


But when the current fiscal year ends in 30 days (or in the fall for many municipalities), state and city spending will fall, along with employment — slowly at first and then quite noticeably after the next president takes office.

Of course Florida is the worst off.

No state seems more vulnerable than Florida, with its plunging home prices and slashed property-tax assessments, not yet on the books but soon to be. In anticipation, the legislature in May approved a $66.5 billion budget for the coming fiscal year, down from $72 billion in the current one.

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