“Throw in a few billion here and a few billion there, and before you know it, you are talking about real money…” . I don’t recall who first coined that phrase, (I think it was in the late ’80s), but when I first heard it, it was Millions not Billions!
America’s states are facing a projected budget shortfall of $165 billion for fiscal year 2010, the cumulative total projected through 2011 is estimated somewhere between $350 billion and $375 billion and that’s only if the unemployment rate flattens out and begins to drop by mid- 2010.
Economics 101: When states and local municipalities run out of cash to pay their bills, their options are: 1) anger working families [by raising the “jambalaya” of taxes they pay every day], 2) hurt the working poor and those unemployed [by cutting spending on essential services] or 3) just piss everyone off by doing both. When the federal government is short of cash, they can do the same things or just simply vote to print more cash – in Football, that is called a punt. When you are elected to Congress, you punt a lot.
As obscene as $165 billion of “real money” may sound to you, consider that the US tax payers gave $180 billion to bail out just one company, AIG, $13 billion of which went straight to pay AIG’s debt to another company, Goldman Sachs.
That’s right, for what we tossed just to AIG, we could have covered the budget shortfall of every state in the nation for 2010 and still have $15 billion to spend. Add in the $50 billion to another company (Citigroup) and $45 billion to another (Bank of America) and Goldman Sachs who received their own $10 billion tax payer toss, and we are on the path to ensuring that no state in the nation needs to cut vital services through 2011.
I know what you are thinking … “but we averted a global financial meltdown that would have resulted from the banks inability or fear to lend money (a.k.a., the credit freeze)”. Perhaps, but credit is as cold today as it was last Fall. And when was the last time you heard of anyone walking into a Goldman Sachs branch to get a home mortgage? [Hint: Never – Goldman Sachs, along with others, became a “bank” only after the TARP program was announced.]
Fed Chairman Bernanke, in his testimony to the House and Senate finance committees, used the recent recovery of the stock markets and the swelling bottom line of the large financial institutions (and by definition, their record bonus payouts) as a vindication of the Treasury and the Fed policies, and proof that they had averted a global financial disaster.
Perhaps, Bernanke also made clear that the prospects for improved employment, home values or even a decrease in home foreclosures, wasn’t likely for the next couple of years. He went on to say that “financial conditions remain stressed, and many households and businesses are finding credit difficult to obtain”…e.g., in spite of the massive amount of money the US taxpayers have tossed to the banks, the credit freeze remains.
Moody’s Economy.com predicts that 1.8 million borrowers will lose their homes this year, up from 1.4 million last year. I know what you are thinking … “but wasn’t that the reason we tossed out all those billions and billions of dollars (a.k.a., real money) to the banks?” Perhaps.Obviously, homeowners in or at risk of foreclosure are also not paying their local real estate taxes.
The Center on Budget and Policy Priorities reports that 20 or more states have already made cuts to public health programs, programs for the elderly and disabled, and aid to K-12 education. Over 30 states have cut assistance to public colleges and universities. Across the nation, states have announced additional cuts to; health coverage to elderly and disable, school meals, homeless shelters, services to seniors, occupational therapy, Alzheimer services, drug assistance, mental health issues, legal services for foster children, K and Pre-K programs, and more. But all is not gloom, the Feb Chairman is correct; the stock market is indeed up and so are the Wall Street bonuses.
Something is very wrong with this picture, but you may have noticed there is not much “buzz” in the press these days about TARP money. The new “House” fire everyone in Washington is running to is the one where our nation’s first black president is being compared to a Nazi because of his health care policies. That one may take me a lifetime to figure out so I will do as Congress does and just punt.
-Surface Earth columnist: CB