States' Deplorable Fiscal Situation Betrays True State Of The Economy Stripped Of Stimulus
There is nothing the administration hates more than the anti-propaganda truth, especially the kind that discloses the pathetic situation of the economy. Which is why Larry Summers must be positively loathing the most recent report from the Pew Center On The States, entitled "Beyond California: States in Fiscal Peril", which, as the observant among you may surmise, discusses states in fiscal peril. In short, that would be all of them. A snippet: "California’s problems are in a league of their own. But the same pressures that drove it toward fiscal disaster are wreaking havoc in a number of states, with potentially damaging consequences for the entire country."
And while the Fed may hope to bail out the ongoing contraction at the Federal level indefinitely (or until it runs out of toner cartridge), the options facing the various states are much less sanguine. To wit:
This examination by the Pew Center on the States looks closely at nine states, in addition to California, that are particularly affected. All of California’s neighbors—Arizona, Nevada and Oregon—and fellow Sun Belt member Florida were severely hit by the bursting of the housing bubble and landed on Pew’s top 10 list of recession-stricken states facing a similar set of fiscal difficulties. A Midwestern cluster comprising Illinois, Michigan and Wisconsin emerged, too, as did the Northeastern states of New Jersey and Rhode Island.
These states’ budget troubles can have dramatic consequences for their residents: higher taxes, layoffs or furloughs of state workers, longer waits for public services, more crowded classrooms, higher college tuition and less support for the poor or unemployed. But they also pose challenges for the country as a whole. The 10 states account for more than a third of America’s population1 and economic output.2 And actions taken by state governments to balance their budgets—such as tax increases and drastic spending cuts—can slow down the nation’s economic recovery.
And if the following statement can be spun somehow as indicative of anything even closely resembling favorable data, or conducive to consumers going out to the latest foreclosed Mall (whose REIT owner is at a 52 week high) and buying Fendi garter belts, we would love to hear how that would be possible:
States overall struggled to close an estimated $162 billion in gaps for fiscal year 2010; since July, that tally has grown by nearly $16 billion. Tax collections in all 50 states for the first quarter of 2009 were down a record 11.7 percent from 2008. Meanwhile, the unemployment rate was 9.2 percent nationally during the second quarter of 2009 (the latest figure available at the time of our examination) [make that 10.2% currently], with 12 states suffering from double-digit jobless rates. That rate was up from 4.8 percent when the recession officially began in the fourth quarter of 2007.
Another way to visualize the impending need for a state-wide bailout. We doubt Obama will mind printing another $200 billion for that purpose. What is immediately noticeable is that of the 10 "worst states" the average budget gap is north of 20%, with California, Arizona and Illinois all sporting a 40%+ budget gap, and as tax revenues collapse!
Another way to see who the 10 worst states in America according to Pew is presented in the map below:
Yet by and far the worst fiscal situation is in California and its closest Southwest state neighbors. Of particular note is Arizona, where the foreclosure problem is even worse than in California. Yet Toll would like you to believe that all is good, even as the CEO sells ever more shares.
Keep in mind: states basically highlight the true economic picture of the economy absent Federal stimuli (and wholesale propaganda). There is no reprieve anywhere yet at the state level. In fact, at this rate many more states aside from California will be forced to not only make very difficult fiscal decisions, which have thus far been successful postponed, but will be forced to come begging to Ben Bernanke for scraps, regardless of how this would look like from a political standpoint. As Pew highlights, the fall out from the ongoing recession is nowhere near contained and in fact it is only getting worse when one removes the sugar coating of various recurring stimuli. In the meantime, the US is simply getting deeper and deeper in debt as it merely buys time before the inevitable collapse ultimately occurs.
Full Pew report.