Latest on the "Worst Economy since Herbert Hoover"

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Haydnseek
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Latest on the "Worst Economy since Herbert Hoover"

Post by Haydnseek » Mon Feb 20, 2006 9:12 pm

Flush With Cash, States Make Pricey Plans
By ROBERT TANNER, AP National Writer
Mon Feb 20, 1:49 PM ET

http://news.yahoo.com/s/ap/20060220/ap_ ... _the_money

Tax cuts, new cash to health care programs, blueprints for new roads and schools — states have jumped into 2006 with ambitious plans to spend the money pouring into their coffers, a windfall that's just in time for governors and legislators as they start re-election campaigns.

The spending spree is the clearest proof yet that the gloomy days of cuts and budget-tightening that dominated the first half of the decade are over, even as some urge caution and others say states have yet to fully recover from the downturn.

Lawmakers are arguing for tax cuts in Alabama, Arizona, Hawaii and New York. California is looking at sweeping road improvements. Property taxes are being targeted in Maryland and Florida.

"It's a lot better having extra, let me tell you," said Massachusetts Gov. Mitt Romney. "My first few weeks in office we had to find immediate savings to avoid a financial crisis ... The last two years have seen a billion dollar-plus surplus."

Romney, a Republican who is exploring a presidential run, wants to invest in education with laptop computers for 500,000 students to cost $54 million over two years; to cut the state income tax from 5.3 percent to 5 percent over two years; and to invest $200 million toward implementing a universal health insurance program in the state.

Massachusetts is one of many with ambitious spending plans:

• Florida: With $3.2 billion in higher-than-expected revenues, GOP Gov. Jeb Bush is pushing for $1.5 billion in tax cuts, including a rebate for homeowners, elimination of a tax on stock and bond holdings and repeal of a tax on alcoholic beverages sold by the drink.

• Oklahoma: Democratic Gov. Brad Henry wants to pour most of the extra money into education, with scholarships and raises for teachers. He also wants to cut taxes on retirees, fix bridges and fund high-tech research.

• California: GOP Gov. Arnold Schwarzenegger proposed a stunning increase in spending, including a record $54.3 billion for K-12 education; $170 million over two years to get health care for 300,000 uninsured children; and a big boost in funds for highway improvements. The state estimates $7 billion in higher-than-expected tax revenues over two years.

"Frankly, it just fits exactly with how the cycle goes," said Scott Pattison, executive director of the National Association of State Budget Officers, which reported at the end of last year that "state fiscal conditions rebounded notably in fiscal 2005."

"We had a boom in the late '90s, so we could do plenty of tax cuts and program expansion. ... Then of course we went through the really bad budget-cutting time. Now, with revenues back up, you'd expect exactly that. We're back to proposals for additional spending and tax cuts."

Republicans and Democrats alike are embracing tax cuts, though Democrats this year mostly argue for targeted cuts while Republicans push for more sweeping changes. Thirty-six states choose governors this year, and all states but four will elect legislators.

"I want a new perception for Democrats — that we're pro-growth, that we're pro-working families through investments and training," said New Mexico Gov. Bill Richardson, head of the Democratic Governors Association, who is considered likely to pursue a presidential run. He proposed several tax cuts this year to build on earlier income tax cuts, but most did not win legislative approval.

In Arizona, Democrat Janet Napolitano is proposing $100 million in tax cuts, aimed at giving breaks on employee health insurance, high-technology research, gas-thrifty vehicles and back-to-school purchases. Republicans in the legislature would quadruple her plan with $440 million in tax cuts.

Napolitano is convinced voters want to see state leaders manage finances responsibly. That means using two-fifths of an estimated $1 billion surplus to pay back budget-balancing maneuvers during the rough times, like $118 million the state borrowed from road-construction funds.

She has already signed a Republican bill providing a healthy pay raise for state employees and is pushing for a raise for K-12 teachers, complete funding for all-day kindergarten and $100 million for border-related law enforcement.

"When I came into office, I kid you not, my predecessor governor left me a ceramic jar on the desk labeled rainy day fund. And in it was 30 cents ... a quarter and a nickel," Napolitano said. Back then she faced a $1 billion shortfall. Now, she said, "we have more choices."

Even the most ambitious plans mix new spending and tax cuts with savings, but some analysts worry that state leaders might be going too far too fast.

"People really have to be careful," Pattison said. Surpluses reflect the cautious budgeting of the past few years. "It's because revenue went down so far and we're very cautious about future projections. It doesn't necessarily mean that happy days are here again."

But even those who've criticized tax cuts in the past see the attraction now.

Saying he shortchanges education and other needs, Florida Democratic leaders have often criticized Jeb Bush's overall tax policy, which since he won office in 1998 resulted in $14 billion in tax cuts so far.

This year, however, Democrat leaders proposed $100 rebates to homeowners, while Republicans wanted a sales tax holiday that would cover goods costing up to $5,000.

Both sides got their wish. Bush, with so much money in hand, incorporated both ideas into his tax-cut plan.

Copyright © 2006 The Associated Press.
"The law isn't justice. It's a very imperfect mechanism. If you press exactly the right buttons and are also lucky, justice may show up in the answer. A mechanism is all the law was ever intended to be." - Raymond Chandler

John Bleau
Posts: 283
Joined: Sun Feb 08, 2004 1:50 pm

Post by John Bleau » Tue Feb 28, 2006 12:35 am

Foreign ownership of public debt has gone from about 17% in 1982 to about 32% at the beginning of the Bush era to over 50% now. Private savings are negative. Wage growth was negative compared to inflation last year. The housing bubble is showing signs of bursting. The US dollar is losing its luster as world's reserve currency: not counting China, end 2004, 37.0% of international financial assets were in USD vs 48.6% in Euros, while in 2000, the proportion was 49.6% USD vs 30.1% Euro. GDP growth was 3.5% last year, which may seem decent, but this is on .8 trillion in foreign lending to the US, causing asset inflation and a false sense of prosperity, but will likely end with a run away from the dollar, last man out please shut the lights.

I believe the Fed and the Federal Government might be able to stave it off until after the mid-terms, but there is a good chance that 2006 will bring a painful correction. A little over a year ago, I figured that the short-term gain of the tax cuts would be somewhat outweighed by the long-term cost, but now my outlook is far more pessimistic. Add to that the twin Iraq/Afghanistan fiascos and Iran laughing in your faces, and you have the worst administration in decades.

Gregory Kleyn

Post by Gregory Kleyn » Tue Feb 28, 2006 2:07 am

John Bleau wrote: the worst administration in decades.
Most Republicans know it too, - and W's coming retirement years might well be shaken and uncomfortable as chickens come home to roost and the fact finally dawns on him also.

Dennis Spath
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Joined: Thu Dec 18, 2003 2:59 pm
Location: Tyler, Texas

Post by Dennis Spath » Tue Feb 28, 2006 12:09 pm

It was with both interest and amusement that I viewed the Q&A feature of C-Span2's BookTV this past weekend. The featured author was Bruce Bartlett, principled Conservative and economic whiz kid of the Reagan and Bush-41 Administrations: Also co-author with Senator Roth of the famous Kemp-Roth Legislation. At issue was his just published critical assessment of George Dubya's irresponsible fiscal policies under the title of...."IMPOSTER: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy".

In deference to reality, though, we cannot lay all the problems at the feet of President Bush. He had to have had some help....if not directly, then by reason of sycophantic deference to the President's wisdom in spite of personal misgivings. Even then, as with "The Pottery Barn Rule" warning, we must acknowledge the President's inclination to follow his own best judgement. There are those loyalists still believing that our 43rd President of these United States will be remembered among our "greatest" Presidents....if not for the economy, then for having brought democracy and peace to the Middle East. Let us pray!!
It's good to be back among friends from the past.

FrankAderholdt
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Joined: Mon Nov 15, 2004 11:37 am
Location: Hattiesburg, Mississippi, USA

Post by FrankAderholdt » Tue Feb 28, 2006 1:42 pm

As a principled, more or less "paleo" conservative -- not a Republican -- I believe that conservative fiscal principles are on life support in Washington, if not brain-dead already. Regrettably, my votes lately have been determined by the "lesser of two evils."
"Next to the Word of God, music deserves the highest praise." -- Martin Luther (1483-1546)

jbuck919
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Post by jbuck919 » Tue Feb 28, 2006 2:48 pm

John Bleau wrote:Foreign ownership of public debt has gone from about 17% in 1982 to about 32% at the beginning of the Bush era to over 50% now. Private savings are negative. Wage growth was negative compared to inflation last year. The housing bubble is showing signs of bursting. The US dollar is losing its luster as world's reserve currency: not counting China, end 2004, 37.0% of international financial assets were in USD vs 48.6% in Euros, while in 2000, the proportion was 49.6% USD vs 30.1% Euro. GDP growth was 3.5% last year, which may seem decent, but this is on .8 trillion in foreign lending to the US, causing asset inflation and a false sense of prosperity, but will likely end with a run away from the dollar, last man out please shut the lights.

I believe the Fed and the Federal Government might be able to stave it off until after the mid-terms, but there is a good chance that 2006 will bring a painful correction. A little over a year ago, I figured that the short-term gain of the tax cuts would be somewhat outweighed by the long-term cost, but now my outlook is far more pessimistic. Add to that the twin Iraq/Afghanistan fiascos and Iran laughing in your faces, and you have the worst administration in decades.
It seems strange finding myself for once agreeing with John, but I do.

There's nothing remarkable about it. All one has to do is hit the right keys at the right time and the instrument plays itself.
-- Johann Sebastian Bach

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