Collapsing From the Bottom Up

December/03/2008 23:39PM
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The attention heretofore has been Wall Street and Detroit. Chicken Little(Hank Paulson) has been telling us the sky is falling for a month now. First it was Freddie and Fannie. Then,  the banks, except Lehman Bros, which must have offended Paulson when he was at Goldman Sachs, since King Henry said they could fail. Then it was Detroit. All too big to fail. GM employees number 110,000 but somehow 4,000,000 will be unemployed if they file bankruptcy. Hard math to follow. No one is talking about the real problem yet.

What is happening to the cities? Philadelphia is closing swimming pools, libraries, etc. Woe is me, they are going to actually lay off 200 city employees. Wow. Citi Corp is letting 50,000 go and Philadelphia is getting in the game and letting 1 percent of their employees go. Miracles will never cease.

Tax revenue for cities will fall by as much as 30% in the next year or so. They are unable to cut expenses. Just as Washington is unable to cut people. Where will the money come from? You, that’s where. My local community is raising sales tax 1%. The real estate taxes lag the property assessments by 3 years in most places. If you are in trouble when the assessments the taxes are based on are at the high water mark, where will you be when they hit the low water mark whenever that comes. Most cities can’t raise the rate without a vote. No chance of that today.

Then comes the counties and the states. I’ve been predicting that California will go first. It stands to reason. All of the bad practices that have created this mess are magnified in California. More entitlements, more immigrants, more spending, more taxes, more of everything. Governor Schwarzenegger says the state will run out of money about the same time GM does. Who will bail California out? You will.

The public is living with less. The public sector is still growing. There is a big, big problem coming and coming fast. It is no different than the auto industry. One part of that industry is doing OK, not asking for help. The other has been screwing up for years and is broke, but wants us to fix them. Some cities and states are doing OK. Others like Philadelphia and California are broke. They want us to fix them.

We have fundamental problems everywhere today and all want the same fix. Money from Washington. Washington doesn’t make money, they print it, they borrow it, or they tax it,  but they don’t earn it. The earners in this country are getting very scarce. The failures want more and more from the fewer and fewer earners who have any assets to give.

I’m trying real hard to be positive, but for the life of me I can’t see the way out of this mess for a long time.

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