The economic decline is starting to impact state and local budgets in a meaningful way. With almost every state having a balanced budget requirement (ex Vermont), any state budget shortfalls will have to come from tax increases or spending decreases. It should come as no surprise that I strongly favor expenditure cuts. The problem with tax hikes during a downturn is twofold. First, you're asking (telling) people to pay more at a time when they have less to pay. Second, these hikes are seldom if ever rolled back once the economy begins to grow again.
When times are good, government programs proliferate. And when times are bad, government programs still seem to proliferate. Perhaps when times are really bad, government may finally be forced to retrench. As much as I'd like to believe that any move to smaller government expenditures would be permanent, the wool just doesn't stretch that far over my eyes.
Below are a few of the headlines from just the last 24 hours. This list is by no means exhaustive.
"Schwarzenegger asks for $4.4 billion tax hike" - USA Today
"Philadelphia Makes Big Cuts to Help Close a Budget Gap" - NY Times
"Bad Budget News in Kansas" - Kansas City Star
"Granholm's executive order will cut state budget" - Crain's Detroit Business
"Election hangover: State Democrats face $3 billion budget hole" - Milwaukee Journal Sentinel
"More trimming as NC budget expected to worsen" - Forbes
"Nickel a drink to save state budgets" - MarketWatch
"Big Apple starting to crumble" - Financial Post
"Arizona officials plan for special budget session" - Forbes
"Toledo council may rotate trash pickup over holiday weeks" - Toledo Blade
"$1.8M cut from Norwalk operating expenses" - The Advocate
"Elgin cutting jobs to save $5 million" - The Courier News
"State's flow of red ink deepens as it runs up $2B in new debt" - NJ Star-Ledger
"State Revenue Down in Declining Economy" - WMUR New Hampshire
"San Diego mayor proposes drastic budget cuts" - San Jose Mercury News
Disclosure: The Rubbernecker is short wool eye masks.
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