Time to “bring it home” as they say. I have been extremely pessimistic about our immediate economic future and critical of the claim that the recession is coming to a close. In fact, I wholeheartedly believe that once the stimulus funding runs out, the recession will deepen, unemployment will rise for the next couple of years and interest rates will climb.
Why so gloomy you ask? Let’s start at the top and work our way down.
Lightning Round Recap: The federal government, the private sector and home owners are riding high during an extended period of “irrational exuberance” fueled by the greed of Wall Street. The global economy opened up new markets for investment bankers to screw over with prepackaged investment vehicles loaded with lousy mortgages guaranteed by no one. The homeowner loses phantom wealth they’ve already spent, banks either collapse or freeze lending and the private sector companies get squeezed. President Bush calls an audible at the end of his term and provides bailout money for big bankers. Congress throws a reversal and gives the ball back to the new president who throws a Hail Mary down the sidelines and into a crowded end zone.
Current Status: New jobless claims are leveling off, home prices seem to have found their bottom and some of the TARP recipients are starting to pay back funds. Taxpayers can even log onto Recovery.gov and track the path of stimulus money through fun color graphs and charts. Watch the government employ seven people in Kansas, award a road paving contract in Arizona and winterize a home in Ohio! Fun for the whole family!
The Issue: Okay, back to basics and common sense. Use your own finances as the analogy. You lose your job but are receiving unemployment benefits. Instead of looking for a new job or learning a new skill you decide the prudent thing to do is to refurbish your kitchen, lease a newer model car and start collecting glass figurines. Arguably each one improves the value of life’s balance sheet. Your home is worth more, your car gives you status and those precious figurines will surely appreciate over time therefore protecting your future. And then, your benefits run out.
This is what is happening right now. We’re fooling ourselves thinking that things are going to turn around. As soon as the stimulus funds (benefits) run out the nation is going to plunge further into the hole because the funds we have allocated aren’t going toward things that will make us more efficient or give us a competitive advantage. They are going toward needed repairs of our aging infrastructure which will hold it in place for longer but not move it forward. Or, if you prefer, whipped cream on shit.
New York State is staring down the barrel of a $4 billion budget deficit and admits that this number may grow between $18 billion and $30 billion over the next two years. Press down further on the pressure point and we have Nassau and Suffolk Counties. Nassau is all but bankrupt. Steve Levy has done a far better job of keeping the wheels on than his neighbor in Nassau but still faces a looming budget crisis if the state continues to mandate disproportionate payments and sales tax revenues continue to decline.
The Fix: (1) This past summer the state legislature passed a consolidation bill that gives citizens the right to dissolve local governments. Let’s get it done. There are too many special taxing districts and villages on Long Island even though the Long Island senate delegation mysteriously voted against the bill. (2) Our Congressional representatives should be asking for stimulus money to do one thing and one thing only: retire the $6 billion in outstanding debt of the Long Island Power Authority that is due to the Shoreham plant. We didn’t ask for it. We don’t deserve it. We can’t move forward with it. (3) Allow Charles Wang and Scott Rechler to put their shovels in the ground. This isn’t about the Islanders or skyscrapers on the Island; this is about establishing a central commercial and residential district that proves we still have economic mojo. (4) Suspend county real estate taxes on all Long Island-based manufacturing companies who employ more than 50 percent of its workforce locally for the next five years. (5) Finish one final round of tax certiorari negotiations with commercial property owners, pay them out then abolish it. (6) Bring the teachers unions to the table and demand that middle and high school teachers add one more hour of teaching to their day. (That’s the one I expect the hate mail for.)
If you wish to comment on “Off the Reservation,” send your message to email@example.com.