(Read earlier post on "The Crisis Isn't Over" for initial context.)
If you think the "reckoning" that I wrote about before can't happen, look at Egypt. What's happening goes to show of how fast the "unthinkable" can take place. Underlying fiscal problems can take center-stage rapidly and markets can react dramatically and extremely fast ca...tapulting the issue to crisis proportions practically overnight.
All that's needed is a catalyst. Surely these records snow storms are putting extraordinary pressure on government's budgets. I'm sure many municipalities are blowing through their annual budgets for snow removal. Spring cleanup from storm damage and equipment repairs is only going to add to their problems. And there's still a over a month to go.
Fiscal problems deepen and while hope springs eternal, this springs snow-melt will reveal more problems than flowers. April's tax day will reveal what governments can expect in revenue from 2010 filings. If I had to guess it's going to deliver some shocking news. While the economy is certainly picking up and revenues and income for 2011 look promising for stocks markets, that won't help governments when it comes to tax revenues from 2010 filings. To the contrary - the things that governments did to stimulate the economy the last couple years are going to cost them when it comes to 2010 tax revenues that fund 2011 budgets. Tax breaks, credits, loss carry forwards, borrowing, and other things that take are going to take a big bite out of 2010 tax revenue filings and governments operating budgets are going to hit hard right at a time when government finances can least afford it.
Where will governments turn? The big catch-22: The need for giant tax increases and massive budget cuts versus the impact on a young recovery. Tea party activists are keeping a watchful eye, and so are municipal bond market analysts. Union leaders and retirees on government pensions that are underfunded have a lot to protect. Lot's of interests at stake! I'm betting on the average citizen - "they're fed up and not going to take it anymore," so I don't think governments are going to be able pass the burden over in the form of higher taxes without causing a massive revolt from the electorate just as the politics starts to heat up for the 2012 elections.
Somethings gotta give. It's a case of the proverbial "camel's back." Hmmm, maybe there is something to this "Mayan calendar" thing??
Feb. 2011
Related articles:
Federal Shutdown Looming
Debt Ceiling: Postponing hike comes at a cost
Bulls & Bears Agree: Muni default risk greater than ever
If you think the "reckoning" that I wrote about before can't happen, look at Egypt. What's happening goes to show of how fast the "unthinkable" can take place. Underlying fiscal problems can take center-stage rapidly and markets can react dramatically and extremely fast ca...tapulting the issue to crisis proportions practically overnight.
All that's needed is a catalyst. Surely these records snow storms are putting extraordinary pressure on government's budgets. I'm sure many municipalities are blowing through their annual budgets for snow removal. Spring cleanup from storm damage and equipment repairs is only going to add to their problems. And there's still a over a month to go.
Fiscal problems deepen and while hope springs eternal, this springs snow-melt will reveal more problems than flowers. April's tax day will reveal what governments can expect in revenue from 2010 filings. If I had to guess it's going to deliver some shocking news. While the economy is certainly picking up and revenues and income for 2011 look promising for stocks markets, that won't help governments when it comes to tax revenues from 2010 filings. To the contrary - the things that governments did to stimulate the economy the last couple years are going to cost them when it comes to 2010 tax revenues that fund 2011 budgets. Tax breaks, credits, loss carry forwards, borrowing, and other things that take are going to take a big bite out of 2010 tax revenue filings and governments operating budgets are going to hit hard right at a time when government finances can least afford it.
Where will governments turn? The big catch-22: The need for giant tax increases and massive budget cuts versus the impact on a young recovery. Tea party activists are keeping a watchful eye, and so are municipal bond market analysts. Union leaders and retirees on government pensions that are underfunded have a lot to protect. Lot's of interests at stake! I'm betting on the average citizen - "they're fed up and not going to take it anymore," so I don't think governments are going to be able pass the burden over in the form of higher taxes without causing a massive revolt from the electorate just as the politics starts to heat up for the 2012 elections.
Somethings gotta give. It's a case of the proverbial "camel's back." Hmmm, maybe there is something to this "Mayan calendar" thing??
Feb. 2011
Related articles:
Federal Shutdown Looming
Debt Ceiling: Postponing hike comes at a cost
Bulls & Bears Agree: Muni default risk greater than ever
