Bad economic news could confound state budget projections

Question Mark - wikipediaFeb. 15, 2013

By John Seiler

Gov. Jerry Brown’s cheery announcements of the state’s budget health are guiding budget spending priorities. As he said in his State of the State address, “The message this year is clear: California has once again confounded our critics. We have wrought in just two years a solid and enduring budget. And, by God, we will persevere and keep it that way for years to come.”

He praised the Legislature for cutting spending and continued, “Then, the citizens of California, using their inherent political power under the Constitution, finished the task. They embraced the new taxes of Proposition 30 by a healthy margin of 55 percent to 44 percent.”

But what if the modest economic recovery in California and the rest of the United States turns sour? What if the tax increases themselves hurt the economy? Not just Proposition 30 and Proposition 39 (taxing out-of-state businesses), but the Obamacare, payroll tax and other federal tax increases?

We won’t have good numbers on these things for another month or so. But until then, there are warning signs that the second part of a “double-dip” recession may be flying overhead like that meteor that just hit Russia.

Internal emails from Wal-Mart executives described February sales as “a total disaster.” Reported Bloomberg:

“Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.

“Wal-Mart and discounters such as Family Dollar Stores Inc. are bracing for a rise in the payroll tax to take a bigger bite from the paychecks of shoppers already dealing with elevated unemployment. The world’s largest retailer’s struggles come after executives expected a strong start to February because of the Super Bowl, milder weather and paycheck cycles, according to the minutes of a Feb. 1 officers meeting Bloomberg obtained.”

So, as we have repeatedly warned on CalWatchDog.com, the higher taxes are taking a toll not just on the rich, but on everybody. Lower sales will mean lower sales taxes collected by the California government.

Global problems

According to new estimates, Europe’s economy shrank by 0.6 percent in the fourth quarter of 2012. And U.S. News & World Report wrote, “Japan’s economy shrank in the last three months of 2012, its third straight quarter of contraction… The 0.4 percent contraction in annualized terms in October-December was worse than expected.”

Those two reports come after the U.S. Commerce Department calculated that the U.S. economy shrank by 0.1 percent in the same period.

Manufacturing, the mainstay of an industrial economy, is stagnant. Reported the Financial Times:

“US industrial production shrank in January after the biggest back-to-back gain in three decades, while factory activity in the New York region unexpectedly expanded in February, in a mixed picture of the country’s manufacturing sector.

Output at factories, mines and utilities fell 0.1 per cent last month after a 0.4 per cent gain in December, figures from the Federal Reserve showed on Friday. While economists had expected a 0.3 per cent rise in January, revised data for November and December showed the biggest two-month gain since 1984.”

One seeming bright spot is that China’s economy grew 7.9 percent in the fourth quarter of 2012. But that still was below the tepid pace of 10.4 percent in 2010 and 9.3 percent in 2011. And China’s growth rate for 2012 was its slowest since 1999, during the Asian financial crisis.

For California governments at all levels the message is: Be more frugal then ever. The rosy scenario celebrated by Brown fades away once the rose-tinted glasses are removed.

If the double-dip recession hits, then the budget cutting has not ended, but is going to be deeper than ever. And businesses will flee even faster California’s high-tax climate for the refuge of low-tax states.

35 comments

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  1. Ted Steele, The Decider
    Ted Steele, The Decider 15 February, 2013, 15:53

    Well John– I for one, hope the projections were realistic! Ted!

    Reply this comment
  2. us citizen
    us citizen 15 February, 2013, 18:35

    What IF things turn sour?……..should be WHEN things turn sour………

    Reply this comment
  3. Douglas
    Douglas 15 February, 2013, 18:38

    I’m with you, Ted. “bad economic news” could confound EVERYBODY’S budget projections.

    Oddly enough, some people would apparently enjoy that. Go figure.

    The glass is at least half full.

    Reply this comment
  4. jimmydeeoc
    jimmydeeoc 15 February, 2013, 18:41

    Teddy ——
    And I still hold out hope that I am stranded on a desert isle with Kate Upton…..

    Both are about equally likely.

    Reply this comment
  5. jimmydeeoc
    jimmydeeoc 15 February, 2013, 18:47

    “Oddly enough, some people would apparently enjoy that.”

    No one would “enjoy” that, Douglas. It’s just that some of us realize that is apparently the only way to pound some sense into politicians who promise gumdrops and lollipops and the idiot childish electorate who vote for them.

    Reply this comment
  6. Rex the Wonder Dog!
    Rex the Wonder Dog! 15 February, 2013, 20:46

    And I still hold out hope that I am stranded on a desert isle with Kate Upton…..
    ==
    I like your thinking Jimmy 🙂

    Reply this comment
  7. Ted Steele, The Decider
    Ted Steele, The Decider 15 February, 2013, 21:29

    Jimmy– You and Ms. Upton?

    Sorry man, there is NO chance.

    Reply this comment
  8. Ted Steele, The Decider
    Ted Steele, The Decider 15 February, 2013, 21:30

    I agree Douglas……But….let the sad sacks roll!

    Reply this comment
  9. jimmydeeoc
    jimmydeeoc 15 February, 2013, 22:29

    “Jimmy– You and Ms. Upton?

    Sorry man, there is NO chance.”

    As is your bedtime prayer, Teddy.

    Reply this comment
  10. Dyspeptic
    Dyspeptic 15 February, 2013, 23:10

    “Well John– I for one, hope the projections were realistic! Ted!”

    Right Theodore. And I hope to fly to the moon by flapping my arms. If you actually paid attention to the facts in this article (I realize that’s a stretch for you Regressives) you would see the trend. Europe, Japan, China and the U.S. are all slipping back into recession (after the weakest recovery in history). And, it’s worse than the official figures as usual. Why? Because the inflation figure that is used to convert nominal GDP into real GDP is bogus. Real inflation is at somewhere between 4 and 6% already, not the low ball bull$hit CPI figure. Ben Bernanke’s money pumping is running out of steam, even at $85 billion clams a month. If the Bernanke stock market bubble collapses it will get real ugly real fast. Sound familiar?

    Sometimes the Irish in me begrudges Jerry some admiration even though he is a career politician, but ultimately he is as fantasy prone and dangerous as everyone else in his hopelessly foolish party.

    Reply this comment
  11. Rex the Wonder Dog!
    Rex the Wonder Dog! 16 February, 2013, 05:34

    ”The message this year is clear: California has once again confounded our critics. We have wrought in just two years a solid and enduring budget. And, by God, we will persevere and keep it that way for years to come.”

    Come on, we all know this is pure bull. We are hundreds of billions in the hole and have NOT stopped spending, this years budget was $13 BILLION more than last years, wiping out ANY possible gain in Clowns taxes

    Reply this comment
  12. Rex the Wonder Dog!
    Rex the Wonder Dog! 16 February, 2013, 05:35

    If you actually paid attention to the facts in this article (I realize that’s a stretch for you Regressives) you would see the trend. Europe, Japan, China and the U.S. are all slipping back into recession (after the weakest recovery in history).
    ==We were NEVER POUT of recession. Once you take away the ZIRP policy (great for big banks, bad for everyone else), and the deficit spending, we have had negative GDP.

    Reply this comment
  13. Hondo
    Hondo 16 February, 2013, 08:54

    California has confounded its critics again. Things are far worse than they thought.
    Saying Kalifornia is doing great is like saying the Lakers are doing great because they can beat UNLV or Rhode island state in basketball. The Lakers can’t compete in the NBA, where it counts.
    Like wise, Kalifornian should have the LOWEST level of poverty in the country when it has the HIGHEST. Kalifornia has the greatest ability to grow its economy than any place on earth. No place is more blessed with more natural economic assets. Kalifornia should have the LOWEST unemployment rate in amerika, not racing Nevada and Rhode Island for the worst.
    Wal-mart’s numbers are real. Amerika’s increase in the unemployment rate is real as are it’s negative economic numbers.
    6 trillion in deficit stimulus spending down a rat whole. The raising taxes just as another recession takes hold. The results couldn’t be more obvious.
    Hondo……

    Reply this comment
  14. Ted Steele, The Decider
    Ted Steele, The Decider 16 February, 2013, 09:45

    Oh no—- a big meteor “could” hit the earth too! And we’d be so screwed!

    We are doomed!!!! I tell ya! DOOOOOOOOOOOOOOmed!!!!

    Reply this comment
  15. Donkey
    Donkey 16 February, 2013, 10:13

    Rex is correct, the recession never abated. The lies put forth by the RAGWUS feeders and their media will not alter the truth, no real economic growth in 23 years, and all the while the RAGWUS feeders take more and more of nothing. 🙂

    Reply this comment
  16. Donkey
    Donkey 16 February, 2013, 10:16

    Hondo , we so have what it takes to grow, our biggest problem are the RAGWUS bureaucracies, they seek to control everyone in the private sector, but place no limits on their own power and corruption. 🙂

    Reply this comment
  17. Ted Steele, The Decider
    Ted Steele, The Decider 16 February, 2013, 16:38

    Yes Duncey— you are correct! YOU speak the truth! YOU are brilliant!!! The cabals of unwashed workers are forming up to take our guns and money!! Soon they will be at the door! BE RREADY!!!!!

    Reply this comment
  18. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 February, 2013, 00:38

    Teddy with more drivel….

    Reply this comment
  19. Ted
    Ted 17 February, 2013, 07:34

    LOL
    He HAS to comment
    I live in his head
    I’m picking out new drapes.
    0 for 14 ™!
    oh my
    it’s just that easy with this troll!

    Reply this comment
  20. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 February, 2013, 08:16

    ^^^^^^^^

    LOL
    He HAS to comment
    I live in his head
    I’m picking out new drapes.
    ^^^^^^^

    Who has to comment???
    BAM!!!!!!!!!!!!!!!!!!! Where di I send my rent check Teddy, to you or Queeg, or Uhaul??? 🙂

    Reply this comment
  21. BobA
    BobA 17 February, 2013, 09:33

    Donkey:

    You’re wrong about economic growth. If you work for for the federal government the U.S. economy is just fine. If you’re a Wall Street banker or a rich Hollywood liberal (like that fat slob Michael Moore) the economy couldn’t be better.

    It’s those mean rascally republicans who wants the government to stop spending money it doesn’t have who are the problem. Only fools think the government spends too much money and the debt is to big.

    Besides, deficit spent only hurts those who have to pay it back. We don’t have yo pay it back and it’s “other peoples money” so what’s the fuss all about? Let our children and their children worry about paying it back.

    Reply this comment
  22. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 February, 2013, 11:41

    You’re wrong about economic growth. If you work for for the federal government the U.S. economy is just fine. If you’re a Wall Street banker or a rich Hollywood liberal (like that fat slob Michael Moore) the economy couldn’t be better.
    =
    You nailed it

    Reply this comment
  23. Ted
    Ted 17 February, 2013, 21:26

    The only thing Poodle nailed is yet again another comment about me!

    Why?

    Because I live in Zero the Poodle’s head!!!

    0 for 14 ™!

    Reply this comment
  24. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 February, 2013, 22:59

    You just cannot go a single comment without bringing my name up!!! I OWN you Teddy 😉

    Now give the adults their blog back. Thank you. The readership.

    Reply this comment
  25. BobA
    BobA 18 February, 2013, 09:15

    By the way:

    Sorry for the bad spelling and grammar at times. I’m human and I sometimes get in a hurry to finish what I wrote and don’t always proof read it before submitting it.

    Reply this comment
  26. SeeSaw
    SeeSaw 18 February, 2013, 09:38

    If you can’t think of something nasty enough to say about someone who looks at politics differently than you, just fall back on, “fat slob”, eh, BobA. Michael Moore is a citizen of Detroit, Michigan whose father and others worked in the auto industry. He saw what was happening to the ordinary workers of that industry and shined a light on that. He is from the private sector and creates hundreds of jobs for people who work on his films. You should be celebrating, not berating him!

    Reply this comment
  27. Rex the Wonder Dog!
    Rex the Wonder Dog! 18 February, 2013, 10:47

    Michael Moore is a citizen of Detroit, Michigan whose father and others worked in the auto industry
    ==
    Actually he was from Flint MI, not Detroit, and he does not live there anymore.

    Reply this comment
  28. BobA
    BobA 18 February, 2013, 12:22

    SeeSaw:

    So you’re saying that because he’s a rich Hollywood celebrity, his opinion counts more than mine and I should kiss his ass and worship him? I’m not the political correct type and I don’t drink liberal Kool-Aid. I call it like I see it and anyone who says or thinks otherwise needs to have their mouth washed out with soap and then water-boarded & lobotomized.

    Sorry madam but I’m not into celebrity worship. Their crap stinks just like everyone else and I hardly regard them as society’s leading “intellectuals” or paragons of virtue.

    If Michael Moore wanted to impress me he would shut his pie-hole, make his lousy movies and keep his ignorant opinions to himself. He should also lay off the double whopper with cheese and get a real job.

    Reply this comment
  29. SeeSaw
    SeeSaw 18 February, 2013, 14:25

    Michael Moore is a good citizen and it doesn’t really matter where he lives or how much money he makes. I am not into celebrity worship–I am into politeness.

    Reply this comment
  30. Ted Steele, CEO
    Ted Steele, CEO 18 February, 2013, 16:26

    Michael Moore writes and produces WELL above poor BobA’s tiny brain. BobA is doing the best he can though to figure all of this out. He tries. He should get partial credit for that. He’s harmless.

    Reply this comment
  31. BobA
    BobA 18 February, 2013, 19:29

    SeeSaw:

    I don’t do politeness. That’s for people who are afraid to say what they really think. I have no such inhibitions. I never equivocate because the truth is a dish best served raw & cold.

    Ted, this is and A & B conversation so you can C your way out. Take your nickel and go buy an opinion that is worth reading and keep the change.

    Reply this comment
  32. Ted Steele, CEO
    Ted Steele, CEO 18 February, 2013, 20:15

    LOL

    The classic pip squeak blow hard! They ALWAYS say…..”well, I don’t edit…just say what I think” etc etc etc —yaaaaaaaaawn…

    I am certain, every boss you’ve EVER had, every neighbor, every social contact you makes tells you this little buddy…..your condescension to almost every poster out here is….well……always inarticulate of course….but plain to see.

    Please—- another rant?

    lol

    Reply this comment
  33. Rex the Wonder Dog!
    Rex the Wonder Dog! 19 February, 2013, 06:40

    Oh my, Bob spanking Teddy AND seesaw!!! Love it 😉

    Reply this comment
  34. BobA
    BobA 19 February, 2013, 07:39

    Rex:

    It wasn’t so much a spanking as it was a reality check. Our state and country would be a lot better off if people started talking to each other and dealing with the truth and facts like adults instead of children.

    Reply this comment
  35. Sean Morham
    Sean Morham 19 February, 2013, 15:09

    John, someone once said that raising taxes in a recession is like throwing gasoline on a fire. It looks like we are going to find out how true that is in the coming months. The cost of health care insurance premiums is beginning to reflect to cover the cost of the unisured. That is in effect “a tax” in the pricing of the premiums. The increases have also been passed to workers through higher deductions from their pay. That is also a drag on spending. That will get blamed on the insurance companies, and they will have a difficult time defending their postion(they are after all difficult to defend).

    Reply this comment

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