Federal Deficits Up, State Revenues Down
The U.S. budget deficit for October surged to $176 billion, a record for the month, the Treasury Department announced today.
During the month, the government racked up $311 billion in outlays compared with $135 billion in receipts. (Blogger note: This means the US Gov’t spent 225% of October tax receipts! Clearly a dangerous level of out of control spending.)
The October numbers mark the first month for the new fiscal year after the U.S. wrapped up the 2009 fiscal year that ended on September 30 with a record-high $1.4 trillion budget deficit due to increased government spending to stop the recession and the financial crisis. The final deficit for the 2009 fiscal year was equal to 10 percent of the nation's GDP, the highest shortfall relative to GDP since 1945, the final year of World War II. www.abcnews.com
Meanwhile, according to the Rockefellow Instititute, which has ongoing research on State budgets (by state and region) is reporting record drops in tax revenues, including declines in 49 states. www.rockinst.org
In the RI report of October 15, 2009 (for 2nd quarter 2009); “Both nominal and inflation adjusted figures indicate that the second quarter of 2009 marked the largest decline in state tax collections at least since 1963. The same is true for combined state and local tax collections, which declined by 12.2 percent in nominal terms.
Second quarter revenues fell by amounts unseen in at least five decades. Total state tax revenue in the second quarter of 2009 declined by 16.6 percent relative to a year ago, before adjustments. The income tax was down by 27.5 percent, the sales tax was down by 9.5 percent, and while the corporate income tax increased by 2.9 percent.
At the same time, in the Rocky Mountain region (Colorado, Idaho, Montana & Utah), personal withholding state tax collections were off 7.3%, while in the Southwest Region (Arizona, NM, Oklahoma) personal withholding declined 10.9%. Estimated state tax payments (2009 vs 2009) for the April to June 2009 period (2nd quarter) were down 44% in Colorado and 44.9% in Arizona. Across the US, state estimated payments (taxes) were down 32.3% (median)” Lucy Dadayan & Don Boyd, www.rockinst.org
States are being forced to cut spending by 5% to 15% (year over year), as they are unable to deficit spend (unlike the undisciplined Federal Government).
According to the recent Rasmussen Reports, the US economy is at the top of the list of Importance of Issues to the American people. Not health care (#3), or the war in Iraq (#8). www.rasmussenreports.com
So what to do next? Work with the US private sector, with the business community and small business to create a better environment for business in the United States. Stop the health care bill, and start over with a bi-partisan approach. Put climate change legislation through an economic impact analysis, before passage of any bill. Cut capital gains taxes for one year (or reduce down to 5% or 10%) and reduce corporate income tax (now the US is the 2nd highest in the world). Really address unnecessary Federal regulations, mandates and laws that adversely impact small business and tamp down innovation. Finally, the hardest task of all, slash Federal government spending, programs and mandates. Unless the Federal government is put on an austere financial diet, the US risks becoming a third world debtor nation, beholden to Far East (China) and Middle East sovereign wealth funds and unfriendly governments.
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