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March 23, 2009 08:35 PM UTC

Budget Picture Worsens, Stimulus Or No Stimulus

  • 32 Comments
  • by: Colorado Pols

As the Pueblo Chieftain reports:

Colorado’s financial situation is worse than the state economists thought three months ago, and at least one forecaster is predicting that recovery may not occur for another year.

Chief Legislative Economist Natalie Mullis told state lawmakers Friday that the long-awaited March forecast, the economic and revenue summary that the Legislature bases the next year’s budget on, not only is bad news, it’s worse than that.

“The economy is reacting to the bursting of an asset and credit bubble,” Mullis said. “As a result, credit has been tight and assets are stagnating. In December, we had anticipated a sharp decrease in the financial markets, and we had anticipated that consumer spending would fall off dramatically.

“But what we didn’t fully anticipate was the rate at which the job market reacted,” she added. “Since May until about a week ago, the number of people who’ve been added to the unemployment insurance rolls in Colorado is greater than the total number of people who were added during the 18-month recession earlier this decade.”

…The forecasts call for about $200 million in additional cuts the state needs to make for the current fiscal year, which ends June 30. That’s on top of the $600 million it’s already taken out of the budget.

Additionally, next year’s revenue shortfall now is at $900 million, and those figures include some, though not all, of the federal stimulus money the state is to get in Medicaid funding and other programs.

“We’re getting deeper in the hole,” said Sen. Abel Tapia, D-Pueblo, and a member of the Joint Budget Committee, which writes the state’s annual spending plan.

Comments

32 thoughts on “Budget Picture Worsens, Stimulus Or No Stimulus

  1. This news doesn’t bode well for any statewide Dems in 2010. Ritter and Bennet are already looking at steep uphill climbs to win; Cary Kennedy is in a slightly better position, but as Treasurer she will be the #2 target of economic attacks from the GOP–right behind the Governor.

    Even if we start recovering, it might be too little too late (even if things those Dems did while in office helped the turnaround.)

    2008 was a walk for Dems. 2010 is going to be a battle.

    But I say bring it on.

      1. It’s not as though Wadhams had any credible challengers. It’s fair to ask why that was, but not to expect the party to dump Wadhams for either of two unknown cranks.

        1. with which transgressors in the GOP are treated when they challenge the party line. Most moderate Republicans stay silent because they aren’t willing to take the beating that will ensue if they cross Wadhams and the party leadership. Remember, this is the party of Dick Cheney, Karl Rove, Tom Delay, and Donald Rumsfeld.

          Assimilate or die. Aren’t those the only options given by the Borg?

          1. The religious-right wing of the Republican Party has already told St. Rep. Don Marostica that he will be primaried because he did not support the appointment of Kevin Lundberg to St. Sen. Steve Johnson’s state senate seat when Steve became a Larimer County Commissioner. In short, you must pass every test or be primaried. No deviations from Republican ideology is acceptable and God help you if you don’t support the most extreme right-wing candidate running.

            I’ve written about this many times here, but it is worth saying again, the Republican Party no longer allows any room for moderates and obviously no room whatsoever for anyone who uses their own mind. Free thinking is not allowed. This has lead the party to become locked in a box canyon where it can no longer address the real issues facing government.

            1. but has he really warranted sainthood?  🙂

              Seriously though, your post is dead-on. I’m glad that Rs like yourself who are fed up have emigrated to the Dem voting bloc.

            2. The Democrats seem much more monolithicly liberal than the Republicans are conservative.  Deviation from the union agenda, at least on the core issues, is not tolerated in the Democrat Party.  Just ask Cheri.

              1. twenty years in the Republican is nonsense and certainly doesn’t put the Democrats in the same boat with the Republicans. And the Republicans are by far more monolithic than the Democrats and their ever shrinking numbers establish that.

        2. It’s not like they just randomly called a meeting, giving 2 hours notice and Dick was the only who showed up.  How long have we been making fun of him for fuck-ups?  In all that time the party hasn’t managed to find a new leader, or to convince this one to change course.

          That’s what makes them too stupid to take advantage.

    1. In 1934, Franklin Roosevelt ran the off year election as a referendum on the New Deal. After his inauguration in March 1933, the economy began to recover a little but slumped again and then leveled off. Even with a very bad economic situtation, FDR decided to run on his record and the other Democrats followed along.

      About two weeks before the election, VP John Nance Garner told FDR the Democrats would be lucky if they lost only 36 seats in the U.S. House of Representatives. Garner was betting on the normal off year election loses that most sitting presidents suffer.

      On election day in 1934, the public gave FDR and the Democrats a resounding victory. Democrats gained 9 U.S. Senate seats and 13 U.S. House seats and Republicans held only seven governorships.

      One can only speculate as to how 2010 will shake out, but if President Obama’s economic plan shows signs of reviving the economy the Republicans could be in big trouble next year and could suffer a greater defeat than they did in 2006 or 2008.  

      1. But the Dow went up 500 points today so I guess that means Obama is doing a good job as President since that’s the only determining factor.

        I’m hoping that by the end of the year, the signs will be pointing towards recovery, and the Republicans will have to harp on something else to make gains in state and federal offices.

  2. fault. I continue to recommend a book by Charles Morris called, “The Trillion Dollar Meltdown”. Taken with the revelations provided by Naomi Klein in ” The Shock Doctrine”, one gets a very clear picture of the culprits. Sure, a few Dems were culpable, but not on the state level.

    This will not keep Scott McLobbyist from trying to hang it on Ritter.  

    1. the GOP doesn’t care about facts, cause and effect, or the chronological order of events.

      Dick Wadhams will do everything in his power to run the most expensive smear campaign against Bill Ritter that he can. They will say or do anything to win, because they know that if they can’t make some gains in 2010, then they are going to be on the sidelines–probably for a lot longer than two or four years too.

      1. The GOP will spend heavily on the legislative races because of redistricting. In fact, don’t be surprised if they make the legislature their primary target instead of Governor or Senate.

        1. I understand the downside of not having one of the Houses, but lets get real here.

          The GOP needs to roll 4 senate seats (w/o erosion of existing districts) – name them?

          Bacon, Schwartz, Moorse, Isgar, Keller?? I think they roll 2 at best.

          The GOP needs to roll 7 House seats (without a loss of existing districts) – name them?

        2. But outside of the Appalachians, Utah, Idaho, and Oklahoma/Texas the GOP is now a minor player.  They will have to attempt to spend money in EVERY state legislature across the US.  The don’t have the money coming in to their coffers, they don’t have the party unity they need, and they don’t have a resonant message that will carry them to victory.  They’ll win an occasional seat here and there, but their losses will continue in 2010 unless they find a message the average American can live with.

          1. Common sense says your post is dead on, but in our faux blue state using Dems as a scapegoat might work.

            I agree with Pols entirely and think none of our seats should be considered safe.  Ask Buescher about taking things partially for granted (rough district, but he didn’t do the campaigning he should have).

            1. Buescher was out there working hard. What was working against him were the charges of raising property tax bills, which did go up in Mesa County with the mill levy freeze; the infamous bathroom bill, and the hard campaigning against him by oil and gas interests.

              That he won two terms in such a Republican district at all was amazing.

  3. There’s a very significant possibility that the economy will be in far worse shape in 2010 than it is now.  Two years from now, after being at the helm of a ship run aground, Ds won’t be able to blame Rs for failing to turn around the economy.

    Total commitments to the bailout are now in excess of $10 trillion (the entire US GDP is about $14.3 trillion and we “only” spent $600 billion in the wars in Iraq and Afghanistan over the last 6 years, and total national government spending (fed, state and local) is “only” about $5.2 trillion), so put on your inflation boots for 2010.

    Japan tried massive public works spending and all the stuff our Fed and Treasury are doing to bail itself out of its financial/credit crisis and that did not work for them.  Japanese housing prices fell about 60% and commercial real estate prices fell a whopping 83%.  There’s still a LOT of downside in our real estate and financial markets.

    Feel good Dem-driven energy projects, transportation projects and health care reform do na-da-la-squada to address the systematic crises still lurking in the banking system.  

    Here’s a NY Times article detailing the commitments todate …

    http://www.nytimes.com/interac

    Here’s a NY Times article that describes how poorly public works spending programs fared in turning around the Japanese economy.

    http://www.nytimes.com/2009/02

    1. The source you cite is misleading in several ways.

      First- the Federal Reserve is not part of the federal government.

      see http://www.federalreserve.gov/

      So all of the buying and guaranteeing from the Fed isn’t part of the gov’t.

      Second- the other guarantees (money market, FDIC, etc)  are federal gov’t commitments but not spending.  The only way it can make sense to count them in the spending is too assume that all the insured assets will fail. Makes no sense.

      US 2009 is very different from Japan 1985 in many ways.

      I’m too lazy to cite specific sources- Financial Times archives would be good. Or perhaps a reasonable upper level undergraduate text about money and banking.

      1. In January, Takeo Hoshi, University of San Diego (and NBER economist) and Anil K Kashyap, University of Chicago (and Federal Reserve Bank of Chicago economist) presented a paper at the American Economics Association in January that detailed the parallels between the US situation and Japan.  But, I guess you were there, saw their presentation, and read their paper and dismissed it as not a “reasonable upper level undergraduate text about money and banking.”

        If you’re right, you should apply for a job at the Federal Reserve, ’cause there’s a lot of Federal Reserve economists who believe the analogy between the US and Japan is spot on.  Maybe replace Ben Bernake.

        1. I didn’t say there are no parallels.

          there are.   But there are huge differences.  

          Example-

          National Debt

          Similar

          Japan in the 80’s:  approx 65% of GDP

          US now – approx 70% of GDP

          Different

          Japan in the 80’s- 90%+ domestically held

          US now – approx 35% domestically held

          Economic activity

          Japan 80’s: mostly manufacturing

          US now mostly not manufacturing

          Oil production and consumption

          Japan in the 80’s – little production, incentives to move away form consumption working

          US now- little production, but incentives to decrease consumption not working

          Keiretsu lending

          Japan in the 80’s – yes, of course

          US now – no

          So, if I make the comparison to the thing that’s the same, but ignore the thing that’s different, it’s an awkward comparison, at best, simplified.

          Not incidentally-

          Hoshi, Kashyap and Fischer (yes, Stanley) wrote the book I was describing as an upper level, undergraduate text

          (see Corporate Financing and Governance in Japan: The Road to the Future, 2004)

          And I haven’t read the paper you cite- I presume you mean Hoshi, Takeo and Kashyap, Anil K.,Will the TARP Succeed? Lessons from Japan(October 2008). NBER Working Paper No. W14401. Available at SSRN: http://ssrn.com/abstract=1282973

          If so- their conclusion makes sense to me: ,

          …it appears that U.S. is at risk for running into some of the same problems that hobbled the Japanese policies.  

          Especially., the gov’t not buying enough assets to sufficiently recapitalize the surviving banks.

          If it was some other paper, please provide a cite. Hoshi, in particular, writes a lot and it’s hard to keep up.

        2. What do you propose?

          I mean bashing the administration and belittling me are good sport, but do even less to address the systematic weakness in banking.

    2. Bush and Company ran the ship aground.

      Obama is now trying to get it off of the reef.

      Much easier to do the former, much harder to do the latter.

      1. The Dems will be able to blame the ‘pubs in two years because large messes don’t get clean up quickly. Nonetheless, they’ll need something to show for it as well.

  4. about budget or economy come the next cycle.  But they will have to come up with workable plans of their own if they are going to unseat incumbent D’s.  “Just say no” is not a plan.  The “Party of No” has been bereft of ideas for several years.  It is why they are the minority.  Anyone can whine.  The difficult work comes in formulating viable solutions.  

    And I suspect it will be “The Party Of Ideas” v. “The Party Of No” once again.

    “Yes, as through this world I’ve wandered, I’ve seen lots of funny men; some will rob you with a six-gun, and some with a fountain pen.” ~Woody Guthrie

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