Countries worldwide are spending more than they raise in taxes. People are beginning to realize that the funding for all of this is unsustainable over time. In Greece, rumor has it that they will need a further bailout down the road (May or June). Was the EU able to solve Greece’s financial problems? Notice, nobody showed up at Greece’s doorstep with tons of gold to buy off the creditors. Europe didn’t raise taxes to bail out Greece; they did a Fanny and Freddie refi--get a payment today and worry about it again next month.
Us old farts understand inflation. The loaf of bread we paid 20 cents for as a child is now two dollars. Being a millionaire in today’s world just doesn’t have the same cachet as it did back in the 1960’s. The high school graduates today, have read about inflation but have yet to experience it. The price of gasoline just went up 50 cents a gallon last week and Obama has appointed an Oil Speculation Task Force to look into the matter. Gas is still a dollar cheaper in Mexico. So we can pretty well deduce that Obama hasn't got a clue on this one.
Our government is facing a "Catch 22" situation. Tax receipts are decreasing because of the economic slump. Wages are pretty much frozen. So when the government prints dollars, the normal expectation is for wages to rise in lock step with inflation, which in turn increases taxes collected, and that isn’t happening. The extra printed dollars have lowered the average person’s standard of living while at the same time raised governments fixed costs of doing business. Using this example, it is easy to see that the reduced standard of living (from the ability to consume less-i.e. higher energy costs) has the same effect as a tax increase. The government’s problem; they collect the same amount in taxes, but it doesn’t go quite as far, as it did the year before. (Now how can that be?)
California’s latest update of tax receipts for February of this year looked a bit abysmal when compared to last year. Corporate, personal and sales tax collections have dropped a total of 23%. See the chart below.
There is some good news though; California’s food stamp participation is the second lowest in the country. The reason, the welfare offices are too overwhelmed by demand --- the State can’t afford the staff needed to cope with the problem (I'm not making this up). And naturally in an election year, Obama has ads running informing voters about their possible eligibility for the food stamp program. The November election could reflect a change in attitudes this year. The Democrats will be too tired or too mad to vote the party line after trying to sign up for food stamps.