Politicians Will Dispel Gloom

The U.S. economic “recovery”is going to feel more like a recession for some time to come. So said a variety of forecasters after economic growth slowed significantly in the second quarter.

Governor Haley Barbour questions whether the “recovery” ever moved beyond Wall Street, saying “it has not come to main street.”

At a Neshoba County Fair press conference last week, the Governor forecast protracted unemployment for thousands of Mississippians, flat consumer spending, and tough times for local and state governments. He also said the oil spill has negatively impacted Mississippi’s economy and July’s improved tax collections are unlikely to be sustained.

A group of mayors meet periodically to discuss issues. At their late July meeting, they complained that not only are tax revenues down, but unfunded costs from higher levels of government are going up. These range from increased retirement and health insurance costs for public employees to mowing state highway right-of-ways inside city limits. All this plus state funding cuts for schools put the burden on local governments to raise taxes for things they have no control over.

Local burdens, though, pale in comparison to what legislators face. As the Governor has said for months, about $500 million in federal recovery funds that support state spending will go away next year.

That means next January, at the start of a re-election year, legislators will face terrible choices to cut deeper or raise taxes. Neither are good choices during a recession. Both are bad for legislators’ re-election chances.

“With state programs already reeling from massive budget cuts, can the state absorb another $500 million incuts?” I asked the Governor.

He didn’t think another $500 million in “across the board cuts” could be absorbed. He said this makes government restructuring “inevitable.” He said he told legislators that it would be better to restructure in 2010 than during are-election year. But, they didn’t listen. He said his next budget will again propose “rightsizing” government.

He will, of course, oppose taxincreases. “Our problem isn’t that we tax too little,” he said,”it’s that we spend too much.” Still, there will be a push to raisetaxes at the state level.

Meanwhile, federal taxes may go up too. Unless our confrontational Congress can reach some kind of agreement, the so-called “Bush tax cuts” will expire in December causing everybody’s tax rates to go up.

All this paints a pretty gloomy scenario for the average taxpayer.

Thank goodness we have two rounds of elections coming up…the federal elections this November, then Mississippi elections next year.

With non-stop politicians telling us how they will make things better, maybe we won’t notice how much things aren’t better.

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