Tuesday, March 23, 2010

Apparently I'm a little out of the loop

I don't get it. It's clear that states like NY and California are broke and need to cut their spending drastically, yet every attempt to cut spending is met with protests and the legislature seems to cave every time.

NY's governor proposed cutting $1.1 billion in aid for education. Now the legislature is going to cut that to just $500 million. Schools will see that as a manageable gap to meet through higher taxes and we'll maintain the status quo. Schools are critical to the future of our state but the return on our investment is subpar. But as we did last year, we'll kick the can down the road and hope next year is better.

The governor also proposed cutting a few prisons that don't seem to be doing anything accept transferring tax dollars to local communities. Nope, can't do that either.

I'm convinced that the stimulus from 09 and the miraculous rally on Wall Street have given people a false hope that things are returning to "normal". Nothing could be further from the truth, in my opinion. Talk to people in the field and you'll be sufficiently depressed.

Consider the following from the Federal Reserve's San Francisco Office:

"We’ve seen no let-up in the pace at which borrowers are falling behind in their loans. Further additions to the already swollen stockpile of vacant homes represent a threat to house prices and new home construction activity.

Last year, for example, the share of mortgages that was 30 to 89 days past due declined. On the face of it, that looked like a hopeful sign. Unfortunately, when my staff examined the numbers more closely, it turned out that the drop actually represented a worsening of mortgage market conditions. What you want to see is delinquent borrowers becoming current. Instead, what happened was that delinquent mortgages moved in the other direction to an even poorer performance status. Many wound up in foreclosure. All in all, I expect that the share of loans that are seriously delinquent will continue to move higher."

I feel like the lone sober guy on South Padre Island. Everyone thinks they're partying like a rock star, but they just look like sloppy drunks to me.

On a related subject - California can't bear to see the housing sector stand on it's own two feet so they are offering their own tax credit just in case the feds don't extend the homebuyer tax credit. It's not like California is broke or anything....

Cheers, I guess.

No comments: