Who's laughing?

Who's laughing?

Bad ju-ju to laugh about this, right Marc?

Bad ju-ju to laugh about this, right Marc?

Bad ju-ju to laugh about this, right Marc?

Wal-Mart Reports $1.43 Billion Sales Fri.

Sat Nov 30, 5:53 PM ET Add Business - Reuters to My Yahoo!
BENTONVILLE, Ark. (Reuters) - Wal-Mart Stores Inc. (NYSE:WMT - news), the world's biggest retailer, on Saturday reported record one-day sales on Friday, the day after Thanksgiving that retailers hope will jump-start sluggish sales.


They're lying, of course. Very typical evil corporatist b.s.

Wal-Mart Reports $1.43 Billion Sales Fri.

Sat Nov 30, 5:53 PM ET Add Business - Reuters to My Yahoo!
BENTONVILLE, Ark. (Reuters) - Wal-Mart Stores Inc. (NYSE:WMT - news), the world's biggest retailer, on Saturday reported record one-day sales on Friday, the day after Thanksgiving that retailers hope will jump-start sluggish sales.


They're lying, of course. Very typical evil corporatist b.s.

Wal-Mart Reports $1.43 Billion Sales Fri.

Sat Nov 30, 5:53 PM ET Add Business - Reuters to My Yahoo!
BENTONVILLE, Ark. (Reuters) - Wal-Mart Stores Inc. (NYSE:WMT - news), the world's biggest retailer, on Saturday reported record one-day sales on Friday, the day after Thanksgiving that retailers hope will jump-start sluggish sales.


They're lying, of course. Very typical evil corporatist b.s.

Caution!

Any comparisons of last Friday's sales versus those of the day after Thanksgiving in 2000 or 2001 should be taken with a grain of salt. There are a couple of factors that have nothing to do with how well the economy is performing that could cause this year's Friday after Thanksgiving to be unusually high:

• Chanukah began sundown on Friday, so people were doing last minute shopping trips for that.
• More significantly, Thanksgiving was late this year, so there was less than four weeks between Thanksgiving and Christmas. So people have to compress their Christmas shopping into fewer days (assuming that you don't really get started until after Thanksgiving).

The important thing will be to compare the overall Christmas shopping sales. We won't know that until January.

Caution!

Any comparisons of last Friday's sales versus those of the day after Thanksgiving in 2000 or 2001 should be taken with a grain of salt. There are a couple of factors that have nothing to do with how well the economy is performing that could cause this year's Friday after Thanksgiving to be unusually high:

• Chanukah began sundown on Friday, so people were doing last minute shopping trips for that.
• More significantly, Thanksgiving was late this year, so there was less than four weeks between Thanksgiving and Christmas. So people have to compress their Christmas shopping into fewer days (assuming that you don't really get started until after Thanksgiving).

The important thing will be to compare the overall Christmas shopping sales. We won't know that until January.

Caution!

Any comparisons of last Friday's sales versus those of the day after Thanksgiving in 2000 or 2001 should be taken with a grain of salt. There are a couple of factors that have nothing to do with how well the economy is performing that could cause this year's Friday after Thanksgiving to be unusually high:

• Chanukah began sundown on Friday, so people were doing last minute shopping trips for that.
• More significantly, Thanksgiving was late this year, so there was less than four weeks between Thanksgiving and Christmas. So people have to compress their Christmas shopping into fewer days (assuming that you don't really get started until after Thanksgiving).

The important thing will be to compare the overall Christmas shopping sales. We won't know that until January.

Many people do not realise this, however if it weren't for the very strong housing boom (driven by the sheer numbers of Boomers, entering their peak earning and spending years), there would be deflation in the economy (the non-housing sector has been in deflation for some time).

In countries were less people own houses like Germany and Japan the economy is already deflationary. For economies with a high rate of home ownership like Australia and the United States delfation is not really a concern until the housing boom ends, and it will end sooner or later.

Many people do not realise this, however if it weren't for the very strong housing boom (driven by the sheer numbers of Boomers, entering their peak earning and spending years), there would be deflation in the economy (the non-housing sector has been in deflation for some time).

In countries were less people own houses like Germany and Japan the economy is already deflationary. For economies with a high rate of home ownership like Australia and the United States delfation is not really a concern until the housing boom ends, and it will end sooner or later.

Many people do not realise this, however if it weren't for the very strong housing boom (driven by the sheer numbers of Boomers, entering their peak earning and spending years), there would be deflation in the economy (the non-housing sector has been in deflation for some time).

In countries were less people own houses like Germany and Japan the economy is already deflationary. For economies with a high rate of home ownership like Australia and the United States delfation is not really a concern until the housing boom ends, and it will end sooner or later.

Originally Posted by Tristan Jones

Many people do not realise this, however if it weren't for the very strong housing boom (driven by the sheer numbers of Boomers, entering their peak earning and spending years), there would be deflation in the economy (the non-housing sector has been in deflation for some time).

In countries were less people own houses like Germany and Japan the economy is already deflationary. For economies with a high rate of home ownership like Australia and the United States delfation is not really a concern until the housing boom ends, and it will end sooner or later.

This is quite correct. It is a perfect example of how history doesn't repeat, but rhymes. To counteract deflation, Keynesian stimulus is required. The last time this wasn't done and there was a Depression. It took the massive stimulus of WW II to get out of the Depression. Should history repeat we should expect the GOP to go down and "tax-and-spend" Democrats come into power and spend a lot just like they did in WW II.

But this isn't what has happened. Instead the GOP has retained power, and although there is a war, it is fiscally a very mild affair. There has been very little in the way of government stimulus. Yet consumer demand hasn't flagged, so such stimulus isn't really needed. What has happened instead is households have refinanced their mortgages and raised a huge amount of cash which they have proceeded to spend. This is stimulus of the very best kind.

How long can it last? Valuation suggests another two maybe three years. By then, we should have reached the bottom of the Juglar cycle, and business investment will pick up the slack. Result: no recession in 2006.

So far it seems like a free lunch. Last time it was tax and spend, this time is seems to be just spend. There is a "tax" component of course (there is no such thing as a free lunch). The "tax" will fall on those who have lent out their funds to the government and mortgage holders at today's low rates (and even lower rates to come). The only way to stop bondholders from paying the price would be for the Federal Government to sharply raise taxes and fund surpluses. But when you consider that a helluva lot of bondholders are foreigners (Americans don't save), who don't vote, why on earth should the U.S. raise taxes to help out foreign bondholders?

So what I see happening is one party is going to represent the bondholders (there are rich Americans who will lose). They will push for "fiscal repsonsibility". I suspect it will be the Democrats. Libertarians, who favor sound money will join them. Social libertarains, who are already in the party will stay there. National liberals, such as myself will probably leave the Democrats and move over to the GOP.

With the exit of libertarians, the GOP will become less economically conservative, but will remain socially conservative. As the free market purists leave the GOP the party can look into solutions of some of our major pressing problems like energy policy and health care. Energy policy could be handled by policy designed to produce increased volatility in oil prices which would eventually result (though the use of derivatives) in higher steady-state oil prices. This policy would result in (1) development of alternate energy, which solves the energy crisis and (2) deliver huge profits to domestic oil interests, whose interests the GOP represent. The other problem will be solved by some sort of national health policy. It will likely produce huge gains for big pharma, biotech startups, and insurance companies (this assumes big health gets on board the GOP wagon).

All the policies will maintain a social conservative stance and pro-corporate style, allowing the GOP to continue to deliver to their key backers. More subtle will be the "soak the rich" (foreign bondholder) background that pays for all this (which will make the GOP a liberal party by my definition). This strategy wasn't available to the US the last time since we weren't the reigning hegemon. But we are now

So I've made up my mind on Iraq, as a national liberal, I favor invasion, if necessary to force Hussein to knuckle under to US demands.

Originally Posted by Tristan Jones

Many people do not realise this, however if it weren't for the very strong housing boom (driven by the sheer numbers of Boomers, entering their peak earning and spending years), there would be deflation in the economy (the non-housing sector has been in deflation for some time).

In countries were less people own houses like Germany and Japan the economy is already deflationary. For economies with a high rate of home ownership like Australia and the United States delfation is not really a concern until the housing boom ends, and it will end sooner or later.

This is quite correct. It is a perfect example of how history doesn't repeat, but rhymes. To counteract deflation, Keynesian stimulus is required. The last time this wasn't done and there was a Depression. It took the massive stimulus of WW II to get out of the Depression. Should history repeat we should expect the GOP to go down and "tax-and-spend" Democrats come into power and spend a lot just like they did in WW II.

But this isn't what has happened. Instead the GOP has retained power, and although there is a war, it is fiscally a very mild affair. There has been very little in the way of government stimulus. Yet consumer demand hasn't flagged, so such stimulus isn't really needed. What has happened instead is households have refinanced their mortgages and raised a huge amount of cash which they have proceeded to spend. This is stimulus of the very best kind.

How long can it last? Valuation suggests another two maybe three years. By then, we should have reached the bottom of the Juglar cycle, and business investment will pick up the slack. Result: no recession in 2006.

So far it seems like a free lunch. Last time it was tax and spend, this time is seems to be just spend. There is a "tax" component of course (there is no such thing as a free lunch). The "tax" will fall on those who have lent out their funds to the government and mortgage holders at today's low rates (and even lower rates to come). The only way to stop bondholders from paying the price would be for the Federal Government to sharply raise taxes and fund surpluses. But when you consider that a helluva lot of bondholders are foreigners (Americans don't save), who don't vote, why on earth should the U.S. raise taxes to help out foreign bondholders?

So what I see happening is one party is going to represent the bondholders (there are rich Americans who will lose). They will push for "fiscal repsonsibility". I suspect it will be the Democrats. Libertarians, who favor sound money will join them. Social libertarains, who are already in the party will stay there. National liberals, such as myself will probably leave the Democrats and move over to the GOP.

With the exit of libertarians, the GOP will become less economically conservative, but will remain socially conservative. As the free market purists leave the GOP the party can look into solutions of some of our major pressing problems like energy policy and health care. Energy policy could be handled by policy designed to produce increased volatility in oil prices which would eventually result (though the use of derivatives) in higher steady-state oil prices. This policy would result in (1) development of alternate energy, which solves the energy crisis and (2) deliver huge profits to domestic oil interests, whose interests the GOP represent. The other problem will be solved by some sort of national health policy. It will likely produce huge gains for big pharma, biotech startups, and insurance companies (this assumes big health gets on board the GOP wagon).

All the policies will maintain a social conservative stance and pro-corporate style, allowing the GOP to continue to deliver to their key backers. More subtle will be the "soak the rich" (foreign bondholder) background that pays for all this (which will make the GOP a liberal party by my definition). This strategy wasn't available to the US the last time since we weren't the reigning hegemon. But we are now

So I've made up my mind on Iraq, as a national liberal, I favor invasion, if necessary to force Hussein to knuckle under to US demands.

Originally Posted by Tristan Jones

Many people do not realise this, however if it weren't for the very strong housing boom (driven by the sheer numbers of Boomers, entering their peak earning and spending years), there would be deflation in the economy (the non-housing sector has been in deflation for some time).

In countries were less people own houses like Germany and Japan the economy is already deflationary. For economies with a high rate of home ownership like Australia and the United States delfation is not really a concern until the housing boom ends, and it will end sooner or later.

This is quite correct. It is a perfect example of how history doesn't repeat, but rhymes. To counteract deflation, Keynesian stimulus is required. The last time this wasn't done and there was a Depression. It took the massive stimulus of WW II to get out of the Depression. Should history repeat we should expect the GOP to go down and "tax-and-spend" Democrats come into power and spend a lot just like they did in WW II.

But this isn't what has happened. Instead the GOP has retained power, and although there is a war, it is fiscally a very mild affair. There has been very little in the way of government stimulus. Yet consumer demand hasn't flagged, so such stimulus isn't really needed. What has happened instead is households have refinanced their mortgages and raised a huge amount of cash which they have proceeded to spend. This is stimulus of the very best kind.

How long can it last? Valuation suggests another two maybe three years. By then, we should have reached the bottom of the Juglar cycle, and business investment will pick up the slack. Result: no recession in 2006.

So far it seems like a free lunch. Last time it was tax and spend, this time is seems to be just spend. There is a "tax" component of course (there is no such thing as a free lunch). The "tax" will fall on those who have lent out their funds to the government and mortgage holders at today's low rates (and even lower rates to come). The only way to stop bondholders from paying the price would be for the Federal Government to sharply raise taxes and fund surpluses. But when you consider that a helluva lot of bondholders are foreigners (Americans don't save), who don't vote, why on earth should the U.S. raise taxes to help out foreign bondholders?

So what I see happening is one party is going to represent the bondholders (there are rich Americans who will lose). They will push for "fiscal repsonsibility". I suspect it will be the Democrats. Libertarians, who favor sound money will join them. Social libertarains, who are already in the party will stay there. National liberals, such as myself will probably leave the Democrats and move over to the GOP.

With the exit of libertarians, the GOP will become less economically conservative, but will remain socially conservative. As the free market purists leave the GOP the party can look into solutions of some of our major pressing problems like energy policy and health care. Energy policy could be handled by policy designed to produce increased volatility in oil prices which would eventually result (though the use of derivatives) in higher steady-state oil prices. This policy would result in (1) development of alternate energy, which solves the energy crisis and (2) deliver huge profits to domestic oil interests, whose interests the GOP represent. The other problem will be solved by some sort of national health policy. It will likely produce huge gains for big pharma, biotech startups, and insurance companies (this assumes big health gets on board the GOP wagon).

All the policies will maintain a social conservative stance and pro-corporate style, allowing the GOP to continue to deliver to their key backers. More subtle will be the "soak the rich" (foreign bondholder) background that pays for all this (which will make the GOP a liberal party by my definition). This strategy wasn't available to the US the last time since we weren't the reigning hegemon. But we are now

So I've made up my mind on Iraq, as a national liberal, I favor invasion, if necessary to force Hussein to knuckle under to US demands.

http://www.dack.com/war/portfolio/

It is not quite Krupp, but would it be prudent to invest in the Perpetual War Portfolio? This marriage of informational and industrial with the coffers of the State ought to do well under National Liberalism... or is it a misplacement of those Enron profits? Do advise.

http://www.dack.com/war/portfolio/

It is not quite Krupp, but would it be prudent to invest in the Perpetual War Portfolio? This marriage of informational and industrial with the coffers of the State ought to do well under National Liberalism... or is it a misplacement of those Enron profits? Do advise.

http://www.dack.com/war/portfolio/

It is not quite Krupp, but would it be prudent to invest in the Perpetual War Portfolio? This marriage of informational and industrial with the coffers of the State ought to do well under National Liberalism... or is it a misplacement of those Enron profits? Do advise.

Originally Posted by Virgil K. Saari

http://www.dack.com/war/portfolio/

It is not quite Krupp, but would it be prudent to invest in the Perpetual War Portfolio? This marriage of informational and industrial with the coffers of the State ought to do well under National Liberalism... or is it a misplacement of those Enron profits? Do advise.

I don't know. So far I have developed a concept for only three classes of investments, the S&P500 index, the energy-service sector and gold. I have no good idea on how to play the defense sector.

I'm dubious that simply buying and holding this permanent war portfolio will beat an index fund or junk bond fund going forward from 12/2/02. But I really don't know how such stocks fare during war time.

Originally Posted by Virgil K. Saari

http://www.dack.com/war/portfolio/

It is not quite Krupp, but would it be prudent to invest in the Perpetual War Portfolio? This marriage of informational and industrial with the coffers of the State ought to do well under National Liberalism... or is it a misplacement of those Enron profits? Do advise.

I don't know. So far I have developed a concept for only three classes of investments, the S&P500 index, the energy-service sector and gold. I have no good idea on how to play the defense sector.

I'm dubious that simply buying and holding this permanent war portfolio will beat an index fund or junk bond fund going forward from 12/2/02. But I really don't know how such stocks fare during war time.

Originally Posted by Virgil K. Saari

http://www.dack.com/war/portfolio/

It is not quite Krupp, but would it be prudent to invest in the Perpetual War Portfolio? This marriage of informational and industrial with the coffers of the State ought to do well under National Liberalism... or is it a misplacement of those Enron profits? Do advise.

I don't know. So far I have developed a concept for only three classes of investments, the S&P500 index, the energy-service sector and gold. I have no good idea on how to play the defense sector.

I'm dubious that simply buying and holding this permanent war portfolio will beat an index fund or junk bond fund going forward from 12/2/02. But I really don't know how such stocks fare during war time.

How To Balance A Budget
States are in crisis. They will have to cut services, raise taxes and try a few tricks. Here's what to expect
By DANIEL KADLEC



SEVANS/AP
University of Massachusetts students protest cuts in state funding for tuition



Sunday, Dec. 01, 2002
If you think it takes a long time now to get a new driver's license, wait until next year. The line at your Department of Motor Vehicles (DMV) may well be out the door and around the corner ? assuming the office is even open. And when it's finally your turn at the counter, expect to pay more for that really bad mug shot taken by an especially grouchy DMV jock who has just been told not to plan on any pay raises before the kids leave home. You can only hope the experience doesn't leave you with an ulcer, because if you're on any kind of health-care assistance, you may find that you no longer qualify. Even if covered, you may find that the nearest hospital has been shut down, along with a wide range of state-funded facilities and services that will impose hardship on millions of Americans next year.

Though we hope nothing like this happens to you, get ready for the most severe state-budget crises since World War II. As Governors across the U.S.--24 of them newly elected ? prepare to ring in 2003, the only thing they are celebrating is that they have lots of company in their fiscal misery. Laws in all states except Vermont require a balanced budget. To achieve that in the current fiscal year, which in most cases runs through June 30, states must slash spending and tack on fees and taxes. What they are pondering ranges from the relatively painless (new taxes on tobacco and expanding gaming and lotteries) to the inconvenient (shortening hours at DMV and welfare offices) to the positively painful (closing hospitals, parks-and-recreation departments and libraries, cutting Medicaid, raising college tuitions and laying off thousands of state employees).


LATEST COVER STORY
Age of Arthritis
Dec. 9, 2002
Past Issues Two Towers Dec. 2, 2002 ----------------- Hunt for Osama Nov. 25, 2002 ----------------- G.O.P Victory Nov. 18, 2002 ----------------- The Womb Nov. 11, 2002 ----------------- Pot Politics Nov. 4, 2002 ----------------- Al-Qaeda Oct. 28, 2002 ----------------- Science and Crimes Oct. 21, 2002 ----------------- New Homes Oct. 14, 2002 ----------------- Headaches Oct. 7, 2002 ----------------- Abraham Sept. 30, 2002 ----------------- Al-Qaeda Sept. 23, 2002 ----------------- Iraq's Future Sept. 16, 2002 ----------------- 9/11 Anniversary Sept. 9, 2002 ----------------- The Fat Riddle Sept. 2, 2002 ----------------- Green Century Aug. 26, 2002 ----------------- Young and Bipolar Aug. 19, 2002

TIME IN-DEPTH
Lure of the Rings
Global Influentials



GALLERIES AND GRAPHICS
Joint Breakdown
Where it Hurts
Prestige Oil Spill

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Health: Age of Arthritis
Nation: Flunking Lunch
Arts: Shania Reigns

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CNN.com: Top Headlines



The main source of the states' budget distress is plunging tax revenue stemming from the economic and stock-market downturns. State receipts, largely from sales and capital-gains taxes, fell 6% last year, the first decline in more than 50 years. The states are running an aggregate deficit that is expected to reach $68 billion by June 30. Not even a sudden economic revival would mend what amounts to bad luck (the recession) teamed with years of poor planning and an ancient state-tax system that largely ignores the fastest growing part of the economy: services. You don't pay tax to have a tooth pulled, your taxes done, your lawn mowed or a lawsuit filed. That may have to change. Goods bought over the Internet are often tax free, and that too might have to change.

In the meantime, the states have pressed Washington for money to pay for things it has demanded ? among them, homeland-security initiatives, election reform and broader Medicaid benefits for the poor. Beset by federal deficits, the Bush Administration is unlikely to provide much help at a time when it is focused on tax cuts and a possible war with Iraq. The states are being left to deal with their crises pretty much alone, but they plan to share their burdens in any way possible. One area ripe for cuts is state aid to municipalities and local transit authorities, so the crises are going to spill into how often your trash gets collected and when the bus runs.

The plight of Harrison township in southeast Michigan is typical. Through the 1990s, local authorities did next to nothing to increase tax revenue, counting on bountiful state pass-throughs as a booming economy and stock market boosted the state's sales-and capital-gains-tax revenues. Indeed, many states were able to support municipalities and cut tax rates at the same time, a strategy that critics say is backfiring and is more to blame than the recession for the states' fiscal mess. Michigan is cutting revenue to townships like Harrison. Governor John Engler is expected to announce some $470 million in total budget cuts this week. Harrison township has already had to shut down its recreation department, sell 12 vehicles, slash $16,000 earmarked to clear seaweed that hampers boat traffic near the Lake St. Clair shoreline and cut $19,000 for improvements to dirt roads. The town board had to approve a special assessment last week to cover police and fire protection. "People still don't have their eyes open," says newly elected township supervisor Mark Knowles, the first Democrat voted into that office in 33 years. "They're going around saying, 'You're raising taxes! You're raising taxes!' Yes. But they weren't paying enough to begin with. They just got caught sneaking into the movie theater."

The dire fiscal straits have been visible for some time, but state and local officials were able to paper over their problems by depleting rainy-day funds ? surpluses built during boom years ? and tapping other onetime sources of cash to keep the budget in balance without encroaching on the everyday lives of most people. But that tactic has been exhausted. Already, many states have broken a trend of tax cuts that began in 1994--raising taxes by an aggregate $9.1 billion last year.

Page 1 of 3 1 | 2 | 3 Next > >

How To Balance A Budget
States are in crisis. They will have to cut services, raise taxes and try a few tricks. Here's what to expect
By DANIEL KADLEC



SEVANS/AP
University of Massachusetts students protest cuts in state funding for tuition



Sunday, Dec. 01, 2002
If you think it takes a long time now to get a new driver's license, wait until next year. The line at your Department of Motor Vehicles (DMV) may well be out the door and around the corner ? assuming the office is even open. And when it's finally your turn at the counter, expect to pay more for that really bad mug shot taken by an especially grouchy DMV jock who has just been told not to plan on any pay raises before the kids leave home. You can only hope the experience doesn't leave you with an ulcer, because if you're on any kind of health-care assistance, you may find that you no longer qualify. Even if covered, you may find that the nearest hospital has been shut down, along with a wide range of state-funded facilities and services that will impose hardship on millions of Americans next year.

Though we hope nothing like this happens to you, get ready for the most severe state-budget crises since World War II. As Governors across the U.S.--24 of them newly elected ? prepare to ring in 2003, the only thing they are celebrating is that they have lots of company in their fiscal misery. Laws in all states except Vermont require a balanced budget. To achieve that in the current fiscal year, which in most cases runs through June 30, states must slash spending and tack on fees and taxes. What they are pondering ranges from the relatively painless (new taxes on tobacco and expanding gaming and lotteries) to the inconvenient (shortening hours at DMV and welfare offices) to the positively painful (closing hospitals, parks-and-recreation departments and libraries, cutting Medicaid, raising college tuitions and laying off thousands of state employees).


LATEST COVER STORY
Age of Arthritis
Dec. 9, 2002
Past Issues Two Towers Dec. 2, 2002 ----------------- Hunt for Osama Nov. 25, 2002 ----------------- G.O.P Victory Nov. 18, 2002 ----------------- The Womb Nov. 11, 2002 ----------------- Pot Politics Nov. 4, 2002 ----------------- Al-Qaeda Oct. 28, 2002 ----------------- Science and Crimes Oct. 21, 2002 ----------------- New Homes Oct. 14, 2002 ----------------- Headaches Oct. 7, 2002 ----------------- Abraham Sept. 30, 2002 ----------------- Al-Qaeda Sept. 23, 2002 ----------------- Iraq's Future Sept. 16, 2002 ----------------- 9/11 Anniversary Sept. 9, 2002 ----------------- The Fat Riddle Sept. 2, 2002 ----------------- Green Century Aug. 26, 2002 ----------------- Young and Bipolar Aug. 19, 2002

TIME IN-DEPTH
Lure of the Rings
Global Influentials



GALLERIES AND GRAPHICS
Joint Breakdown
Where it Hurts
Prestige Oil Spill

More Photos >>>


MORE STORIES
Health: Age of Arthritis
Nation: Flunking Lunch
Arts: Shania Reigns

More Stories >>>


DAILY E-MAILS
Sign up today and get the latest news delivered to your inbox



CNN.com: Top Headlines



The main source of the states' budget distress is plunging tax revenue stemming from the economic and stock-market downturns. State receipts, largely from sales and capital-gains taxes, fell 6% last year, the first decline in more than 50 years. The states are running an aggregate deficit that is expected to reach $68 billion by June 30. Not even a sudden economic revival would mend what amounts to bad luck (the recession) teamed with years of poor planning and an ancient state-tax system that largely ignores the fastest growing part of the economy: services. You don't pay tax to have a tooth pulled, your taxes done, your lawn mowed or a lawsuit filed. That may have to change. Goods bought over the Internet are often tax free, and that too might have to change.

In the meantime, the states have pressed Washington for money to pay for things it has demanded ? among them, homeland-security initiatives, election reform and broader Medicaid benefits for the poor. Beset by federal deficits, the Bush Administration is unlikely to provide much help at a time when it is focused on tax cuts and a possible war with Iraq. The states are being left to deal with their crises pretty much alone, but they plan to share their burdens in any way possible. One area ripe for cuts is state aid to municipalities and local transit authorities, so the crises are going to spill into how often your trash gets collected and when the bus runs.

The plight of Harrison township in southeast Michigan is typical. Through the 1990s, local authorities did next to nothing to increase tax revenue, counting on bountiful state pass-throughs as a booming economy and stock market boosted the state's sales-and capital-gains-tax revenues. Indeed, many states were able to support municipalities and cut tax rates at the same time, a strategy that critics say is backfiring and is more to blame than the recession for the states' fiscal mess. Michigan is cutting revenue to townships like Harrison. Governor John Engler is expected to announce some $470 million in total budget cuts this week. Harrison township has already had to shut down its recreation department, sell 12 vehicles, slash $16,000 earmarked to clear seaweed that hampers boat traffic near the Lake St. Clair shoreline and cut $19,000 for improvements to dirt roads. The town board had to approve a special assessment last week to cover police and fire protection. "People still don't have their eyes open," says newly elected township supervisor Mark Knowles, the first Democrat voted into that office in 33 years. "They're going around saying, 'You're raising taxes! You're raising taxes!' Yes. But they weren't paying enough to begin with. They just got caught sneaking into the movie theater."

The dire fiscal straits have been visible for some time, but state and local officials were able to paper over their problems by depleting rainy-day funds ? surpluses built during boom years ? and tapping other onetime sources of cash to keep the budget in balance without encroaching on the everyday lives of most people. But that tactic has been exhausted. Already, many states have broken a trend of tax cuts that began in 1994--raising taxes by an aggregate $9.1 billion last year.

Page 1 of 3 1 | 2 | 3 Next > >