RANDOM THOUGHTS

02/13/2009

Some random thoughts on a Friday the thirteenth…

THE FINANCIAL CRISIS: a recent analysis by Bloomberg News caught my eye. It estimated that the total federal response to the financial crisis thus far (the stimulus legislation, bailouts, plus the vast infusion of “liquidity” into the financial system) comes to $9.7 trillion. It is almost impossible to envision how big $9.7 trillion is, but here are some illustrations:


It would pay off 90 percent of all the home mortgages in the United States.

It would take spending $13.2 million a day from the birth of Christ until today to equal $9.7 trillion.

It is 13 times more than what has been spent on the Iraq and Afghanistan wars combined.

It could be used to write a check for $1430 to every man, woman, and child alive on the planet today.

It is more than three times the annual federal budget.

Our leaders had better come up with a plan that will work to solve this crisis. There isn’t another $9.7 trillion available for them to take a mulligan on addressing the problems. It is incredible that Congress has rushed to pass a stimulus bill that will cost taxpayers over $1 trillion once the interest on the borrowing is figured in. It is the biggest single piece of appropriations legislation in history, and it is supposed to help reverse a dire economic crisis—yet few will know exactly what they are voting on when the votes are cast. That is a bad way to do business.

THE STATE BUDGET: the Revenue Estimating Conference (REC) is scheduled to meet next week in Baton Rouge. The REC just met in December and usually meets again in May, so it is somewhat unusual for it to be meeting in February. It is highly unlikely that the economists who develop the revenue forecasts for the REC will have any new data that will significantly change the revenue estimate. If that is the case, there is only one reason for the meeting: to certify money coming from the federal stimulus legislation as recurring revenue. If that is done, it would soften the budget cuts that the Jindal administration must submit in its executive budget that must be presented to the Legislature in March. If those revenues are truly recurring in nature, then the REC meeting would be timely. If the revenues are only going to be around for a year or two with no guarantee of them continuing in the future, it will be tantamount to kicking the can down the road for the governor and Legislature to use the money to fund recurring expenses in the budget.

THE LARGEST BUSINESS TAX INCREASE IN LOUISIANA HISTORY: If some legislators and assessors have their way in the upcoming legislative session, businesses in Louisiana could see the biggest hike in their tax burden in modern history. How? By the enactment of a significant increase the homestead exemption which, at $75,000, is at the top of the list in the nation. Currently, $680 million in property tax is shifted from some homeowners to other homeowners and businesses due to the high homestead exemption level. If the exemption is doubled, it would automatically result in a large roll-up of millages to offset the drop in taxable property. Those who pay property taxes would pay much more, and businesses currently pay 80 percent of all property taxes in Louisiana. If the governor and the Legislature don’t want to stifle jobs and make Louisiana even less attractive for economic development, they should nip this huge tax increase in the bud.