They DO believe in Santa Claus

New Jersey is in a budget quagmire because of the decrease in tax revenue and bloated spending. To his credit Jon Corzine has been saying for three years we have to do something to increase revenue, but as a typical big government statist cutting spending is not being considered.

So the state legislators, part time positions with full time salary and lifetime benefits, got together with the Governor and decided to do nothing... they are waiting for Obama's bailout plan for the states to see how much they will be getting. It is an election year so NJ legislators are hoping the entire budget deficit will be covered. If the aid is directed, money for schools, money for infrastructure, affordable housing, etc the state will simply reduce the budget for those items by the amount the feds give.

California, Illinois Missouri, and other states are also playing the waiting game with their budgets... instead of addressing the problem, wildly out of control spending, they are waiting to get federal bailout money. But these funds will be one shot deals... and one time budget gap fixes. So this year the states can spend away as planned but net year the deficit will be there again baring a miraculous recovery as a 1 trillion dollar addition to the deficit will raise the total deficit dangerously close to the countries GDP.

Running some deficit spending is a good thing, loans and financing are how wealth is developed. But it takes discipline and self restraint and one must avoid becoming addicted to the idea of easy money.

The problem is the closer a country's deficit comes to it's GDP, the shakier investments in it's currency become. Japan and many western European countries are already in that boat. Japan s a model of what happens when the deficit exceeds the GDP and how the country refusing to cut it's usury tax rates to force some demand-side stimulation.

The current plan being considered is considering further tax breaks with a bunch of spending to try a demand-side and supply-side jump start to the economy. If carefully considered it could work... unlike the $700 billion that was p*ssed away. Actually only $350B was wasted, another $350B remains and will be added to the $845B.

But the current plan lacks foresight, lacks oversight, and directs huge sums away from the stated purpose of stimulating the economy. In the meantime since 2007 the deficit has grown by $160B (tax stimulus package), $700B (TARP), and now a proposed $845B.

And looking at the proposed plan one is left wondering why so much money is being directed toward non-economy stimulating projects... giving the net effect of expanding government in a time of dwindling revenues... the proposed $145B in tax cuts which do not figure in decreasing tax revenues due to loss of jobs and dwindling revenue from businesses suffering from decreasing sales.

This leads me to believe the government has not only not learned that spending money we don't have led us into this mess. The plan of running up the deficit to the GDP without establishing a revenue source to pay the daily bills is EXACTLY what happened when people ran up debts exceeding their income and could no longer even meet the minimum requirements of their debt service. This will have the net effect of undermining, not bolstering the currency and the markets.

A summary of the proposed $825 billion plan:

• $145 billion in "tax cuts."
• $43 billion for increased unemployment benefits.
• $39 billion for expanded healthcare benefits for the unemployed.
• $20 billion to increase food stamp benefits.
• $41 billion for school improvements, including better buildings, computer upgrades and teacher training.
• $15 billion to increase the maximum Pell grant by $500 in 2009-10; plus, increases to the annual unsubsidized Stafford Loan limits.
• $14 billion in tax credits of up to $2,500 a year for college students with an annual income below $80,000.
• $6 billion for college building improvements.
• $79 billion to help states offset education costs.
• $4 billion for more preventative care programs. (Health care.)
• $1.5 billion for improvements at community health centers.
• $20 billion to computerize health care records.
• $87 billion for states to help pay Medicaid costs.
• $6 billion to weatherize moderate income homes, making them more energy efficient.
• $4 billion for homeowners to take up to 30% of the cost of conservation measures as a tax credit, up to $1,500 per person.
• $300 million for consumers to replace old appliances.
• $500 million to help rural families secure mortgages.
• $16 billion in energy retrofits and improvements for public housing.
• $30 billion for highway and bridge construction projects.
• $10 billion for mass transit, including new lines, buses, trains and stations.
• $3 billion to expand congested airports.
• $1.15 billion for better land and sea ports.
• $4 billion for more police officers and equipment.
• $500 million for better airport screening detectors.
• $31 billion to modernize public buildings, making them more energy efficient.
• $3.1 billion for improvements on public lands, including new roads, trails and facilities at national parks.
• $6 billion for broadband Internet access in rural areas.
• $400 million for flood control efforts, which include buying and preserving open land around the country.
• $6 billion for communities to replace aging sewer lines.
• $4.2 billion for towns to purchase and rehabilitate foreclosed, vacant homes.
• $32 billion for a "smart" utility grid and renewable energy production.
• $10 billion for science research facilities.
  

This is not a stimulus program, this is a spending plan that calls for maxing out the charge card while taking a pay cut.