I'll Take Door Number Three
August 07, 2009
The jobs report came out this morning and the market liked the news. The paradox for me is that a quarter of a million more jobs were lost. This is a little like the Titanic started to sink slower before it eventually went down. I do not mean this to be doom and gloom but clearly, we are not out of the woods fundamentally as much as we would like to be. Unemployment I’ll Take Door Number Three
stands at 9.5% and this causes some problems that most folks don’t think about.
Let’s start with the problem this causes within the Federal Budget. The Feds have the budget predicated on 8.5% unemployment. This may not seem like such a big deal but believe me when I tell you that a full percentage point difference means a ton of Federal tax dollars not being collected which increases the deficits.
When you then pile on the additional spending taking place and the trillion dollar deficit already in place with the contemplation of another trillion in health care reform, the scenario can look mighty scary. Now, throw in the fact that even though the administration says the trillion dollar cost is offset, the one percentage point difference in unemployment makes it necessary to raise 289 billion dollars from all of you in the form of additional taxes.
Now, throw in what the states are doing (my own state of NC raised the sales tax a full one percent and issued a surcharge income tax on incomes over 60,000 that goes from 1 to 3%, and you start to see the measure of the problem.
We are not out of the woods. There is economic work to be done but we have to start with fiscal sanity and responsibility. Failing that, we face the prospect of trading the bird in the hand for the hump backed nag behind door number three.
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