Spitzer in Wonderland, Part II – By George J. Marlin

Let’s review America’s financial and economic mayhem:

  1. Financial institutions have written off $150 billion in losses and some analysts claim there could be up to $350 billion more.
  2. Year-to-Date market returns have been dismal.  The Dow is down 7.79 percent, S&P -9.38 percent, Nasdaq -14.19 percent.
  3. The Index of Leading Economic Indicators which was -0.2% in December and has declined in 4 of the last 6 readings indicates the U.S. is in a recession.
  4. The Empire State Manufacturing Index fell to 9.03 in January, from 9.80 in December. New orders tumbled 13 points to 0.04, after a 10 point decline in December. Business expectations measured by the future conditions index, were very negative, falling 15 points to 19.44.
  5. The CEO Business Confidence Survey fell to 39%, its lowest point since 2000.
  6. The Unemployment Rate has risen to 5%.
  7. Unadjusted Initial Jobless Claims increased to 547,637, the highest since 2002.
  8. The Consumer Price Index (CPI) showed consumer prices rose at an annual rate of 4.1% in December.
  9. The Producer Price Index (PPI) in December showed producer prices were 6.3% higher than the previous year.
  10. December Retail Sales (ex autos) fell 0.4%.
  11. Real Disposable Personal Income decreased in November and December -0.3% and -0.2% respectively.
  12. The S&P/Case-Shiller Home Price Index posted its 10th consecutive month of negative returns. The leading measure of home prices indicates the worst broad-based declines in home values since 1991.
  13. The National Association of Realtors reported 2007 home sales declined by 13%, and a 10-month supply of homes are currently on the market.
  14. Foreclosure rates (1.69% of mortgages) are at record levels according to the Mortgage Bankers Association. 5.6% of borrowers are 20 days past due, 1.26% are 90 days past due and 1.3% of Prime borrowers are past due.

In the wake of all this economic doom and gloom, what does Governor Spitzer do? He calls for a 5.1 percent spending increase (double the inflation index), $1.7 billion in new fees and taxes, risky one-shot revenues, record spending on education, covering 400 thousand additional children with health insurance, increasing the state work force and giving salary raises to state legislatures.

Spitzer truly lives in his own wonderland. After his presentation he even denied his budget calls for tax increases. He is a spoiled rich kid who believes he can will things.

If Governor Spitzer does not wake up to the fiscal realities and cut spending and taxes, he will be responsible for a severely damaged, if not crippled, state economy. Remember, in the recession of 1990-1991 over 20 percent of the jobs lost nationally were lost in New York. And if history repeats itself, expect people to vote with feet and scores of New York towns, villages and hamlets to turn into municipal deserts.

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