Money Jungle: Pew Sez “P.U.!” to Florida

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The latest in a lengthening line of reports raising serious questions about the long-term economic stability of the United States was issued recently, and the questions it raises has no clear or easy answers. But still, those questions must be asked.

“Beyond California: States in Fiscal Peril” was put together by the Pew Center on the States, a division of the Pew Charitable Trusts, one of the nation’s leading sources of foundation money. As such, it represents the cream of established thought, organized by people with significant access to the dominant centers of financial, cultural and political power, on all levels of government and industry. The center has offices on E Street in Washington, as well as on Market Street in Philadelphia, a city that in itself offers vast anecdotal data related to the current breakdown of civil society.

“Many economists are optimistic that America’s Great Recession may be turning the corner,” writes the center’s Managing Director, Susan Urahn. “States, however, are not celebrating.” Urahn led a team of 14 in preparing the report, which was then vetted by 15 colleagues before it was issued in mid-November. Its purpose is to elaborate on the well-known issues related to California by showing how that state is hardly alone on the fast track to financial emergency. This has been widely documented already—the formalized collapse began years ago—but our leaders have been reluctant, at best, to really speak directly to the problem, for fear of making it worse.

Working with data available though July 31, the Pew report evaluates states based on six criteria: 1) foreclosure rate; 2) change in unemployment rate; 3) change in revenue; 4) size of state budget gaps, relative to its General Revenue; 5) the letter grade assigned by its own Government Performance Project (GPP); and 6) “legal obstacles to balanced budgets”, namely whether the states require a supermajority to change budget policy. By their standard, California is in far worse shape than anyone there cares to admit, but it is hardly alone. Among the nine other states listed—including Arizona, Illinois, Michigan, New Jersey, Nevada, Oregon, Rhode Island and Wisconsin—Florida is actually in better shape, despite being one of the first states affected by the crisis.

“The Great Recession has not just stalled Florida’s growth—it has reversed it,” says the report. “In 2005, Florida ranked second among the states in economic growth. In 2008, it ranked 48th.” This precipitous drop was spurred by Governor Crist’s decision to throw our cities into instant deficit with tax cuts to benefit his political base, cuts that came just before the bottom fell out of the construction and real estate markets. Florida was in recession long before it formally spread nationwide.

Like America in general, Florida’s business model required perpetual growth for sustainability. With so much to offer new residents, and a record of steady growth for decades on end, it’s not surprising that we would take our extreme good luck for granted. Much as California (which had major financial issues in the 1990s) continued to reinvest in failed policies long after they should have known better, and as the country doubled-down on disaster in every realm, our state proceeded as if there was no possibility of conditions ever changing, despite abundant evidence to the contrary.

The past year was the first in living memory without the explosive growth we had become accustomed to. “Not too long ago,” according to the report, “Florida was adding as many as 445,000 residents a year; between April 2008 and April 2009, its population actually shrank by 58,000. … [T]here were at least 275,000 homes for sale or rent in Florida that nobody wanted, and the state has the second-highest foreclosure rate [2.72%] in the country.” Judging by the words and actions of our political “leaders”, the shock of the “revelation” has not worn off, and reality has still not set in. Heading into the genre-defining election cycle of 2010-2011, no one is even pretending to have any solutions, besides more painful cuts to essential services.

“States’ fiscal situations are widely expected to worsen even when the national economy starts to recover.” Bad news, given that the national economy is not going to recover at all. Such “optimism” is merely a smokescreen to draw more Americans into Wall Street’s “sucker’s rally”, a desperate attempt to prop up our failed system. Obama botched his only chance to get things in line, and now he, like most of the mayors and governors of this country, is powerless to do anything but watch the numbers and spin the brutal facts into more palatable truths. By stacking his economic team with people who bear direct responsibility for collapsing the economy, he has permanently undermined his own credibility as a reformer and change agent.

sdh666@hotmail.com; November 23, 2009

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