Momentum Shift

by John Rubino - Dollar Collapse
With all eyes on Japan, the news in the US is getting suddenly darker. Stories of falling unemployment and rising home sales are giving way to reports of budget cuts and funding shortfalls and personal desperation. I'm only up to page A7 in today's Wall Street Journal, and have already seen the following:
Food Stamps Surge in West
BOISE, Idaho--Before the recession hit, Idaho, Nevada and Utah had some of the lowest rates of food stamp use in the nation. It was a boom time in a region that has always prided itself on self-reliance and a disdain for government handouts.
Indigent in Idaho
But since the recession began, these three states have the fastest growth rates in the nation of participation in the federal program, recently released figures show. Utah saw a nearly 34% jump in food-stamp participation in December from the same month a year earlier, according to the U.S. Department of Agriculture. Nevada had the second fastest growth rate at 25%, followed by Idaho at 24%.
For the fiscal year ended Sept. 30, those three states plus Wyoming ranked among the top 10 in food-stamp growth, with Idaho leading with a 42% jump from 2009, according to USDA figures.
It's a striking shift for the area, reflecting a post-boom fallout that has been compounded by the many new residents drawn to the region by a hot economy who lacked a support network when jobs disappeared.
"This is a pick-you-up-by-the-bootstraps type of state, which is why the food-stamp participation has [historically] been low," said Rose Andueza, program manager of Idaho's Division of Welfare. "But I think now people have just run out of options."

Mike Buster, 48 years old, said he lost his construction job in the Boise suburb of Caldwell in 2008 and hasn't been able to find stable work since. His wife, Bonnie, 42, said she tried to work odd jobs, but has been limited by health problems, including a heart condition.
After Mr. Buster's unemployment checks ran out, the couple lost their house to foreclosure. In February 2010, they decided to apply for food stamps for the first time. "We didn't have enough food to last a week, so I looked at my wife and said, 'It's time,' " said Mr. Buster.

The number of Idahoans taking food stamps has climbed every month since an October 2007 low, hitting 223,347, or about 14% of Idaho's population, in December. In October 2007, 5.8% of the population, or 87,232 people, received food stamps.
Nationally, the number of residents using food stamps--which today take the form of debit cards--rose to 44.1 million, or 13.1% of the population, in December from 27.2 million, or 9% of the population, in October 2007.

Illinois Pension Crisis Eludes Easy Solutions
Lawmakers in Illinois say they may try to fix the state's ailing pension system by asking current workers to pay more into the plan, though the approach faces substantial legal and political obstacles.
Illinois Gov. Pat Quinn created a stir last month when his budget message suggested that his state's pension fund might need a federal bailout.

The lawmakers are also entertaining the politically difficult idea of applying broader pension changes made this year for newly hired employees to current workers. Those include raising the retirement age and scaling back on annual cost-of-living raises.

Whatever approach is embraced, it remains unclear whether such strategies would fix the Illinois system, which is 45% funded. That makes it the most under-funded state plan in the U.S., according to Moody's Investor's Service.

The proposals come as Illinois focuses on home-grown solutions to its pension difficulties after Gov. Pat Quinn created a stir when he said in his budget proposal last month that the state may need a "federal guarantee" of its pension funds--a reference his office now says was a mistake.
"It should have been edited out," David Vaught, the governor's budget director, said in an interview. "We don't think we need a bailout."

Transit Agencies Rebuffed On Request for More Funds
Officials from more than 30 public transit systems came to Washington this week to tell Congress that most of them don't have the money to keep up with demand as rising gas prices boost ridership.

But a key House Republican said Tuesday that transit systems needed to streamline their operations, and not count on Congress for more money.

The American Public Transportation Association, a Washington trade group, said that most of its member transit systems that responded to a survey reported ridership increases of at least 4% in January or February, compared with a year ago.

The SEPTA system in Philadelphia saw a 10% increase in February. A month earlier, ridership on the Los Angeles County Metropolitan Transportation Authority rose 4.6%, and LYNX in Orlando was up 10.7%.

Many of the increases were larger than in similar periods during 2010. Ridership in 2009 actually fell from the year before.

Triangle Transit, which serves the Research Triangle Park area of North Carolina, said ridership rose 22.8% last month.

Wib Gulley, Triangle Transit's general counsel, said officials would like to introduce larger coach buses to allow more rush hour riders to sit down during their trips. He estimates it would cost about $5 million to buy ten such buses. "We're in the on-deck circle and without the [funding] authorization and more funding, we're never going to get up to bat," he said.

President Barack Obama's 2012 budget requested $22.4 billion for public transit, more than double the amount he sought for fiscal 2010. A separate proposal would pump $119 billion into public transportation programs over six years as part of a $556 billion highway, transit and rail infrastructure bill.
But the fate of both proposals is uncertain. The last multiyear highway and transit bill expired in 2009. Since then, Congress has passed seven extensions to continue funding, but the heads of many transit systems say their plans for growth and upkeep have already been stymied by funding uncertainty.

Mr. Obama hasn't offered a specific proposal for how to fund the multiyear highway bill.

Ohio Governor Poses Steep Cuts to Trim Deficit
Ohio Gov. John Kasich, mirroring the moves of other newly elected Republicans, proposed a two-year budget Tuesday that would close an $8 billion gap by selling prisons, reshaping Medicaid and sharply cutting aid to cities.

Mr. Kasich said his proposal would help local governments offset their loss of state contributions by making it easier for them to share services and by erasing a requirement that they pay prevailing union wages on construction projects.

Pending legislation that would curtail public-employee bargaining rights also would help local governments deal with the cuts, he said. That bill, which passed the state Senate and is expected to pass the House, sparked weeks of protests from tens of thousands of union members and their supporters.

On Tuesday, an advocacy group called Stand Up for Ohio comprising about 30 labor, faith and civil-rights groups, held 13 rallies, arguing that Mr. Kasich's budget proposal would hurt communities hit by high unemployment and foreclosures.

"We're not asking any one group of people to give up any more than any other group," Mr. Kasich said during a news conference Tuesday.
The $55.5 billion general-fund budget would reduce current state aid to municipalities by 25% in the first year and an additional 25% in the second.

The governor's priorities echoed those of GOP newcomers in Wisconsin, Michigan, Florida and elsewhere, who aim to close huge budget deficits by selling state assets, reducing health-care spending, cutting local aid and forcing or negotiating concessions from public workers.

Tim Burga, president of the Ohio AFL-CIO, said Mr. Kasich's budget would hurt middle-class workers by forcing local governments to cut services and lay off workers, or to raise property taxes.
"This draconian budget proposal is less about balancing our budget and more about a partisan political agenda," he said.

Some thoughts:
Food stamp usage is soaring while governors are just proposing big cuts in aid to cities and mass layoffs of public employees. Once these cuts kick in, expect to see even higher levels of dependency.

We aren't nearly as rich as we thought we were, obviously. Which isn't a surprise to anyone fixated on the rising debt levels of the past few decades. We've had to borrow to maintain an illusory lifestyle, and now the money is gone.

Living standards will have to fall to a level not just consistent with our current income, but with our income minus debt service. The transit story is a good example: more people are riding buses and subways because they can't afford to drive. But the president's attempt to double funding for mass transit is pure fantasy. Federal spending on this and most other things will fall, not rise, in the coming decade, so the quality of buses and subways will deteriorate as ridership continues to increase. Meanwhile, pensions will shrink and entry level public sector jobs will pay less and less. We're becoming a Third World country, with no one to blame but ourselves.

John Rubino

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