He Said What?

It’s hard to believe that ANYONE could make this suggestion without laughing loudly upon hearing the words come out:

Levy argues that the reason a temporary tax increase won’t worsen the economy is that the money continues to circulate in California. It will be spent in ways that benefit the economy; it will just be spent differently than consumers would have spent it.

“The tax increase does take money out of the hands of consumers and put it toward government programs that the governor himself says are very critical areas,” Levy said.

[From Analysis: Is Schwarzenegger wise to raise taxes in a bad economy? - San Jose Mercury News]

Apparently Levy believes that footing the bill for unlimited gas cards and car leases for state legislators benefits the economy and represents a critical program that requires additional taxes to continue funding.

Everyone in government talks about reducing wasteful spending but in reality it never happens and budgets grow without end. Reducing wasteful spending begins not with platitudes but with a detailed line by line review of what taxpayer money is being spent on. When taxpayers believe that their money is being spent appropriately, they will support new taxes when it is necessary.

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Extending credit: the pain continues

Dennis provides an example of how the credit markets are impacting supply chains.

This tongue in cheek look at the US dollar’s rise and fall would be funny if it didn’t mask the pain that many feel is upon the global economy. But then I read in the FT that Tesco is strong arming 300 of its non-food its suppliers to pony up an extra 30 days’ cashflow as it seeks to release more cash into its coffers. Over on HotViews, Richard Holway reports the same disease has spread to Computacenter and DSG, noting that:

[From Extending credit: the pain continues | AccMan]

With GM in the news today and not for good reasons it is somewhat reactive to simply say “let them fail” considering the impact such a development would have on the thousands of suppliers and millions of workers who are in play. I’m no fan of government intervention but also remain acutely aware of the consequences of inaction as well. Exhibit A is the Feds decision to save Bear Stearns but let Lehman fail, which in hindsight set of a chain of events that led to the demise of AIG and countless others.

We are living in extraordinary times, as much as I despise that bailout plan and more so how poorly it was conceived, communicated and ultimately acted upon by the Congress, I think we all have to admit that any playbook we thought we had has been ripped in half and we are playing the second half only on audibles.