Financial markets recoiled in horror in July when the Bureau of Economic Analysis announced that the US economy had dropped by a third. Gross domestic product shrank at an annualized rate of 32.9 percent in the second quarter of 2020 vs the same period in 2019. GDP was down 9.5 percent compared to the first quarter of this year.
The good news is that U.S. economic activity is already showing signs of recovery in some sectors. Estimates of U.S. retail and food services sales for June 2020, adjusted for seasonal variation, were $524.3 billion, an increase of 7.5 percent (± 0.5 percent) from the previous month, and 1.1 percent (± 0.7 percent) above June 2019.
But the bad news is that unemployment remains in double-digits. Sectors such as commercial real estate and the fiscal affairs of states and major cities, are in growing distress. While the states tend to focus on sales and income taxes for the bulk of their revenue, the cities and localities depend upon property taxes and local levies to support their budgets. But today the largest U.S. cities remain locked down.
Consider the case of New York State and New York City (NYC). For New York State, income tax collections are running nearly 50 percent below last year while all categories of revenue for the state are down 42 percent vs last year. Democrat Governor Andrew Cuomo has so far refused to take any significant action to cut back state expenses in front of the November 2020 general election. Suffice to say that no state better exemplifies the corrupt relationship between public sector unions and elected officials who set their salaries than does New York.
Ironically, Governor Cuomo is in a political battle with NYC Mayor Bill de Blasio, who wants to borrow in the short-term debt markets to cover the city’s $9 billion budget shortfall. Falling such a venture, de Blasio will need to layoff tens of thousands of unionized teachers, police and public sector workers before the end of the year. But such short-term expedients will not last, nor will they reverse the long-term damage being done to the NYC by its leftward political lurch.
“Ever since 1975 New York City has been haunted by the fiscal crisis that beset it beginning that year,” writes Kim Phillips-Fein in The New York Review of Books. “Images of battered, graffiti-decked subways and the Daily News cover photo of President Gerald Ford, appearing to tell the Big Apple to ‘drop dead,’ are familiar parts of its political iconography. After Andrew Cuomo was first elected governor in 2010, he gave out copies of a biography of Hugh Carey (New York’s governor at the time of the crisis) to his staffers and labor leaders – as though to signal his willingness to stand up to the interest groups often blamed for the near-bankruptcy.”
NYC had a fiscal problem last year, before COVID-19 exploded onto the scene. The business community stopped going to Albany to lobby members of the legislature long ago, leaving the fiscal discussion …read more
Via:: American Conservative
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