2009: The GDP, taxes, and unemployment...

If all the financial indicators I'm reading actually lead to the results indicated, we're in for a very tough year. The GDP was off 5% in the last quarter, manufacturing is off 30+%, retail is in the toilet, and many state and local governments are looking at huge deficits. Unemployment is growing at about 500K jobs per month.

I don't pretend to understand the interconnecting complexities of our nation's GDP (@ $14 Trillion annually), but an example helps put the importance of GDP into context.

Assume two of us live on an island and we each have $100. You have goods and services I need, and I have goods and services you need. I spend my $100 each month with you and you spend your $100 with me. The annual GDP in our little economy is therefore $200 per month X 12 months = $2400. Now assume a third party, government, magically appears and that third party has no money but needs $168 a year to fund it's operation...so government takes 7% of each dollar every time it changes hands (sales tax?)...gets it's money (7% x $2400)=$168/year. If the government puts back that same amount into our little economy the GDP doesn't change. The same amount of money is in circulation...and things are stable. If you and I cut back our spending to $50 each month then the government, still needing it's $168, has to find a new way to tax us to raise the monies needed...or cut back 50% on whatever it does to justify the monies in the first place. When have you seen that happen?

This is why we're seeing moves to tax "miles driven" rather than just the gasoline consumption tax...for example. (My Honda hybrid averages 42 Miles/gallon...and they're starting to feel it in Raleigh.) Other examples abound arising from growing unemployment and the general tightening in spending....and the corresponding drop in GDP.

I personally don't have more money to give to government. My health care costs are up @20%, my homeowners policy is going up astronomically, my property taxes are going up to fund a locally passed $160 Million Community college expansion, and the New Hanover County Commissioners keep throwing taxpayers money at inefficient programs or to incent job creation (even with a polluting cement plant)...so they can collect more taxes. That is also why they're looking to annex Monkey Junction into Wilmington...and massively increase property taxes (an average of $800 per home without much corresponding benefit).

We private citizens are in for a beating this year...and I think for some years to come. The reality is that we can't afford the government we have in the economy we're facing.

There are some solutions:

Our Health care system has to be revised. NOW! Single Payer is the only logical answer. The "for profit" health care insurance industry has to be taken out of the loop. Humanitarian and more cost effective.

Congress has to act on reining in the excesses of the banking and financial sectors...30% credit card interest rates, for example.

State and local government has to cut spending on all but essential functions and stop funding tea-pot museums and the like. Even essential functions like education have to be reassessed in the light of economic reality. We, for example, might stop trying to improve graduation rates (a miserable 60% here) by busing and social engineering and get back to the basics of providing a solid education to those who want it.

There's more...and I'm sure I'll hear your thoughts. This isn't a political statement. It's reality.