Back in November I reiterated my point that the Mother of All Bailouts (MOAB) would know no limits. One of my specific warnings was: “The States – Some 29 of the 50 states are reporting budget crises. Lo an behold, most of the hardest hit states are those with bloated Nanny State bureaucracies. No surprise there. The states that had the worst fiscal management, of course, will get the biggest share of the taxpayer funds. Those that were fiscally conservative will get nothing.” A recent wire service headline confirmed that prediction: U.S. governors seek $1 trillion federal assistance.The article begins: “Governors of five U.S. states urged the federal government to provide $1 trillion in aid to the country’s 50 states to help pay for education, welfare and infrastructure as states struggle with steep budget deficits amid a deepening recession. The governors of New York, New Jersey, Massachusetts, Ohio and Wisconsin — all Democrats — said the initiative for the two-year aid package was backed by other governors and follows a meeting in December where governors called on President-elect Barack Obama to help them maintain services in the face of slumping revenues.”
This is affirmation of my long-standing assertion that the MOAB will continue to expand, uncontrollably. According to a published tally sent to me by SurvivalBlog reader Matt C., $7.2 trillion of bailout money has been allocated, of which $2.6 trillion has already been spent. It is noteworthy that this figure does not include President-elect BHO’s proposed $1 trillion “stimulus package”, nor does it include the $1 trillion sought by the state governors.But even this glut of Federal largesse (from your wallet, BTW), will be insufficient. You will read of some spectacular state and municipal bond failures, more derivatives fiascos, state pension funds “in crisis”, and then there will be news of “special levies”, “temporary’ or “one time” taxes, and so forth. I anticipate that both state income taxes and state sales taxes will increase dramatically. There of course will also be news of “drastic” cut-backs, but chances are that while some of the more extravagant programs will be cut, few bureaucratic paper-pushing jobs will be sacrificed. (That, my friends is is the only truly “essential service” in the eyes of a bureaucrat.) I also would not be surprised to see some of the states that have never had sales taxes start to implement them. The bottom line is that we can expect taxes to increase at the city, state, and Federal levels. In an era of rising unemployment, the few people that are still productive and fully employed will be asked to shoulder the burden of the bailouts. It will be wealth redistribution on a grand scale–Robin Hoodism run amok. The only genuine escape from all this would be expatriation, but few will take that route. However, the one thing that you can do with relative ease is move internally to a state with a smaller scale of government. Again, it is no coincidence that the states that have he most bloated bureaucracies, the least fiscal responsibility, and the most Nanny State trappings are those that are having the biggest budget crises. If you stay in any of those states, they are going to sock it to you. You can expect–with utter certainty–that the tax rates in those states to soon rise to painful levels. My advice is simple: Vote with your feet.
For any of SurvivalBlog readers that are self-employed, or that are retired (or that are about to retire), or that have “portable” jobs that are readily available with the same job security in other states, my advice comes down to one word: move. If you have been considering moving to a state with suitable retreat areas, take this as your cue. Given the deteriorating real estate markets-both residential and commercial–this may indeed be your last chance to sell and move before you lose another 30% of your equity. Parenthetically, I recently had some correspondence with a consulting client that owner of a small but prosperous business in California. This man owns both a home and half a dozen pieces of commercial real estate. He is someone that has been “considering” moving to a state where hi family would have better chance of avoiding violent crime. My advice to him was blunt:
“I recommend that you seriously consider moving out of California, while you still have the chance to sell your business as a profitable operation, and sell your other commercial properties at a profit.” And later, “I recommend moving out of California and making your new [retreat] home your full-time residence. Sell off most or all of your California properties. Perhaps leave one or two that are the most stable, profitable, and recession proof in the hands of a trustworthy commercial property management company. I realize that it is a major life change that we are discussing, but recognize the real decisions have already been made, and made by folks “above our pay grade”. Presently, 99% of the population are deer in the headlights. They are petrified and they are going to get squashed. You are in a good position at present, and you should take full advantage of it by cashing out and moving as soon as possible. If you wait until the recession (and then depression) sets in in earnest, you will probably lose nearly everything. ” And later in the correspondence, after he mentioned how his business ventures were still prospering, I wrote: ” At the current rate, the prosperity you currently enjoy will evaporate in less than two years. By then, all that you will have is un-sellable properties and negative cash flows. Get out!” I then went on to recommend to make some specific recommendations on potential retreat locales (one of which was highlighted in my book “Rawles on Retreat and Relocation“.) I concluded with an admonition: “There are quality of like issues at stake, but more importantly preservation of life issues. Discuss this with your family and pray about it. In any case reduce your commercial real estate holdings, as soon as possible. That needs to be done, regardless of where you move. Do not hesitate.”
I’m sure that there are many other SurvivalBlog readers that are in comparable situations to that consulting client. My advice to many of you would probably be much the same. The only strong proviso in all this is: Do not abandon a job that is good-paying and that has genuine job security. In times like these, that would be foolish.