New York

My Economic Guess

I expect that (absent a black swan I'm not expecting) things will stop getting worse soon in the aggregate, but will get no better on that basis until 2012. The reason is that while some aspects of the economy may improve, others will get worse. What 2008 was to the financial markets and 2009 was to the job market, 2010 may be for commercial real estate -- unless the participants postpone the inevitable by "extending and pretending."

Always postponing the inevitable while making it worse, is government, particularly the State of New York. Expect disaster for public services and taxes, due not only to the recession but also to the greed of the past, in revenues taken from the future, costs deferred to the future, up-front (if unconstitutional) debts, pension sweeteners, and inadequate pension contributions. The disaster is due late this year (after the election) or in 2011.

Whatever happens in the next city and state budget, that isn't it. Even if the rest of the economy turns around in 2012, I wouldn't expect any improvement (or even stability) in the Vampire State finances until late 2013, which means fiscal 2014. And assuming the vested interests stay vested and don't give anything up, public services will continue to degrade and taxes will continue to rise until that point. They may not recover for a decade or more after, assuming existing priorties stay in place -- and those no in Albany, and who have been part of that culture, will never change them.

No matter what our "elected" officials say, much of the pain is not the inevitable result of circumstances beyond their control. And it is not the result of New York's "ideology." It is a result of 20 years of self dealing by those in control in Albany, and pillaging of the future by those cashing in and moving out.

What black swan that I do not expect could happen? For the federal government to be able to finance its debts at a less than disastrous interest rate. Regardless, expect younger generations, those born after (say) 1958, who already were made to do without defined benefit pensions (unless they were in government or top executives), to also have their future Medicare and Social Security benefits slashed (while being taxes for public employee retiree health care). Just a few years after Medicare was enriched for today's seniors, all with borrowed money (by a Republican Administration).

Bottom line -- those coming after the Greatest Generation but born before 1958 are Generation Greed, which aside from the plutocrats and retired public employees may be the richest we will see for a century. Impossible? Ask the Argentines, who have been living in the wake of a could of Generation's Greed for 40 years. The non-greedy members of Generation Greed did not succeed in assuring an equal future for their children. Neither did the Generations Apathy that followed, who are both victims and victimizers.

We are now living in the wake of an "I want for me now" era, and in a situation of scarcity that attitude will lead to an institutional collapse. But with Generation Greed in control of and continuing to rape our institutions for short term gain, putting more into them does not appear to be a solution. The alternative to institutional collapse may be worse. Perpetual serfdom.