The Current Fiscal Crisis and State Budgets by CdL3Ox

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									What will be the “New Normal”
              and
     Are We There Yet?

          Jeffrey H. Dorfman
       The University of Georgia

           March 11, 2010
Outline


   Have We Hit Bottom?
   Where Are We?
   When Will It Get Better?
   Will It Ever Be Like It Was Before?
Have We Hit Bottom?
                         Georgia Housing Starts
   12000



   10000



   8000



   6000



   4000



   2000



      0
      Dec-99   Apr-01   Sep-02   Jan-04   May-05   Oct-06   Feb-08   Jul-09




                                                            Source: UGA Selig Center
Have We Hit Bottom?
                             GA Monthly Total Revenue

                2500

                2000
    Million $




                1500

                1000

                500

                  0
                                                May
                                    Mar




                                                             July




                                                                                        Nov
                                                      June


                                                                    Aug
                       Jan




                                          Apr
                              Feb




                                                                           Sept
                                                                                  Oct


                                                                                              Dec
                                    2010          2009              2008           2007




                                                                                  Source: GA Dept of Revenue
Have We Hit Bottom?




                      Source: GA Dept of Revenue
Have We Hit Bottom?
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                                                                                         Where Are We?



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                                                                   Consumer Confidence




                                  /20
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                                /1/
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                            1/1
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                                        10
Source: Conference Board
Where Are We?
                  Industrial Manufacturing Index

65
60
55
50
45
40
35
30
  97.1 98.1 99.1 00.1 01.1 02.1 03.1 04.1 05.1 06.1 07.1 08.1 9.1 10.1



                                 Source: Institute for Supply Management
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                                                                   Consumer Confidence




                                        09
                            7/1
                                  /20
                                                                                         When Will It Get Better?




                                        09
                           10
                                /1/
                                    2009
                            1/1
                                  /20
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                            4/1
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                                        10
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                                        10
                           10
                                /1/
                                    2010
                            1/1
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                                        11
Source: Conference Board
When Will It Get Better?
When Will It Get Better?
When Will It Get Better?
This Has Happened Before
                                              US Housing Starts
           3,000



           2,500



           2,000
  1,000s




           1,500



           1,000



            500



              0
             Jun 1957   Dec 1962 Jun 1968   Dec 1973 May 1979 Nov 1984 May 1990 Oct 1995 Apr 2001   Oct 2006




                                                                                     Source: US Census Bureau
Will It Be Like Before?
   Depends largely on the
    savings rate.

   We have lost $200B/yr in
    spending from real estate
    wealth.

   Non-government economy
    contracted about 10%.

   Will take 3-4 years to
    regain what was lost.
Will It Be Like Before?
                         Exports appear to
                          be recovering
                          sharply.

                         This is good for
                          agriculture.

                         However, will
                          probably take until
                          2011 to regain
                          losses.
Will It Be Like Before?
                         Farmer’s exposure to
                          the rest of the
                          economy depends
                          on the commodities
                          grown.

                         Not only does non-
                          farm income vary,
                          but if you grow
                          nursery plants, the
                          real estate slowdown
                          affects you.
Will It Be Like Before?
   So far, farmers have
    managed to hang
    on.

   However, the shift
    toward lower
    incomes will effect
    wealth eventually,
    which causes debt
    load issues.
         Will It Be Like Before?
                                                                                                                Georgia economy was led by real
                                                                                                                 estate and financial sectors.
                                            US Housing Starts
         3,000                                                                                                  Those sectors will not return to
         2,500
                                                                                                                 peak levels for a long time, if ever.
         2,000
                                                                                                                Local governments needs new
1,000s




         1,500                                                                                                   revenue streams or will shrink.
         1,000



          500
                                                                                                                State government needs to be
                                                                                                                 resized to the long-term trend and
            0
           Jun 1957   Dec 1962 Jun 1968   Dec 1973 May 1979 Nov 1984 May 1990 Oct 1995 Apr 2001   Oct 2006
                                                                                                                 not to the best of times.

                                                                                                                Ag should return to normal this
                                                                                                                 year or next depending on export
                                                                                                                 dependence and world recovery.
What is the “New Normal”
   We need to plan for normal growth from the
    current situation.

   We should not expect to recover to earlier levels
    and then grow from there.

   The new normal starts from here and now.

								
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