“This thing is moving fast, and it’s impossible to predict,” Rainey said of the factors affecting the economy. “It’s hard to understand.” Source
prompted me to ask the question: who is John Rainey, and why is it so hard to understand?
John Rainey is this guy:
He's also chair of the SC Board of Economic Advisors, chairman of the board of Easlan Capital Inc., has not one, but two law degrees (USC, Georgetown), and, apparently, doesn't understand why SC's economy is tanking.
More to come later.
4 comments:
Here's the revenue report for June, where the sales tax fell off a cliff (14.0% decrease YoY). Of course, one would expect a sales tax regime based on discretionary spending to decrease in a recession. Once the stimulus effect wears off, the numbers should get uglier.
http://www.bcb.sc.gov/webfiles/BCB_BEA/Monthly%20Revenue/June_08_revenue_tables.pdf
In all fairness to Rainey, the confusion is from the fact that the sales tax fell so much, while the receipts from individual (+15%) and corporate (8%) rose so much. However, an explanation is not that difficult. Tourism and consumer spending are leading indicators for corporate and, subsequently, individual income. For example, it takes a decrease in Starbucks lattes to occur before lay-offs of baristas.
The other fact buffering the lost was the ridiculously run-up in agriculture commodities that was aided by the weak dollar; having corn increase by 300% sure does help with agricultural revenue. The problems with this are two-fold; first, agriculture is seasonal, so this effect will decrease as the year progresses. Second, agricultural products have corrected by up to 30% in the past couple weeks.
Of course, there are still the usual suspects:
shopped-out consumer
falling home prices
gasoline prices
food prices
rising unemployment
increasing local taxes (look at the jump in insurance tax for June)
Blue, good to see you posting again. This is really a money quote, yet still slightly better than former Sen. Grahms "it's all in your head mentality."
So, as of this article date, the Board recommended $140 million (2%) in budget cuts. By August 14, the Board ordered state agencies to cut spending by $188 million, or 3%.
In the interim, we've had a correction in agricultural prices, a dollar rally, and a sales tax holiday--all which will hurt revenue. While some will point to decreasing gasoline prices as having a positive effect on discretionary spending, I find this argument wanting. The bulk of August discretionary spending would have been for the "back to school" season, which of course would have been tax free.
July YoY may be actually worse than June...
Here we go, as predicted.
"These numbers have fallen off the cliff," Rainey said.
http://charleston.net/news/2008/sep/27/outlook_gloomy_s_c_finances56069/
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