2009 receipts are headed toward an 18% drop in collections compared to 2008--this would be the biggest annual percentage drop in tax collections since the Great Depression. Additionally, even before potential health care remolding, the FY 2009 deficit looks to be the largest in U. S. history at between 1.5 and 2 TRILLION dollars. All forms of tax receipts are down with corporate receipts running less than half the 2008 level and Medicare facing only its third decrease ever. Highway projects are being deferred even though Congress is supplementing the federal highway fund through emergency appropriations. Senator Herb Kohl (D-WI) states that the shaky economy means that a deal to stabilize Social Security is particularly important with some projections now showing the fund going broke as early as 2027 and the U. S. Chamber of Commerce actually is supporting an increase in the federal gasoline tax.
What caused the financial debacle of the past year? A lot of theories, including poor financial regulation, overly liberal mortgage lending policies by both private and governmental lending bodies and the spike in petroleum prices (and perhaps overly strict environmental policies which may have aggrevated the price spike) have surfaced; perhaps all play at least a part in the problem. More relevantly, however--how do we fix the mess? The present attempt to spend the economy out of recession at very best is only starting to succeed and very well may be laying the groundwork for significant dollar inflation in the next year or two with little structural improvement to any part of the economy except government. Recent trial balloons regarding tax increases ignore recent trends (Bush Sr. 1990, Democratic Congress 1994) where the only result of tax increases were losses in the following national elections. In my opinion, President Obama should ratchet down his frentic efforts to reshape America and concentrate on strengthening the ability of private enterprise to more successfully compete in the international arena while assuring that investors are receiving full discloure from corporate reports. In the short-term, the second goal should defer movement to IFRS until more is known about the impact of such changes and new types of financial instruments may need an FDA-style review and approval process, combined with strict disclosure requirements, before they can be issued in U. S. capital markets.