Tuesday, May 10, 2011

Racing for the Bottom

The precursors of the coming Palin Administration Period are already unfolding. With the continuation of austerity measures unfolding at the state level, it is becoming very clear from a socionomic perspective that a massive bear market is unfolding.

In a deflationary collapse, tax revenue dries up, and governments respond with austerity measures which means that essential services and safety nets get cut back or even purged altogether. As the worst of "The Great Deflation" is still yet to unfold, the austerity trend is still in its infancy.

In the latest series of developments, Michigan, Missouri, and now Florida, have passed legislation aimed at cutting back on unemployment benefits. Here's the chain of events that have unfolded so far:

1 -- In March 2011, Michigan became the first state to cut unemployment benefits, reducing the standard duration from 26 weeks to 20 weeks. The change would take effect in January 2012. There is more information about the development here. Just before Gov. Rick Snyder signed the bill into law, the National Employment Law Project expressed concern that other states would start working on similar legislation.

2 -- In April 2011. Missouri became the second state to cut unemployment benefits. The reduction is the same as in Michigan, but the law would take effect immediately upon signing into law. Gov. Jay Nixon signed the bill into law a short time later. There is more information about the events in Missouri here.

3 -- In May 2011, Florida is set to become the third state to cut unemployment benefits when Gov. Rick Scott signs HB 7005 into law. The cuts go substantially farther than in either Michigan or Missouri. The duration of unemployment benefits would be cut to as little as 12 weeks. Additionally, the new law will require potential workers to provide detailed documentation of five employer contacts per week. There is more information about the development here. In response to the imminent signing of HB 7005 into law, Christine Owens, the Executive director of the National Employment Law Project, made a statement about the potential destructive impact of the new law.

The trend that we see here is what is known as "the Race to the Bottom". Expect this trend to not just continue, but accelerate in the coming months and years. As Primary wave [3] down unfolds, the effects of "The Great Deflation" will result in tax revenue that rapidly dries up. This will lead to increased austerity measures at the state level.

The actions of Gov. Rick Snyder, Gov. Rick Scott, and Gov. Jay Nixon, all at the state level, is a precursor to what the Palin Administration will do at the federal level in 2017. As the worst part of "The Great Deflation" unfolds with Primary wave [5] down in force, unemployment benefits will be purged at the federal level by the Palin Administration sometime in 2017. By then, federal tax revenue will have almost completely dried up.

No comments:

Post a Comment