From Volume 38, Issue 39 of EIR Online, Published October 7, 2011

U.S. Economic/Financial News

Urban Fiscal Conditions Continue To Worsen

Sept. 29 (EIRNS)—The results of the latest survey of fiscal conditions conducted by the National League of Cities proves that years of budget cuts only lead to more budget cuts. The survey of 272 cities, released on Sept. 27, found that cities ended FY2010 with "the largest year-to-year reductions in general fund revenues and expenditures in the 26-year history of the survey." General fund revenues in 2010 declined 3.8% from 2009 revenues while expenditures fell by 4.4%.

Those declines are expected to continue in 2011, though by smaller margins of 2.3% and 1.9% respectively. Conditions are not expected to improve in 2012 and 2013 either, because property tax collections, which fell 2% in 2010 compared to 2009, haven't yet expressed the full collapse of the real estate market; collections tend to lag market conditions by 18 months to several years. City sales and income tax receipts also fell, although cities tend to rely on these taxes less than on property taxes.

As a result of these revenue shortfalls, cities have resorted to murderous budget cuts. Seventy-two percent of cities reported making personnel reductions, such as through layoffs and hiring freezes, and 60% reported delaying or canceling capital infrastructure projects (both actions lead to increased unemployment, though this is not stated). "Facing revenue and spending pressures, cities are likely to continue to make cuts in personnel and services, and to draw down ending balances in order to balance budgets."

Cattle Herds Liquidated as Drought Causes Crop Failures

Sept. 27 (EIRNS)—The rate of cattle liquidation in the parched drought states of the Southern High Plains, may result in at least a 7% drop in the breeding herd by January 2012, and severe meat shortages in the near future, warned the Kansas Farm Bureau this week. Ranchers cannot maintain their herds, under the extremes of weather, lack of water infrastructure, and venal inaction by the Obama Administration.

Still, the Agriculture Department and White House continue their policy of non-intervention into the unfolding food supply crisis. In this void, civic groups, churches, and students are trying to come to the rescue of Texas ranchers, with small-scale relief drives. For example, the western Iowa Lutheran church (ELCA) is now mobilizing to collect donated hay, and truck it to northern Texas, where a Lutheran church distribution network is trying to provide the fodder as the margin that will allow a few ranchers to continue in operation. Interstate shipping costs for a semi-load of big bales is $2,500, for which fundraising is going on nationally.

An article, "Fewer Cows," was issued Sept. 24 by John Schlageck of the Kansas Farm Bureau. "The U.S. beef industry is in the throes of a severe drought that is burning up the southern High Plains—particularly Texas, Oklahoma, Kansas and New Mexico.... Ranchers across these states are liquidating their herds at historically high rates, as grazing land, feed and water supplies dry up. Texas alone is expected to lose 600,000 beef cattle.

"Those livestock producers who have been forced to shrink their herds will have fewer cattle to sell. Because they've been forced to sell off large numbers of heifers, many will have smaller breeding herds to rebuild supplied....

"'If liquidation continues into the Fall, the breeding herd on Jan. 1, 2012, could fall as much as 7%,' the Kansas Farm Bureau economist [Mark Nelson] says. 'This would be a loss of 2 million head of beef cows. This is huge and could mean a reduction in cow herd numbers this country hasn't seen since the early 1960s.'...

"...Rebuilding the nation's cattle herd will not happen overnight and may be painfully slow."

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