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alstry (35.03)

A Paycut as a Bonus?

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June 01, 2008 – Comments (1)

Does this sound like me?

As consumers max out their credit lines and banks clamp down on lending, many older and middle-class Americans are resorting to pricey, often-risky alternatives to stay afloat. Some are depleting their retirement accounts, tapping 401(k)s for both loans and hardship withdrawals. Some new fast-cash options allow homeowners to squeeze equity from their houses -- without the burden of monthly payments. One new product offers a one-time payment. In exchange, the company gets up to 50% of any future change in the property's value, typically collecting its share when the house is sold.

Americans are resorting to these more extreme measures due to the combination of dwindling jobs, falling home prices, shaky credit markets and a sharp run-up in food and energy prices. Consumer confidence hit a 28-year low in May, according to the latest Reuters/University of Michigan survey of consumer sentiment. Consumer spending and income inched up 0.2% in April from March, but after adjusting for inflation were flat, government data show.

Nope just an excerpt from tonight's WSJ.

As revenues keep contracting....municipalities, business, and individuals will resort to behavior never seen before.  Layoffs will continue to rise:

“The city will eliminate hundreds of positions as it copes with a budget shortfall and a slowdown in tax revenue, City Manager Dale Fisseler said in a letter to employees. ‘I am convinced that these budget cuts will require us to reduce the workforce by several hundred positions,’ Fisseler wrote.”

“Fort Worth is hardly alone in facing revenue shortfalls. State and local governments nationwide are struggling to make up for declining revenue and are considering layoffs, service cuts and other measures to make ends meet.”

“A recent study estimated that at least 27 states are facing a combined $47 billion in shortfalls next year. ‘The bursting of the housing bubble has reduced state sales tax revenue collections from sales of furniture, appliances, construction materials, and the like,’ the study stated.”

The above estimate will likely turn out to be very light.  Heck, CA alone has increased from $4 Billion to about $20 billion in less than a year.  As everyone is forced to cut back, cutbacks will rise causing further contraction and revenue implosion.

Don't be surprised if your boss comes up to you at the end of the year and says Johnny, this years bonus is just a 20% paycut instead of the 40% paycut everyone else is getting.

 

1 Comments – Post Your Own

#1) On June 02, 2008 at 8:04 AM, mandrake66 (96.39) wrote:

Don't be surprised if your boss comes up to you at the end of the year and says Johnny, this years bonus is just a 20% paycut instead of the 40% paycut everyone else is getting.

From a psychological standpoint, most people would be happy with that. They'd rather make 60K when everyone else was making 50K than make 70K when everyone else was making 80K.

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