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Fascinating domino effect of high gas prices...more bad news for the government

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September 06, 2008 – Comments (3)

Everyone knows that the high price of oil and in turn gasoline has caused people to cut back on driving, but I never gave much thought to the implications of this reduction in gas sales on government tax revenue until now.   Check out the following article:

U.S. highway fund crushed by cutback in driving

As drivers cut back on gas, The Department of Transportation says its Highway

Trust Fund will be depleted and needs an $8 billion emergency infusion.

Link

Here are a few quotes:

-  "An unprecedented decline in driving will deplete the federal Highway Trust Fund by the end of September and prompted the Bush administration on Friday to ask Congress for an $8 billion emergency infusion."

-  "Without the additional money, the Department of Transportation will not be able to fully reimburse states for their highway investments. Officials are projecting that in September the department will collect $4.4 billion in funding requests but collect only $2.7 billion in revenues."

-  "Either the states would have to borrow money to close the gap, divert money from elsewhere or stiff the contractors," Horsley said. "None of it is good. This is the first time in 50 years that we've seen the cash flow get to the point where they can't honor their commitments."

-  "In 2007, the Highway Trust Fund took in about $38.8 billion in revenue. It started the 2008 fiscal year last October with a balance of $8.1 billion but has blown through that cushion as revenue slowed. It expects to start its 2009 fiscal year on Oct. 1 with a zero balance."

Yikes.  Are you kidding me?  The government is throwing money around like a drunken sailor.  Billions here.  Billions there.  And yet the U.S. dollar keeps humming along, soaring to the moon.  Look, I'm not rooting for the dollar to collapse, but its recent rally has been waaaay over done.  All of the talking heads keep saying that the dollar is back and here to stay, but I'm not buying it.  Why is everyone buying treasuries?  Perhaps a lot of the recent purchases of treasury bonds are foreign central banks selling their GSE paper and using the proceeds to buy them.  

 

Deej 

3 Comments – Post Your Own

#1) On September 06, 2008 at 10:53 PM, dwot (38.88) wrote:

Another effect of high fuel prices are how much food prices increase where I am.  I think we've seen 20-30% increase in time sensitive goods.  I couldn't believe it, $5.65 for 2 liters of milk, about half a gallon...

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#2) On September 07, 2008 at 3:01 AM, AnomaLee (28.69) wrote:

All of the talking heads keep saying that the dollar is back and here to stay, but I'm not buying it.  Why is everyone buying treasuries?  Perhaps a lot of the recent purchases of treasury bonds are foreign central banks selling their GSE paper and using the proceeds to buy them. 

Absolutely, just look at this chart... 

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#3) On September 07, 2008 at 8:59 PM, wm052 (32.53) wrote:

taxes to government is like heroin to a junkie - time to go cold turkey - turkeys! So where is the govnment going to rob Peter this time!? bugger all

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