calling all economic experts...how does an recession work ?

[leeland]

i am curious to get a grasp on how a recession works...

the money doesn't go anywhere so why is every state in a budget deficit ?? here in wisconsin they are cutting budgets for everything, including school. I know this is a broad question but it doesn't make a whole lot of sense to me....and things like school is getting more damn expensive, they are talking about increasing tuition costs 8 to 15% next year....on top of the fvcking book nazis who charge a arm and a leg for books each semester stupid tution will probably be close to 2,500 to 3,000 dollars

thanks for any info

leeland

 

[ElFenix]

you're more asking how state budgets work...

all gov't budgets are pretty much done on an incremental nature, and usually with little regard to how much money is coming in even during good times. so each budgetary session they'll plot out how much money they think they'll need and then hope that that much money, or more, will come in from taxation. well, when tax revenues fall far short of projections you get a budget crunch. i dunno about your state but texas makes the budget for 2 years in advance.

if you're asking why recessions happen, well, thats because people start preparing for one, so one happens. its self-fulfilling, for the most part.

 

[ViRGE]

The short explaination:

It started with people losing their jobs. For a time at least, they become reliant on the state for unemployment, all the while they weren't making money to contribute to the tax pool. Multiply this by a large number, and then all of a sudden you have a lot of people not contirbuting to the tax pool(out of a lack of jobs, mind you), while needing money from the state. Since states work with budget projections, their plans are made before these people lost their jobs, meaning that they had to cut-back durring the middle of the financial term in order to deal with the lack of money that was comming in. Since they can't very well just chop a professor's salery by 8 to 15%(well, they could, but try keeping a professor that way) the costs are passed on to you. This means you can't buy as many consumer goods, meaning that more people will lose their jobs(there won't be a need for them since there's less product needed), and there you have a recession.

Edit: ElFenix, Oregon is somewhat similar. At the start of our bienium, the legislators plan the budget using the predictions from the Dept. of Revenue; they don't actually go past what Revenue thinks they'll get

 

[eakers]

eco-monic

its fun to say hehe

 

[LeeTJ]

States almost always run deficits. this is the norm. HOWEVER, during good times the expectation is that revenues (taxes) will continue to increase. people spend more (most states are very dependent on sales taxes) and so the state continues to spend more.

then peoples outlooks change and spending habits turn around, then the revenues fall and the deficits really become noticed.

 

[leeland]

Originally posted by: ViRGE
The short explaination:

It started with people losing their jobs. For a time at least, they become reliant on the state for unemployment, all the while they weren't making money to contribute to the tax pool. Multiply this by a large number, and then all of a sudden you have a lot of people not contirbuting to the tax pool(out of a lack of jobs, mind you), while needing money from the state. Since states work with budget projections, their plans are made before these people lost their jobs, meaning that they had to cut-back durring the middle of the financial term in order to deal with the lack of money that was comming in. Since they can't very well just chop a professor's salery by 8 to 15%(well, they could, but try keeping a professor that way) the costs are passed on to you. This means you can't buy as many consumer goods, meaning that more people will lose their jobs(there won't be a need for them since there's less product needed), and there you have a recession.

Edit: ElFenix, Oregon is somewhat similar. At the start of our bienium, the legislators plan the budget using the predictions from the Dept. of Revenue; they don't actually go past what Revenue thinks they'll get

thank you, that was an excellent description, very easy to understand for a red-neck from wisconsin !!!


thanks
leeland

 

[leeland]

Originally posted by: eakers
eco-monic

its fun to say hehe

thanks for pointing that out 🙂