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Suddenly, it seems, we're getting hit from all directions.
Energy and food prices are soaring. The housing market continues to collapse. Government revenue is falling, and taxes are rising. Airlines are jacking up fares and fees while reducing service. Banks are pulling credit lines. Auto companies are cutting production once again. Even investment bankers are losing their jobs.
The tendency is to see these as separate developments, each with its own causes and dynamic. Fundamentally, however, they are all part of the same story -- the story of the global economy purging itself of large and unsustainable imbalances that for a time allowed many Americans to think they were richer than they really were.
What I've described is a double whammy for American households: the slower growth that comes with downsizing a number of key industries that expanded as a result of the credit bubble, along with rising prices for a food, energy, health care and almost everything imported. And you can add a third blow, this one from government.
Across the country, state and local governments are already hip-deep into budget crises in response to declining revenue from property assessments and real estate transfers. Here in Washington, a dramatic drop off in revenue from business profits and capital gains has wiped out any hope of reducing federal operating deficits that, under the likeliest political and economic scenarios, will exceed $500 billion a year for as far as the eye can see.