So QE ends in June. The stock market may be in for a hangover at that point. The fiscal year for the state and local governments commence in July and there is not a day that goes by where we don’t see massive tax hikes or spending cuts or both...
States that don’t have to renegotiate with the unions are unilaterally opting for co-pays with retirees, reduced benefits, and are moving towards defined contribution plans. States that do not have that luxury and count their pension payments against their general revenue obligations are going to manage to wring concessions via layoffs and furloughs or outright wage cuts. The restraint is already in place ― we can see that in the employment and construction data, but the sparks are really going to start in July. And then in October, the federal spending cuts commence as that is when the next fiscal year begins. Then in the first quarter of 2012, we are going to see a huge air pocket because if the payroll tax cuts and the bonus depreciation allowances, set to expire at the end of 2011, are not extended, then it is going to feel like a huge sucking sound for the economy as the fiscal stimulus evaporates. So what we are talking about in the third and fourth quarters of this year and the first quarter of next year is the double-dip that the U.S. economy managed to avert last summer ― but not avoid altogether...
---Rosenberg, op cit
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