You want stress? Then do whatever job you do for a paycheck but imagine that you're doing so with only the hope of future paychecks--a hope that dwindles every week that the economy continues its free-fall.

This is why I have predicted that local and state governments are completely ill-prepared for the tidal wave of small business failures which are about to decimate their tax revenues. The average municipal manager is assuming everything will return to normal soon, as all those faceless small-business worker bees will persevere and keep paying their rent, taxes and fees regardless of the hardships, stress and rising debts.

Nobody can operate their business for long when they're losing money. I would guess that over half of small businesses in the U.S. are already marginalized in terms of survivability, and very little separates those from their "if we can just get through 2009 we'll make it" brethren who still have a bit of cushion.

As noted here before, an entrepreneur always has an alternative "Plan B" livelihood : whatever one used to do in a formal, high-cost way, then do it informally from home. Do it for barter, do it for cash; pay no office or warehouse rent, have no employees, pay no business taxes, and whatever net income is left, it will be so low that the income taxes will be negligible.

If the politicos and government employees think they're in trouble now, wait until the end of 2009. When the streets are lined with closed storefronts, the chain stores and malls have been shuttered, and the auto dealerships are weed-filled empty lots, then go ask the survivors to pay more taxes and fees.

Oh, and here's where some state/local tax revenues are going (link courtesy of Cheryl A.): Double-Dipping Government Employees in Florida.

Sadly, there won't be many left to hear your pleading for more tax revenue. But go ahead and raise taxes and fees anyway, and drive the survivors under. Then the last businesses you can try to load up with higher costs will be Wal-Mart and Safeway and the local branch of Citicorp/WAMU/BofA/Countrywide/Morgan/Chase or whatever it will be called.

You can try raising property taxes, but as homeowner net worth and equity continues sliding, you may find some resistance to higher property taxes. You can start charging $10 to use the county park, and guess what, you'll find nobody needs to go there now. You can charge $10 a month to use the library, and guess what, you will either face a citizen insurrection or few will enter what was once considered a sacrosanct civil institution--the public library.

Or you can take stock and realise that government is an enterprise, too; it too needs to live within its means--especially as those means diminish along with the economy which supports you. Unlike the Federal government, you can't print money to pay yourselves or fund your pensions. You might want to focus on helping the goose which lays the eggs--small business--survive rather than devote all your energy to strangling it with higher taxes and fees.

You can either keep the libraries open, or you can fund your pensions. But you won't be able to do both.

The more taxes and fees are raised, the less tax revenue will be collected as the pool of small-business survivors melts under the strain. It's called a death-spiral, and we will all have ringside seats as 2009 unfolds its dark wings.

Lest you think this is just some outlier attitude, please read this commentary from an astute reader. This was written in response to my essayProductive and Unproductive Capital (December 27, 2008), but it resonates with the death-spiral I describe today:

"I compare today to say America in 1832 to 1942, what we did, what we believed, how we lived with mostly independent agrarian life, no distances, no transit, only walking to the homecoming game with your pal and your gal at the school 3 miles away. I keep saying, "does that sound so bad?" Is it so terrible to work where you live, in small, modest shop of our own making small, modest profits?

Your last post was insightful in this, which has a near-absolute effect on people who control and deploy capital.