Gross Domestic Product or GDP, the value of all goods and services produced in the country rose at an annualized rate of 0.6% in the fourth quarter of last year, indicating the economy was already on life support.

The next reading on the economy's performance for the current quarter due out in late April will indicate we are already in a recession, and will likely be in one for some time. While some confessing by major financial institutions of their loan losses on mortgages and related derivative investments has occurred, there is still more to come to the tune of hundreds of billions of dollars more. Add in credit cards, auto loans, and other lending product losses and you have long-term trouble for the economy, which for state and local governments translates into lower tax revenues, layoffs, and reductions in public services. The Federal Reserve Open Market Committee throwing more free money at the situation might forestall the agony for a few months at best, and then the slide resumes. The multiple failed stock market rallies on Wall Street is also a bad sign.

What we witness before us is an economic rebalancing cycle of enormous magnitude, that in one way or another is going to run its course whether we like it or not. The earnings addiction that financial institutions find themselves in is actually making the situation worse. The actions of banks and other firms to actually drive up rates on other consumer products in an effort to offset mortgage losses is killing the average debt-ridden consumer. The new motto must be "So what if they're losing their homes, let's bleed'em some more." When many of the boorower's shouldn't have owned homes in the first place.

With gas prices that are expected to climb by as much as another 75 cents per gallon this summer, expect the consumer to pretty much stop spending, and more consumers to lose their jobs and homes. Recent Inland Empire real estate auctions, have repossessed homes moving at bids more than 25% below the expected sale price. This further erosion in prices will translate into lower property tax assessments not just this year, but for at least two additional years.

The 2009-10 fiscal year will most likely be negative property tax revenue growth combined with lower sales tax revenue. Not a pretty picture.