Category Archives: Economy

From Your Pocket To Union Pensions

Economy, Government, Political Economy, Politics, Private Property, States' Rights, The State

The compliant voter keeps electing local officials who’ll use their police powers to pick from the pockets of wealth creators so as to give to a more powerful constituency: members of the public sector unions. WSJ:

“Cities across the nation are raising property taxes, largely citing rising pension and health-care costs for their employees and retirees.
In Pennsylvania, the township of Upper Moreland is bumping up property taxes for residents by 13.6% in 2011. Next door the city of Philadelphia this year increased the tax 9.9%. In New York, Saratoga Springs will collect 4.4% more in property taxes in 2011; Troy will increase taxes by 1.9%.
… Some cities have also pushed unions to reopen contracts in an attempt to pare benefits or raise workers’ contributions for pensions and health care. They have faced stiff resistance from some unions that argue it’s unfair to penalize workers for a financial crisis that isn’t their fault. Others have agreed to some cutbacks.”

“WE ARE DOOMED.”

UPDATED: Deadbeat States

Debt, Economy, States' Rights

Socialism is secondary to state squandering—and a consequence of it. America is a debtor nation. The defining characteristic of the Unites States is debt—public and private; macro and micro, federal and state.

I sincerely hope you are not invested in municipal bonds. The “$3 trillion municipal bond market, where state and local governments go to finance their schools, highways, and other projects,” is about to come crashing down.

“60 Minutes” (CBS): “By now, just about everyone in the country is aware of the federal deficit problem, but you should know that there is another financial crisis looming involving state and local governments.”

It has gotten much less attention because each state has a slightly different story. But in the two years, since the ‘great recession’ wrecked their economies and shriveled their income, the states have collectively spent nearly a half a trillion dollars more than they collected in taxes. There is also a trillion dollar hole in their public pension funds.

The states have been getting by on billions of dollars in federal stimulus funds, but the day of reckoning is at hand. The debt crisis is already making Wall Street nervous, and some believe that it could derail the recovery, cost a million public employees their jobs and require another big bailout package that no one in Washington wants to talk about.

‘The most alarming thing about the state issue is the level of complacency,’ Meredith Whitney, one of the most respected financial analysts on Wall Street and one of the most influential women in American business, told correspondent Steve Kroft.

Whitney made her reputation by warning that the big banks were in big trouble long before the 2008 collapse. Now, she’s warning about a financial meltdown in state and local governments.

‘It has tentacles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy'” …

“…The problem with that, according to Wall Street analyst Meredith Whitney, is that no one really knows how deep the holes are. She and her staff spent two years and thousands of man hours trying to analyze the financial condition of the 15 largest states. She wanted to find out if they would be able to pay back the money they’ve borrowed and what kind of risk they pose to the $3 trillion municipal bond market, where state and local governments go to finance their schools, highways, and other projects.

‘How accurate is the financial information that’s public on the states? And municipalities,’ Kroft asked.

‘The lack of transparency with the state disclosure is the worst I have ever seen …’ Whitney said”

MORE.

UPDATE (Dec. 21): The Guardian (UK) has taken note: “US states have spent nearly half a trillion dollars more than they have collected in taxes, and face a $1tn hole in their pension funds. … American cities and states have debts in total of as much as $2tn.”

Facts About Those ‘Fat Cats’

Business, Economy, Human Accomplishment, Socialism, Taxation

Via Bernie Goldberg:

In case you didn’t know:

“The top 1 percent of Americans pay about 38 percent of all our federal personal taxes (according to the National Taxpayers Union)?”

“Or that the top 5 percent pay just under 60 percent?”

“Or that the top 10 percent pay about 70 percent of all the personal income taxes collected in this great land of ours?”

“These ‘fat cats’ are the ones who do the heavy lifting in this country. They’re the ones whose federal tax dollars pick up a big chunk of the tab for all sorts of noble things, such as food for folks who don’t have enough to eat … medicine and doctors for people with little money … financial aid to help other people’s kids go to college … milk and diapers for poor babies whose 15-year-old mothers and deadbeat fathers are too irresponsible to take care of their own kids … a safety net for old folks who are retired on fixed incomes … and on and on. …”

“By the way, the bottom 50 percent of wage earners pay a paltry 2.7 percent of our federal income taxes. How many poor people do you think their tax dollars are taking care of? If you ask me, they’re the ones not paying their fair share. Every time they pass a ‘rich’ person on the street, they ought to say, ‘Thank you for everything you do me and for this country.'”

Dead-In-The-Water Debt Commission

Britain, Debt, Economy, Government, Inflation

My maxim,“Government commissions are where accountability goes to die,” played out today when, as the Washington Examiner reports, “President Barack Obama’s deficit commission failed to forge consensus on what to do about an increasingly urgent debt problem …”

“The 11-7 vote in favor of the panel co-chairmen’s recommendations for a painful mix of spending cuts and tax increases foretells a bitterly partisan and possibly unproductive debate in the House. If there’s a deal to be had, it will likely be reached in the Senate. Fourteen votes were needed to officially send the plan to Congress now for quick action on it.”

“The Details” of the thwarted plan, have been distilled by The Huffington Post’s Sam Stein:

“The draft put out by the commission chairs has been released, coming in at 50 pages. The overarching goal, Simpson and Bowles write, is to achieve ‘nearly $4 trillion in deficit reduction through 2020’ while reducing ‘the deficit to 2.2% of GDP by 2015.'”

“How they get there is going to be a matter of contention as other commission members have already stressed their displeasure with the suggestions. But here are a few of the more noteworthy suggestions.”

* Roll discretionary spending back to FY2010 levels for FY2012, requires 1% cut in discretionary budget authority every year from FY2013 though 2015;

* Fully offset the cost of the ‘Doc Fix’ by asking doctors and other health providers, lawyers, and individuals to take responsibility for slowing health care cost growth;

* Reduce farm subsidies by3 billion per year by reducing direct payments and other subsidies;

* Achieve100 billion in Illustrative Defense Cuts;

* Index retirement age for Social security to increases in longevity. ‘This option is projected to increase the age by one month every two years after it reaches 67 under current law, meaning the normal retirement age would reach 68 in about 2050 and 69 in about 2075.’ There will be a ‘hardship exemption’ for those unable to work beyond 62;

* Give retirees the choice of collecting half their benefits early and the other half at a later age to minimize impact of actuarial reduction and support phased retirement options;

* Reduce corporate tax rate to 26% and permanently extend the research credit;

* Gradually increase gas tax to fund transportation spending.”

[SNIP]

Think about it: The American president appoints a select group of like-minded officials tasked with coming up with a plan to tackle the deficit, the debt and the government’s long-term, looming liabilities. The commission completes its task by agreeing not to tackle the task. Meanwhile, the British PM has fired hundreds of thousands of state worker and slashed departmental budgets.