Let’s check in with our discussion on which city or state government is going to get to bankruptcy court first. Our primary cities in the race to bankruptcy include New York City, Chicago, Los Angeles, San Francisco, and newcomer, Seattle. The state governments that we think are soon heading into bankruptcy include New York, New Jersey, Illinois, and California with Washington state a newcomer to the race.
The reason for returning to this topic in the midst of our corruption series is because there have been some significant developments in the race to bankruptcy court. However, before reviewing the latest news and seeing which state or city is making the best progress towards government bankruptcy, let’s review how these cities and states got themselves into this financial death spiral position to begin with:
A government entity keeps expanding its budget, eventually putting pressure on the tax revenue stream it receives.
At some point, rather than cut government spending or make its programs more efficient financially, the politicians in charge raise taxes to meet the ever growing government expenditures.
The raising of taxes causes some residents and businesses to leave the city or state for less tax burdensome areas, reducing the tax base and reducing the revenue stream.
Rather than cut expenses and become more efficient to match the reduced tax revenue stream, politicians in the above cities or states raise the tax burden even more.
This causes more residents and businesses to flee the city or state, further reducing the tax base and tax revenue stream.
At some point politicians panic and raise taxes more and start cutting vital government services (e.g. police, fire, education) in order to try and balance government spending against the shrinking tax base and revenue stream.
The reduction in quality of government services in particular and quality of life in general drives more residents and businesses out of the area.
Eventually, the expenses, costs and financial liabilities outstrip the reduced tax stream and bankruptcy occurs.
Okay that’s the process. Let’s see what is going on in the newest and possibly the strongest contender for bankruptcy court.
1)Two big reasons why residents and businesses are fleeing Chicago and taking their tax dollars with them, making Chicago a prime city to go bankrupt soon, is high taxation and high crime. But other quality of life issues are also probably driving the out migration:
According to Rooftop Revelations, on the west side of the city, Frederick Douglas Academy has a grand total of 27 students being taught in the building.
The building has the capacity to teach 1,000 students.
It is one of 13 Chicago schools that currently have fewer than 100 students in the schools’ enrollments.
In total, 35% of the city’s schools are operating at less than 50% capacity.
The entire school system has 77,000 fewer students than it had in 2010.
Besides families fleeing the city and taking their kids with them, there are about 18,000 city kids that are still in the city but have opted for charter schools, private schools, and parochial schools to get a basic education.
And test results show why families that stay in the city are looking for better options: black students in non-public schools are three times more likely to be reading at grade level and black kids at non-pubic schools are five times more likely to be at grade level in math vs. public school black students.
Things are so bad that the head of the Chicago Teachers Union does not even send her own kids to public schools.
Just another example of why residents and businesses are fleeing the city: besides high taxes and high crime rates you can add in pathetically failing public schools. And the city tax revenue base continues to shrink.
2)Let’s jump over to New York City, another prime candidate to go into a bankrupt swoon because of high taxes and high crime rates:
Rather than address the problem of high crime in the city, the Mayor. Zohran Mamdani, is likely going to make the situation worse.
His administration recently issued a directive that stipulates that the New York Police Department (NYPD) will longer be responding to emergency calls relating to homeless encampments in the city.
Instead, social workers will be the first to be onsite for emergency calls from homeless encampments in the city.
According to the New York Post: “This year, the NYPD responded to more than 26,000 of the 36,000 complaints to 310 about encampments. Now, [the Department of Homeless Services] will handle triple the calls they previously responded to, with fewer than 2,000 staffers across the entire agency.”
So, the social worker staff will respond to an additional 26,000 complaints or about 80 more a day, what could go wrong?
And that number is likely to go up in the future since the homeless population in the city just hit a five year high.
So there is likely to be more homeless encampments going forward, more mentally ill and drug addicted people walking around the streets of the city, and fewer police resources available to protect the taxpaying, noncriminal citizens of the city. According to a New York Post editorial: “The vagrants who erect and inhabit these camps are hard-core homeless who’ve already rejected the option of living in a shelter … Compassionate encouragement won’t dislodge people sleeping on cardboard sidewalk pallets. That’s why the city has always tasked police with handling encampments.”
Think about it: there are currently 310 homeless encampments in the city. Who wants to continue to live in that environment of addiction, human waste, fires, and criminal activity, no wonder folks are fleeing the city and taking their tax dollars with them. Mamdani does not have the answer and those fleeing are seeing his ignorance illustrated through the 310 homeless encampment areas.
3)Consider the condition of many Californians today:
There are almost 182,000 homeless Californians in the state.
8.8 million state residents, one in five of the total population, struggle with food insecurity.
About 9,000 state residents, on average, die from drug overdoses every year and 5.6 residents are fighting substance abuse problems.
There are about 2.3 million state residents that do not have health insurance.
Now consider what Californian politicians are spending $11 billion a year on:
The state government spends about $11,000,000,000 a year on illegal immigrants' welfare.
According to reporting by the Post Millennial, this $11 billion is spent on providing illegal immigrants with health care, free cell phones/service, rent subsidies, college grants, care insurance, food, and other life necessities.
One of the state’s programs in this spending is called the Cash Assistance Program for Immigrants (CAPI).
An employee within this program told the Post Millennial: “If [you are] a citizen, you cannot get CAPI. I don’t care about legal or not. Not being [a] citizen [is the key].”
So, imagine you are a California taxpayer. You work hard, pay taxes, and maybe expect that our tax dollars will be used to help your neighbors that are homeless or hungry, fellow citizens that may need medical and health insurance relief or maybe drug addiction treatment. And you then find out that $11 billion of those tax dollars you paid is used to provide free and subsidized services to illegal immigrants, services that are often not available to state American citizens.
Combine that reality with the reality of high state tax burdens, high state homelessness rates, high crime rates, government incompetence (e.g. high speed rail line failure, fire response failure to the LA fires, etc.) and you might understand why businesses and residents are fleeing the failing state of California as it spirals down into bankruptcy, morally and financially.
4)The financial state of Chicago became so bad a few years ago that it sold new city bonds to finance the interest it was paying on currently issued city bonds. That is not a formula for long run financial stability, borrowing money to pay the interest payments on money you previously borrowed. In fact, Chicago politicians are going to have to pay interest on the newer bonds they sold to pay interest on old bonds, a vicious cycle.
That condition hasn't improved as we have previously discussed since city actuaries, very smart people, have predicted that this kind of financial nonsense will cause the city to go bankrupt in 7-12 years. But the current mayor of New York City, Mamdani, apparently has not learned a lesson from Chicago's shaky bookkeeping:
Mamdani got elected promising soaring socialism benefits from socialism programs he planned on implementing.
But he quickly found out once in office that the money he needed for his socialist utopia was not readily available and in fact, the city had a fiscal deficit looming just trying to finance current city government programs.
The city was facing a whopping $12 billion budget deficit.
He was able to close that deficit but not by eliminating bad or inefficient government programs or making government programs more efficient.
No,he finagled the state government, i.e. state taxpayers not associated with New York City to cover about $8 billion of that shortfall.
The remainder of that deficit he closed by postponing payments into city pension programs.
Specifically, the city negotiated with city unions to extend repayment of pension funds from 2032 to 2037.
In other words, money owed to the city pension funds does not go away, he just delayed the inevitable payment into those pension funds until well after he leaves office.
City actuaries estimate that delaying the payments will increase the amount owed by $5 billion.
Why would a construction company, or any company, invest in the city when within ten years that financial postponement will come due for a city that is struggling today to pay its bills? Why would someone move to the city,or stay living in the city, when the tax burden to fund his socialist programs and basic government services and pensions will continue to grow and require higher and higher taxation?
So we now have another financial desperation move to avoid bankruptcy, postponing pension payments.The city already had high taxes and high homelessness burdens. And the other costs of living in the city continue to accelerate. Consumer prices were up 4.3%, food prices were up 3.3%, and energy costs were up 15.4% over the past year. Tough to find any reason to argue New York City is not heading down a financial death spiral bankruptcy.
Meanwhile, Florida has no state income tax, it may significantly reduce the property tax burden in November, it has $18 billion in state government reserves, it has significantly reduced long term debt over the past few years, and it has a AAA rating from major credit rating agencies. And many New Yorkers understand the financial situation since, in 2024, over 50,000 of them moved out of New York and set up life in Florida.
That will do it for today. Apparently high taxes, high crime rates and high homelessness rates are not enough for some politicians: they need to postpone pension payments, operate overpriced and ineffective public schools, reduce police effectiveness, and spend billions and billions of dollars on illegal immigrants while Americans in need get ignored. All of which drive our favorite city and state governments candidates closer and closer to bankruptcy.
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If you agree that we need to deseat every member of Congress for their lack of success and accomplishment, then please consider going to the following petition link to help the cause:
https://www.change.org/p/deseat-congress-reset-freedom
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