- The Washington political class has run up a whopping $20 TRILLION in national debt, doubling the debt in just the eight years of the Obama administration.
- The per person Federal debt comes out to roughly a $61,000 debt burden for every man, woman, and child in this country, or almost a quarter of million dollars for a family of four.
- Just the three state governments of Illinois, New Jersey, and California have hundreds of billions of dollars in unfunded liabilities coming due in the coming years.
- The state government of Illinois is so dysfunctional that they have not been able to pay out state lottery winners due to their budget crisis even though they continue to sell state lottery tickets, a bait and switch strategy that would get everyone else thrown in jail for running such a fraudulent scam.
- Local governments across the country like Detroit, Michigan and Stockton, California have filed for bankruptcy protection since they already could not meet their fiscal obligations and promises.
- And Puerto Rico was a financial and economic basket case before it was devastated by Hurricane Marie.
We recently came across a useful analysis from the League Of Power website by Mark Patricks which offered the following question and then proceeded to try and answer that question: “Which American Cities and States Will File Bankruptcy Next?” His analysis updated many of the discussion we have had and have listed above on how the political class are pretty inane and useless when it comes to fiscal sanity:
- The state of Illinois recently raised its state income tax 32% as it has entered into the fiscal death spiral.
- The unfunded government liabilities, outside of the Federal $20 TRILLION national debt, is between $5 and $8 TRILLION, a hole that even massive tax increases may not resolve.
- Political promises are so bad in Chicago that over 60% of the city’s tax revenues goes solely to supporting the pension requirements of retired city workers and the city’s massive debt load, leaving less than 40% of the tax revenue to be used for schools, roads, etc.
- According to the article, “Lubbock, Texas; Atlanta, Georgia; Pittsburgh, Pennsylvania; Austin, Texas; Baton Rouge, Louisiana; Honolulu, Hawaii; Dallas, Texas; Oakland, California; Phoenix, Arizona; Houston, Texas; and Los Angeles also have huge liabilities that are just under the range of Chicago's.”
- In each of these cities, at least 50% of their tax revenue is used to fund their city’s past promises on pensions and for debt payment.
- JP MorganChase says that any city with a figure of more than 30% of their tax revenue being used for pensions and debt management will find it difficult to invest in infrastructure, bond repayment, pensions, non-pension spending, and other expenses.
- JP MorganChase estimates that the city of Honolulu could only fix its budget problems with at least a 30% hike in taxes or a 76,000% increase in worker pension contributions, either of which will likely never happen in time to avoid an eventual fiscal implosion.
- City government pensions in Chicago, Dallas, Phoenix, and Pittsburgh are considered by JP MorganChase to be in “crisis” mode since their future pension payouts are funded at 55% or less with Chicago’s funded pension payouts are only at 23%, a level that will drop to a mere 15% in 10 years if nothing is changed.
- A study by the moving company, United Van Lines, found that the top six states with the highest out migration rates have an average taxpayer burden that is five times higher than the nine states with the highest in migration rates, which is part of the death spiral discussed above: the higher the taxes the more likely citizens will move to more tax-friendly states which leaves their past states with a smaller tax base which requires higher tax rates which drives up more out migration and the death spiral is in place.
- Chicago was found to have the highest out migration rate, not surprising given its putrid fiscal situation and high tax rates.
- Not only is Chicago in an out migration and economic death spiral, but the whole state of Illinois is in the same condition, having led the country in the out migration rate for three years in a row.
- But this situation in Illinois is not surprising since Forbes ranked Illinois as having the 46th worst tax burden in the country BEFORE the state raised income tax rates 32%.
- In lower taxed northwestern Indiana, on the Illinois border, home construction was up 19% in 2016 while in Cook County, Illinois, home of Chicago, home construction is down 6%.
- As people have migrated out of Chicago, home values have dropped leaving the city with one of the highest rates in the country for mortgages being “under water,” i.e. the amount of mortgage owed is more than the value of the homes.
The really sad part of the whole fiscal insanity of American politicians is that while we have these mountains of debt we have nothing to show for it. Our roads, bridges, and dams are falling apart across the country. Our public schools still under educate our kids. Our electric grid is outdated and subject to attack and disruption. Our social welfare programs, Social Security, Obama Care, Medicare, and Medicaid, are rushing quickly into insolvency. We have no national energy strategy or plan to make us energy independent. We have not cured the major diseases of our times including cancer, Alzheimer’s and dementia illnesses, Parkinson’s disease, etc. We have nothing despite the tens of trillions of dollars in debt.
So don’t worry about Trump and the Russians. Don’t worry about Hillary and the Russians. Don’t worry about any other issue at the state, local, or Federal levels. Because unless we fix our debt problem very soon, that dam is going to break and the red ink that it is holding it back will wipe out every other paltry political issue that exists today.
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