Let’s return to one of the hottest topics we have been covering over the past few years, coverage that has intensified recently: which major city or state government will get to bankruptcy court first? Our primary cities it he race to bankruptcy include New York City, Chicago, Los Angeles, San Francisco, and newcomer, Seattle. The state government that we think are soon heading into bankruptcy include New York, New Jersey, Illinois, and California with Washington state a newcomer to the race.
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, now lets check the progress some of the above listed government entities are making to achieve this bankruptcy goal against this process:
1)Let’s look at another set of data which continues to prove that a major demographic shift is underway in this country as smart businesses and residents take their tax assets with them to less tax burdensome states and cities:
New Census data says that Los Angeles County lost 54,000 residents between July, 2024 and July, 2025.
Obviously, most of Los Angeles county is the city of Los Angeles itself, a prime candidate for making it to bankruptcy court.
And losing 54,000 residents and their tax revenue stream and economic buying power does not help.
This was the biggest county resident loss in the country.
In 2020, the county was home to over 10 million people but the current population estimates says that the county population six years later is under 9.7 million.
High taxes, high crime, high homelessness, inept politicians and government operations, no wonder residents and businesses are leaving and taking their tax revenue with them. Thus, Los SAngeles is still very much in the mix to go bankrupt first.
2)Maybe the latest idiocy from the state government is just another reason why people are leaving California and taking their tax revenue with them:
A new state government program called Golden State Start was recently implemented.
The objective of the program is to provide free diapers to newborns in hospitals in the state in conjunction with the nonprofit organization called Baby2Baby.
The government gave $20 million of taxpayer wealth to Baby2Baby who just happened to have a CEO who sits on the board of the California Partners Project, an organization co-founded by the governor's wife, Jennifer Siebel Newsom.
Thus, this is at least the appearance of nepotism, a friend of the wife of the governor getting millions and millions of dollars of taxpayer wealth to hand out diapers.
If this is not bad enough, consider what might be a tremendously inefficient use of taxpayer wealth, as pointed out by Steve Hilton, a candidate for governor in the state: “If you take the number of diapers they’re planning to send out and the amount of money that he’s spending on it, it’s 50 cents for each one, which is like 100 times more expensive if you just bought them in Costco. But where’s the money coming from? Us.”
More from Mr Hilton: “Instead of taking our money, putting into some scheme that benefits their friends and cronies, why don’t they let us just keep more of our money in the first place so we can decide how to spend our money?”
Is it no wonder why people and businesses get frustrated when they see their hard earned tax dollars being spent on trash programs, politically connected programs like this. Crime is up in the state as is homelessness and the cost of living and the governor and his wife take $20 million and spend it inefficiently on this idiocy?
3) And it is not just us that think that things will get worse for the cities and states listed above that we believe are in a financial death spiral that is likely to end in bankruptcy:
Fox Business host, Stuart Varney, believes that the domestic migration wave underway recently will accelerate and leave the cities and states listed above with fewer residents and businesses at a faster rate.
He cites tax policy, business overregulation, and business conditions as the primary reasons for the migration.
He also cited analyses by economists Art Laffer and Stephen Moore that forecast millions of people will be on the move over the next few years out of the cities and states listed above: “We’re talking about mass migration within the United States from one group of states to another. This is America, and we move. But you ain’t seen nothing yet.”
Laffer and Moore estimate that California and New York together could lose 800,000 residents a year for the next three years, well over 2 million people and their tax dollars moving away.
They also think that half a million people will move out of Connecticut, New Jersey, and Minnesota over the next few years, states that all have heavy taxation and business regulations problems.
Varney: “These numbers are from economists Art Laffer and Stephen Moore. Quote, millions of people, 1000s of businesses and 10s of billions of net income will flee high tax, blue states for low tax red states.”
Not surprisingly, he says low tax states like Texas, Florida, Utah, and Tennessee will benefit from the population shifts into their areas.
No surprise that others are seeing the same trends that we have been discussing for a couple of years now: the outward flow of businesses and residents, along with their taxable income and economic burying power, will cause a state or major city to go bankrupt very soon. Mr. Varney’s advice to those still living in those vulnerable cities and states: “For years we’ve been seeing migration. Now get ready for mass migration. “If that happens, our best advice to blue state residents is simple: get while the getting is good. Translation: Leave now.”
Leave now, great advice.
4)One state we have not discussed a lot about being a benefactor of the migration from states like New York, New Jersey, Illinois and California is South Carolina. But they have quietly also been picking up out immigration residents from other states:
Between 2022 and 2023, South Carolina picked up more than 59,000 new residents from other states.
From a percentage growth perspective, South Carolina had the highest growth rate in the country, gaining over 1% of the state’s entire population.
While the bigger states like Florida and Texas had higher total numbers of people moving in, they had a lower percentage relative to their total population.
These new South Carolina residents brought $4.1 billion in new income to the state and as a result, the state government actually had a budget surplus of $2.7 billion.
South Carolina also had the largest GDP growth in the first quarter of 2025 relative to the other 49 states.
The state government has been cutting state income taxes for three years straight and the governor is now trying to eliminate the state income tax altogether.
Over the same period that South Carolina was booming, California lost 100,000 taxpayers and almost $12 billion in income while New York lost 72,000 taxpayers and about $10 billion in income.
New York state is facing a $10 billion budget deficit for the next fiscal year that is already five weeks overdue from being finalized.
California could be facing a running deficit of $35 billion a year.
The numbers and reality do get a little redundant after a while: people want to be free of excessive taxation, excessive business regulations and want a better quality of life, less crime, less homelessness, less inept and wasteful spending (see the diaper caper above), etc. And the states and cities that can provide that are winning the economic war. Those states and cities that do not provide those attributes are already in a financial death spiral.
5)One last example of why cities like Chicago are losing residents and businesses everyday besides high taxation and high business regulation:
Unfortunately, Sheridan Gorman, a college student out with friends in Chicago recently was shot dead by an illegal immigrant.
She was walking down the street with friends and had not had any contact or confrontation with the shooter that sparked her murder, apparently just random violence.
Besides the illegal immigrant aspect of the story, an illegal immigrant that had been arrested and released in the past for other infractions, it was the reaction of Alderman Maria Hadden that really escalated the situation.
Rather than condemn the violence of the illegal immigrant to show compassion for the friends and family of the victim, the Alderman nonchalantly referred to the situation as one of “wrong place, wrong time,” implicitly blaming the victim for getting in the way of a bullet.
And these types of politicians wonder why everyone is leaving their cities and states. When an elected official, one that is supposed to protect the lives and property of the citizens they serve, casually dismisses this violence as wrong place, wrong time, it fuels another reason for those to get out of town as soon as possible, given at least this politicians’ disregard for life and minimizing the city’s violence and crime.
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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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