The Fiscal Disaster Of Connecticut: Another Canary In the Debt Coal Mine For The Rest of The Country

A few posts ago we did an analysis that showed how pathetically in debt we are as a nation. The total debt and unfunded liabilities of the Federal government and state governments is well over $100 TRILLION:

https://loathemygovernment.blogspot.com/2018/10/dont-worry-be-happy-any-short-term.html

Our last post looked at one “special” state in particular, Illinois. Illinois was rated the state in the worst shape from a fiscal condition perspective with unfunded pension liabilities that are likely never to be paid off. That post and the dire conditions in Illinois can be accessed at:

https://loathemygovernment.blogspot.com/2018/10/the-fiscal-disaster-of-illinois-canary.html

This debt burden issue has often caused to ask what state will go fiscally up in flames first, with our favorites for fiscal meltdown usually being New Jersey, California, and Illinois. However, according to a recent Wall Street Journal article, the state of Connecticut is now a dark horse candidate to financially meltdown first given that:

• Despite nine years without a recession, a time when the overall country’s and most states’ economies managed to create year over year economic growth, the state GDP of Connecticut actually shrank 9.3% from 2007 to now.
• Over the past eight years the length of time of the current governor, the state’s economy has shrunk an average of .5% a year.
• Compare this to history when from 1976 to 1991 the state led all other states in state GDP growth, likely due to low taxes and relative lower cost of living despite being in the usually expensive northeast part of the country and adjacent to New York.
• If the state’s economy had grown at the same rate as the overall U.S. average since then, it would now be collecting an additional $3.9 billion in taxes annually and its economy, and the jobs that would have been created, would be about $50 billion bigger.
• But in 1991 Connecticut levied an income tax on state residents of 4.5% for the first time, a tax rate that has grown higher and higher over the years.
• That tax rate now tops out on the margins at 6.99% as a result of the outgoing governor’s efforts and he also imposed 10% surtax on business income over $100 million.
• The state’s 8.25% top business income tax rate is the highest among all neighboring states.
• As a result of the ever increasing taxation, residents and businesses have pulled up stakes and gone to lower taxing states in order to keep more of their hard earned income.
• Thus, rising tax rates usually do not deliver the promised tax revenues because the tax base continues to shrink and Connecticut is no exception.
• This out migration has cost the state the ability to tax $8.8 billion since that taxable income has gone to other states, mostly to Florida which has no state or local income tax.
• Even with all of these additional taxes, state politicians have managed to fund only 50% of its future pension liabilities and face a $2 billion budget shortfall next year, again, even in the face of these additional and ever rising taxes and tax rates.
• It’s outgoing (Democratic) governor now rates as the second most unpopular governor of the entire country.
• But apparently the Democratic candidate to replace him, Ned Lamont, has no concept of why the state is dying fiscally since rather than get taxation and government spending under control he wants MORE government spending and MORE taxation despite the failures of both actions over the years.

But it is not just the Wall Street Journal that has identified the dire financial conditions of the state:

• The Mercatus Center, in its annual review of each state’s financial conditions, rates Connecticut as the 49th worst state in the union, just ahead of Illinois, the worst state in the union.
• Its total long term unfunded liabilities are at 230% of anticipated assets, a shortfall of over $17,000 for every state resident.
• Revenues currently cover only 92% of its expenses.

Wow, this state could really give the big three, California, New Jersey, and Illinois a run for their money when it comes to which one will be the first state to fiscally implode. 

And as we said with Illinois in our last post, that state and now Connecticut could both serve as the debt canaries in the debt coal mine. Since the Federal government has over $100 TRILLION in long term debt and unfunded liabilities, what happens to these two states, from a bankruptcy perspective, will likely give us an idea to what is going to happen to all of us when the Federal government debt bomb implodes.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:

www.loathemygovernment.com

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Please visit the following sites for freedom:


http://www.reason.com
http://www.cato.org
http://www.bankruptingamerica.org
http://www.conventionofstates.com
http://www.youtube.com/watch?v=08j0sYUOb5w