Let’s take a brief break from our run of posts regarding the massive corruption and fraud in government programs and 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 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, now lets check the progress some of the above listed government entities are making to achieve this bankruptcy goal against this process:
1)California is currently our number one choice to be the first state government to go bankrupt and apparently Fareed Zakaria of CNN agrees with us:
He recently described the state of California as a "failing model of governance.”
He stated that while the state has wealth, talent, and natural beauty, the state government and the politicians who operate that government are not delivering a high quality of life for its residents.
Despite all of its positive assets, he correctly stated that the education, housing, high taxation, and homeless problems are not getting resolved.
Given the inroads that Republicans have recently made in this heavy Democratic state shows to Zakaria that Californians are not happy.
His numbers show how inefficient and corrupted the state government bureaucracy has become.
Since 2000, the state population has grown about 15%.
However, the annual state government budget has grown from $78 billion to $248 billion, more than a three fold increase, fueled by some of the highest taxes in the country.
Government spending has grown from $2,300 to $6,300 per person in the state.
The number of state employees has grown about 50% despite the overall state population growing only 15%.
Over the past seven years, the state population has shrunk by 1.9 million people as people and businesses have fled the state to get away from high taxes, high utility and gas prices, high crime rates, and high homelessness rates.
Nothing here that we have not already discussed. But to have someone from a leftist news outlet like CNN to be this critical of how mostly Democratic politicians have screwed up the state is especially significant. A bloated state government funded with higher and higher taxes without resolving any of the state’s major problems, it is no surprise the state is emptying out of people just fed up with the lowering quality of life in the state.
2)It has been our opinion for a while that New York City would be the next major U.S. to go bankrupt. And with the election of Mamdani as mayor, we were even more confident in that opinion. But with the election of Katie Wilson as mayor of Seattle, our faith that NYC will go bankrupt first is under pressure from the West Coast:
Ms. Wilson had little, if any, political ability or economic understanding before getting elected as mayor.
She did not help her cause or the financial viability of the city when shortly after getting elected she condescendingly said and waved “Bye” when asked if she was concerned that millionaires were leaving the city.
And that is exactly what is happening, millionaires, non-millionaires, and businesses are fleeing the city due to high taxes, high crime, and a mayor who does not understand how heavily the taxes are affecting the city’s financial health.
According to a survey done by the Association of Washington Business, a whopping 55% of business owners who were polled in the survey said they are seriously considering moving their homes and businesses out of the state and the city of Seattle.
24% said they are already actively looking into relocating out of the state, triple the number who made the same assertion 16 months ago.
Starbucks, as we have discussed, decided to invest $100 million in Nashville and move 2,000 employees out of Seattle to staff the new location.
In just a few years since the city government imposed a heavy payroll tax on employers in the city, 30,000 jobs have left the city for other cities in the state and other states.
The office vacancy rate in the city is a whopping 35%, one of the highest vacancy rates of any city in the country.
A high city sales tax rate and a city payroll tax when combined with a 9.9% state income tax on millionaires and a state capital gains tax, it is no wonder people are fleeing the city and the state.
Jeff Bezos of Amazon fame fled the state and its high taxes for low tax Florida as has Howard Schultz, the creator of Starbucks.
3)Not a good picture for Seattle as people and businesses flee the multiple and high taxes. But the rest of the state of Washington is not doing much better:
In Spokane County, Washington, 67% of surveyed businesses are considering moving out of the state.
59% of those recently surveyed statewide said they had already started looking for real estate out of state.
Stet wide 44% of business owners have consulted tax professionals and 18% already own business property out of state.
Chris Johnson, president of the Association of Washington Business has called the out migration a “911 emergency” for the state’s economy.
In the past few years the state government budget has grown a whopping $47 billion, going from $33 billion to the current $80 billion level, a level that is looking very difficult to maintain given a large and impending budget shortfall for fiscal 2027.
California is still in a strong lead in the race to bankruptcy court but Washington politicians are doing the same inane things that have gotten California into a financial death spiral: high taxes, high business regulation, high crime, lower and lower quality of life, and the abusing and disrespecting of taxpayers.
4)But it is not just very wealthy people and big businesses that are leaving Seattle because of high taxes:
As businesses leave the city and business towers face massive vacancy rates, the small businesses that rely on those big businesses and its employees suffer greatly.
Brendan McGill is a renowned restaurateur and owner of two long term and highly acclaimed Seattle restaurants.
After more than a decade of serving meals in his two locations in Seattle, he has shut down his two Seattle restaurants and docs on his remaining restaurants that are not in Seattle.
Specifically: “When I look back through the last couple of years of what we’ve been through, it feels a little bleak. But when I look at the whole arc of it, I feel really pleased with what we put forth. I’m not sure that my love for [Seattle] and my long history of being here can justify unsound business decisions at this point. The smarter business move would be to open in a place whose business environment is rolling, like Bellevue or even Tacoma.”
The outlook is “bleak: in Seattle, other areas outside of Seattle have a rolling business environment, code words for businesses moving out of town because of bad business and tax environments.
McGill has noted that foot traffic in downtown Seattle has been declining over the years, not surprising given the out-migration we have often discussed.
This is just one example of the cascading fallout when economically ignorant politicians drive employers and their employees out of town or out of state. The domino effect reverberates beyond thousands of Starbucks employees going to Tennessee; small businesses, e.g. restaurants, dry cleaners, gyms, hair salons, etc., see their customer foot traffic dry up and their businesses undergo financial stress, with some eventually going out of business or moving out of town, further reducing the tax base.
California is failing, Seattle is failing and Washington state is failing and none of their politicians have a clue on how they are causing the failures and resultant financial death spirals.
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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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