August, 2019, Part 1, By The Numbers: The Financial Abyss That is California

On a periodic basis we do some posts that fall under the theme of “by the numbers.” Rather than trust what the American political tells us about reality, we like to examine the real numbers and the real reality in the world to understand what is actually going on. Relying on politicians, and their cohorts in the media, to tell us what is reality is always a sucker bet. They have their own agendas and goals, usually centering around their needs and self-enrichment. So we need to look at the reality of the numbers to determine what is really going on.

Previous analyses of “by the numbers” can be accessed by entering the phrase in the search box above. We will do a few “by the numbers” posts this month where we look at the numbers to truly find out how good, not likely, or bad, most likely, the American political class is doing in managing our tax dollars, protecting our freedoms, and resolving major issues that affect all of us. 

1) We recently and often discussed the fact that the financial situation in California is not too bright. In fact, we have placed them in the group of states that are most likely to go bankrupt first, along with Illinois and New Jersey. While we think Illinois will go belly up first, a recent article on the Real Politics website by Victor Davis Hanson shows how bad the numbers, and risk, for the state of California really are:

• The 40 million state residents depend on only 1% of the state’s taxpayers to pay nearly half of the total state income tax stream.
• California has the highest marginal top tax rate in the country at 13.3%.
• If only 10% of these high earning state residents left the state because of the high tax burden, the state income tax revenue stream would drop a whopping 5% or so, if only 20% left the revenue stream would drop 10% or so.
• I could not find out how many taxpayers there are in California but I do know there are about 13 million households so let’s use that as a surrogate.
• 1% of 13 million households is 130,000 households which we will assume approximates the number of taxpayers paying 50% of the state’s income taxes. 
• Thus, if only 13,000 (10%) of those wealthy households leave the state, the state income tax revenue stream goes down 5%.
• Given the Trump tax cuts which maxes out certain Federal income tax deductions to $10,000, there is more and more advantages for the wealthy to leave the California because much of their high property taxes, high state income taxes, and high mortgage payments will no longer be deductible on their Federal income taxes.
• But the numbers are not just bad financially, consider this quality of life issue: “During the 2011-16 California drought, politicians and experts claimed that global warming had permanently altered the climate, and that snow and rain would become increasingly rare in California. As a result, long-planned low-elevation reservoirs, designed to store water during exceptionally wet years, were considered all but useless and thus were never built.”
• But as we have discussed, most climate forecasts are bogus and in 2016 and 2017 the state received record levels of rain and snow.
• But the state had no place to put the extra moisture and future water supply and thus, trillions and trillions of gallons of water washed out to the ocean, never to be stored or used again.
• This past February alone it is estimated that 18 trillion gallons of rain was not saved.
• Rather than build the needed reservoirs, the state’s politicians wasted $5 billion on a high speed rail line that will never exist since its cost escalated from $44 billion to projected $77 trillion before any track had been laid.
• 27% of the state’s residents were not born in this country as the state’s politicians welcome illegal immigrants into the state which has strained the budget and other services with a full one third of the Medicaid births in California being to illegal immigrants, putting additional financial strain on the state’s finances.
• One third of the country’s welfare recipients live in California and one in five state residents live below the poverty line.

Poverty, water shortage, wasteful spending, high taxes, a delicate and risky tax model, the numbers show that California is still a very likely candidate for government failure in the not too distant future.

2) A great site for numbers relative to the states is www.statedatalab.org. What it has to say after analyzing the California numbers is also not pretty [note: all numbers from the database are from fiscal year 2017, the most recent year that total results are available]:

• Every man, woman, and child in California, all 40 million of them, would have to send the state government a check for $22,000 in order to get the state out of its debt hole.
• Thus, a California of four would have to write a check for $88,000 to dig out of the hole.
• California has $100.1 billion in assets to pay its $369.9 billion in current and future bills.
• Thus, it has a financial shortfall of about $269.9 billion, a little over a quarter of a TRILLION dollars, giving it the designation as a “sinkhole state.”
• Due to accounting tricks, this $269.9 billion does not include another hidden $63.8 billion in pension and retiree healthcare liabilities.
• But the problem for California residents does not stop at the state government level.
• If you live in Los Angeles you would have to pay another $6,000, on top of the $22,000, to get the city out of its financial debt hole, bringing each resident’s debt burden in that city up to $28,000 to cover the overspending and wasteful spending of California’s state and local LA politicians.
• LA only has $12.7 billion in assets to cover its $20.4 billion in current and future liabilities.
• But this is pennies compared to San Francisco which has so much debt that its citizens would have to pony up a whopping $22,600 each to get that city out of its financial hole, meaning that each resident of San Francisco would have to put forth almost $50,000 each to bail out the state and local politicians’ financial mismanagement.

It is a great website if you love numbers, it is a scary website if you believe what the political class in California has done to the financial future of the state and local government finances, a reckoning that will have devastating impacts on the citizens of California. The numbers do not lie.

3) Let’s stay with the same database, numbers, and analyses and see what it has to say about our other two favored states to go bankrupt, Illinois and New Jersey:

• The state of Illinois is over $225 billion short when it comes to assets available to pay bills and costs likely to occur.
• This means that each man, woman,and child of the state of Illinois would have to pay a whopping $50,800 EACH to get the state out of its financial hole.
• This $225 billion shortfall does not include another $36 billion of liabilities in retiree health care costs that accounting tricks allow the state to hide.
• And the city of Chicago is also in bad financial shape and each resident of Chicago would have to pay another $38,100 to get the city out of its financial hole which means every man, woman, and child in Chicago would have to pay $88,900 to fix the financial mess that Illinois state and Chicago city politicians have created.
• But hold on, New Jersey is coming on strong since every man, woman, and child in that state would have to pay $61,400 each to get the state out of its financial debt hole, almost three times what a California resident would have to pay.
• This debt burden is almost 70% higher than it was just four years previous when the debt level per person was about $36,000 each, indicating that New Jersey politicians have been spending and incurring debt like drunken sailors over the past four years.

Wow, Illinois, New Jersey, California, it is a toss up what state will go bankrupt first and given these debt levels and debt burdens, they will go bankrupt, the numbers do not lie. 

To show you how bad the politicians mismanaged the financials in these states, let’s look at a few other random states debt burden to show that these three are likely the worst run operates of all fifty states:

• Florida individual debt burden: $1,800 per person.
• Georgia individual debt burden: $3,400 per person.
• Kansas individual debt burden: $7,600 per person.
• Iowa individual debt burden: $500 per person SURPLUS, i.e. the state of Iowa has enough money to cover its debt and give every citizen a $500 check.
• Montana individual debt burden: $3,300.

You get the idea, some state politicians know how to operate and budget much more efficiently and effectively than New Jersey, Illinois and California.

So given these numbers which state will go bankrupt first...or is there a dark horse candidate or two out there that might make it to the bankruptcy finish line ahead of these three lame financial horses?

More numbers to follow, including the abyss that is Baltimore and the missing hundreds of millions in New York City.

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:

https://www.amazon.com/Walter-Bruno-Korschek/e/B002KYU08Q/ref=dbs_a_mng_rwt_scns_share

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

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

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

We have spent the past three posts examining how the American political class, at both the Federal level and state government levels, has totally screwed up the government fiscal situation at all levels. Trillions of dollars in unfunded liabilities, cash shortfalls to cover short term expenses, tax revenue long term and short term revenue flows, and ominous signs of financial and economic collapse becoming more and more evident every day.

And these huge debt problems have happened in the midst of high levels of taxation. But the high taxes never got used to improve our infrastructure, better educate our kids, improve the environment and our energy usage, etc. So we have nothing to show for those high taxes except a huge debt hole.

Sadly, despite the dire numbers we have discussed previously and will discuss today, current politicians apparently either do not understand the current debt crisis, do not want to address it, or do not have the brain power to fix it. Hopefully, by discussing these numbers during these posts we can finally understand what they have done to us and finally force them to address the financial mess they created.

Our previous posts covered the following debt holes:

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

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

Connecticut debt hole: https://loathemygovernment.blogspot.com/2018/10/the-fiscal-disaster-of-connecticut.html

And today we review the financial crisis in California, one of the three states (Illinois and New Jersey) we have long predicted would be the first states to enter bankruptcy:

• The overall poverty rate in California is 14% despite having the high income areas of Hollywood and Silicon Valley.
• The poverty rate is the highest in the country likely because it has the highest cost of living in the country.
• At one time the state had the lowest poverty rate in the country.
• Children in California are more likely to live in poverty than any other state.
• One in five California are not making ends meet in their daily lives.
• The state’s income tax is the highest in the country at 13.3% and it also has the highest sales tax rate in the country at 7.25%.
• The 7.25% does not include local sales tax levies which often pushes the total sales tax cost over 10%.
• The state’s overwhelming environmental laws force state residents to pay almost twice as much for electricity than in most other states.
• The state’s overwhelming housing policies result in state average rental costs to be $400 higher than the national average.
• The USA Today reported that a movie date and dinner for two will likely cost close to $100 in San Francisco.
• The state has the highest number of illegal immigrants in the whole country with anywhere from 10 to 20% living in the state.
• And many of these illegal immigrants draw on the very generous welfare programs in the state, causing California to spend an amazing $1 trillion in welfare from 1992 to 2015.
• A U.S. News and World Report analysis found that in total, California has the worst quality of life in the entire country.
• Most of those migrating out of the state are in the middle class since middle class families do not have tax shelters like the rich, they do not get bailouts like big companies, and they do not get generous welfare benefits like the poor and illegal immigrants, they just get the check with high taxes and overwhelming government regulations.

The above dismal view comes from Frank Holmes, writing for the Horn News website. But the Mercatus Center analysis of each state’s financial situation verifies this bad state of affairs:

• California rates as the 42nd worst state from a financial viability perspective.
• Its cash flow situation is well below the national average when it comes to covering short term expenses and costs.
• Long term liabilities are higher than average.
• Unfunded pensions liabilities are almost a whopping $1.2 TRILLION.
• There is another $100 billion in unfunded non-pension liabilities.
• The state can only cover 92% of future obligations.

Not a pretty sight. High and higher taxes and yet the state’s politicians have still managed to bury the state government in a mountain of debt and unfunded liabilities. Over regulations and intrusive state government policies result in very high living costs, be it electricity, housing, or a simple date and dinner.

And in previous posts we have reported on other depressing aspects of California life. About 40% of Los Angeles’ population earn so little that they qualify for Medicaid. Homelessness is rampant throughout the state with large homeless settlements springing up in the middle of big cities and under freeway overpasses outside of the cities. The state’s schools generally under educate the kids in the state and the state’s infrastructure is in dire need of repair.

Thus, another state and another large state government debt hole. The sooner we address these debt obligations the less arduous and painful it will be to get the country fiscally sound. The longer we wait, the more difficult and more dire situations millions of Americans will find themselves in as taxes go up, economic growth goes, down, and promised retirement benefits shrink significantly. While politicians may lie these debt numbers do not.

We need to respect and live according to the old adage: “When stuck in a hole, stop digging.” When stuck in a debt hole, stop spending money that you do not have and will likely never have.

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

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

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

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

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

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

The Fiscal Disaster Of Illinois: The 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

This debt burden has often caused us to ponder what state will go fiscally up in flames first, with New Jersey, California, and Illinois the leading candidates. 

The Mercatus Center at George Mason University recently published their annual analysis of state governments’ financial status and their analysis made the case that the state politicians of Illinois have done the best job of screwing up their state’s financial condition, i.e. the Illinois is ranked as the least fiscally healthy state in the union:

• The state Illinois government has a backlog of $7.1 billion of unpaid bills and other budget shortfalls since it took them years to finally pass a budget.
• It ranks 49th out of 50 states in cash solvency, i.e. it will be difficult to fund its short term expense and debt obligations going forward.
• In 2016, the state collected only 92% of the revenue needed to cover its expenses which set off a long, arduous process to close that gap.
• This tax revenue shortfall ranked it 46th out of 50 states when it comes to budget solvency.
• The long term trend has seen Illinois state government funding rise on average 2% a year while tax revenue growth has grown annually only about 1% a year on average, not a formula for success over time.
• The state’s long term liabilities are an amazing, and depressing, three times larger than the assets that are currently available to cover them, ranking it 49th from a long term solvency position.
• While most every state has this same unfunded liability issue to deal with, since 2006, Illinois’ long term liability growth has averaged 11% per capita a year.
• The state’s politicians have funded only about 21% of the state government’s long term pension liabilities.
• A J.P. Morgan study found that the state will eventually have to dedicate 50% of its tax revenue just to fully fund its unfunded pension liabilities, meaning that only half of its tax revenues would be available for education, infrastructure improvement, police and fire protection, etc.
• Alternatively, that same study found that to fully fund those unfunded liabilities, the state government would have to increase tax revenues by 25%, increase worker pension contributions by 689%, or attain pension investment returns to increase to 11.5%, a long term investment impossibility.
• The likelihood of any of these solutions happening is very small, given the history of state politicians not fixing fundamental fiscal problems as illustrated in 2011 when the state raised taxes dramatically but the state government politicians ended up spending the increased tax money elsewhere and not making a substantial dent in the state’s unfunded liability crisis.
• Illinois is one of only eight states that explicitly, in one way or another, constitutionally guarantee the payment of the current level of benefits, making slashing future benefits highly difficult from a legal perspective and it has one of the strictest protection of pensions of any of those eight.
• All of this Illinois fiscal deterioration has occurred in the midst of a nine year economic growth period for the country, i.e. we have not a recession since 2009 and yet the state financial situation has gotten way worse, imagine how much faster it will go downhill when the next inevitable recession hits.
• Even worse, despite a growing national economy, personal income levels in Illinois have grown at less than half the growth rate of the national growth rate of personal income, leaving less wiggle room to raise taxes and not hurt Illinois families and businesses than in other states with higher income growth rates.
• On top of this mess, businesses and families are fleeing the state, leaving a smaller and smaller tax base, resulting in larger and larger tax shortfalls resulting in higher tax rates resulting in more out migration, and the death spiral is complete.

What a disaster the Illinois political class has gotten itself and its citizens into. The debt and unfunded liability hole is huge, its tax base is shrinking, and anyone reading the above details of the situation would probably agree with the Mercatus conclusion [Note: I added the emphasis]: “Illinois finds itself in a deep hole with no fully reliable ladder to climb out. Some even think that the only solution to their mess is to file for bankruptcy and ask the Federal government to bail them out, an event with no legal precedent. There is not one panacea solution for the state to move forward. Their recent attempt to reform pensions through offering buyouts signals that they’re thinking beyond short-term fixes like tax increases, but more work needs to be done in this direction. Illinois needs long-term solutions that will involve regulatory, tax, and pension reform.”

No way out. Bankruptcy. The need for long term solutions. Given that it took decades to get in such a bad position it is highly likely that the politicians in the state will not be able or willing to find a long term solution which will result in the now way out scenario and avoid eventual state bankruptcy. This will likely result in dramatically reduced pensions and benefits to government retirees, more increased taxation and everyone loses.

But going back to the original post on fiscal dangers across the country referenced above, Illinois is the so-called canary in the debt coal mine. Why we can all be thankful that most of us are not living in a state in as dire a situation as Illinois, with the exception of a few states like New Jersey, California, and Connecticut that are not much better than Illinois, as we outlined in the post above, the country as a whole has a debt hole of existing national debt and unfunded liabilities of over $100 trillion. 

All of which means that these “no way out, bankruptcy, and the need for long term solutions” conditions await us all in the not too distant future, given the ineptness, lack of ability, and lack of courage of the American political class at all levels of government.

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

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

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

September, 2017, Part 3, Political Class Insanity: The Fiscal Insanity and Ignorance of Democrats

It is the beginning of another month which means it is again time to review the latest political class insanity from Washington and around the world. Political class insanity takes many forms including the wasting of taxpayer wealth, criminal fraud within government programs, inane and stupid political quotes and actions, the inability to create and implement effective and efficient government programs, stupid and ill performing economic policies and strategies, and other forms of insanity that continue to evolve and surprise and shock us.

1) I am not a fan of either political party, Republican or Democrat. Both parties have been responsible for running up a whopping national debt of almost $20 trillion without resolving a single issue facing Americans today. They are more concerned about their own greed and status than addressing any problem. Our schools still under educate, our infrastructure is still falling apart, we have been and are still embroiled in non-winnable foreign country conflicts, we have no overarching energy strategy or plan, the list of failures goes on and on.

But you have to hand it to the Democrats for being the much bigger screwups than the Republicans. Just look at their history of governing:

• Early in Obama’s Presidency, the Democrats controlled both houses of Congress and the White House but somehow managed to preside over the worst economic recovery in about 80 years, ran up the first annual Federal government trillion dollar deficit and then followed up that horrific performance with three more trillion dollar deficits, enacted Obama Care which is probably the worst piece of legislation ever passed by Washington, etc.
• At the state level traditionally Democratic states Illinois, California, and New Jersey are rapidly approaching fiscal insolvency and meltdown.
• At the local level, traditionally Democratic cities have either gone bankrupt (Detroit, Michigan, Stockton,California, and others), are heading for bankruptcy (Chicago), or are overcome with high levels of murders and violent crime (Chicago and Baltimore).

Quite the inane record of constant failure. But Kyle Becker, writing for the Independent Journal Review in early August, 2017, highlighted some election numbers that show how badly Democrats have performed recently and how Obama has probably contributed to more destruction of the Democratic party than anyone else ever despite having been elected President for two terms:

• If you look at the state governments where Democrats control both houses of the state legislature and the governor’s mansion (a political trifecta), than Democrats rule over only 7.2% of the country’s land mass.
• The Democrats now hold a record low number of trifectas (7) across all of the states.
• Republicans have 24 trifectas across the country, almost four times as many as the Democrats.
• Almost 50% of the country’s residents live in states whose government is completely under the control of Republicans.
• During the Obama Presidency, the Democrats at the state and national level lost over 1,000 governing positions in those levels of government.
• The Democrats now hold a record low number of governorships across the country.
• And things could get worse for the Democrats since in 2018 there are 10 Democratic Senators running for reelection in states that Trump carried in 2016 while the Republicans have only 2 Senators running for reelection that might be in trouble.

Again, I have no use for either party. But you have to be really inept as a political organization to have the results the Democrats have been running up over the past 8 years of the Obama administration. And ineptness is not something the country needs these days, given the many real issues facing Americans every day.

2) Let’s move onto another piece of political class insanity and I am afraid Democrats will do not do much better than what we just discussed. The Mercatus Center at George Mason University recently completed an extensive study along many dimensions (e.g. short term and long term debt, unfunded pension liabilities, etc.) to determine the fiscal condition of each state government. 

A state government in good condition has much more flexibility to serve its citizens since they have a good balance sheet and cash flow. States in bad fiscal shape either have to cut services and budgets or raise taxes which usually ends up in a death spiral of shrinking revenue and rising expenses.

According to their study and analysts Eileen Norcross and Olivia Gonzalez, the following five states are in the best fiscal condition:

1 - Florida

2 - North Dakota

3 - South Dakota

4 - Utah

5 - Wyoming

The following states are in the worst fiscal condition:

50 - New Jersey

49 - Illinois

48 - Massachusetts

47 - Kentucky

46 - Maryland

A few observations about these results:

• With the exception of Kentucky, the worst five states have been dominated by Democratic politicians for decades.
• These five states, according to Mercatus, have massive debt obligations and massive unfunded obligations: “Each state has massive debt obligations. Each of the bottom five states exhibits serious signs of fiscal distress. Their large liabilities and low cash on hand raise serious concerns about their ability to pay bills...Unfunded liabilities continue to be a problem. High deficits and debt obligations in the forms of unfunded pensions and healthcare benefits continue to drive each state into fiscal peril. Each holds tens, if not hundreds, of billions of dollars in unfunded.”
• Which is interesting since these states have some of the highest tax burdens in the whole country with New Jersey having the third highest tax burden on its citizens (according to a Forbes analysis) with 12.7% of citizens incomes being collected as state taxes, Illinois having the fifth highest tax burden (12.6%), Massachusetts having the eleventh highest tax burden (10.3%), and Maryland having the seventh highest tax burden (10.9%).
• In other words, despite taxing its citizens at much higher rates than other states, these fiscally under performing, Democratic controlled states have managed to squander away the high levels of taxes they have collected over the years and still have high levels of debt and liabilities.
• Conversely, the states in the best fiscal condition have low levels of debt, low levels of unfunded liabilities, good cash flows, growing economies, etc.
• And yet they collect far less in taxes then the five worst states with Florida having the 17th lowest tax burden on its citizens (8.9%), North Dakota having the 18th lowest tax burden (9.0%), South Dakota having the second lowest tax burden (7.1%), and Wyoming having the third lowest tax burden (7.1%).
• In fact, three of the top performing states, Florida, Wyoming, and South Dakota, do not even have a state income tax to collect and yet they still far outperform the bottom states which not only have state income taxes by usually high levels of state income taxes.
• Only Utah of the best states has a relatively high tax burden of 9.6% which places it at the 30th lowest tax burden in the country.

Thus, the correlation is pretty strong and yields the following pretty solid conclusions and summary: states dominated by Democrats in elected office tend to have the worst fiscal conditions and worst fiscal management histories even though they tax their citizens at much higher rates than states with Republican domination who have better fiscal management skills yet collect less in taxes on a percentage basis than the worst performing states. The numbers and realities do not lie.

And these conclusions do not end with the top five and bottom five. If you look at the top 18 states that are in the best fiscal health, you see that most are Republican dominated and many do not even collect a state income tax. If you look at the 18 states with a worse than average fiscal condition, you will see that most of them are Democratic dominated and most, if not all, collect a state income tax.

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Again, I have little respect and use for either party but if given a choice, it is pretty clear that Democrats will tax you more, screw up your state government fiscal conditions more, and in the process reduce your freedom by reducing the amount of wealth you get to retain and have to use as you please.

More insanity to follow this week.

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

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

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

Political Class Insanity and Economic Ignorance: California Update

We have often discussed the reality that politicians could not be any more ignorant of economics and financial planning than if they tried. Their economic strategies, policies, and stupidity usually make economic and financial conditions worse. Their idiocy usually comes down hardest on those that can least afford bad economic policies and environments, those at the lower economic scale in this country and around the world.

Their economic policies overseas have stifled economic growth and greatly reduced economic freedoms as we discussed in the following post:

https://loathemygovernment.blogspot.com/2017/07/july-2017-part-4-political-class.html 

Their economic policies at the state and local government levels in this country have crippled economic development in many states and cities. Detroit and several cities in California have already essentially gone bankrupt and the state governments in Illinois, New Jersey, and California are not too far behind when it comes to economic collapse, as the following posts and discussions reveal:

https://loathemygovernment.blogspot.com/2017/02/people-want-to-be-freeas-do-california.html

http://loathemygovernment.blogspot.com/2017/02/februrary-2017-part-3-political-class.html

http://loathemygovernment.blogspot.com/2012/10/why-californias-distressed-economy-is.html

http://loathemygovernment.blogspot.com/2012/07/why-california-is-failing-while.html

http://loathemygovernment.blogspot.com/2012/07/state-level-economic-musings-california.html

And the sad thing about these posts is that they are not all of the bad news that we have previously discussed regarding stupid politicians doing stupid economic things. I just got tired of listing all of them. 

Today we will discuss AGAIN how politicians, California politicians in this case, have managed to economically and financially wreck an entire state’s current and future financial well being. The basis of this review is an article by Scott Osborn, writing for the Joe For America website on August 20, 2017, “Point Of No Return! California Faces Imminent Financial Collapse!”:

• The state of California has incurred and is now carrying a debt load of $340 billion.
• This comes out to a whopping debt load of over $8,700 for every man, woman, and child in the state.
• But that is of today, experts peg the future debt load just for the state pension system at $1 TRILLION, about three times higher than the obscene current debt burden of $340 billion: “California is a cautionary tale for taxpayers in the rest of the country. The people of California are being burdened by an unsustainable, unfunded liability – a $1 trillion dollar government pension system. At the end of the day under California law, the taxpayers will subsidize the shortfall in the budget.”
• While California has 14 million people working in private sector jobs in the state, there is almost the same amount of people (12.6) million not working and who are living on welfare benefits.
• There are 2.1 current state and local government employees but there are 1.3 million people collecting government pensions in the state.
• There are 114 people getting government benefits in the state, either by drawing a government worker check or by getting welfare, for every 100 people outside of government paying taxes to support the 114.
• And this outrageous state government debt was incurred despite the reality that California has one of the highest, if not the highest, state income tax rates in the country.
• For many working people in California, if they moved to Texas and maintained their current income level, their tax savings would enable them to buy a new car every year.
• While there are rich Californians living in Hollywood and Silicon Valley, poverty permeates the rest of the state with homeless people creating tent cities in other parts of the state and the L.A. City Council recently pleading with governor Jerry Brown ““to declare homelessness a statewide emergency“. 
• Despite the sky high taxes, the state’s infrastructure is falling apart with even the governor recognizing the fact and calling for another $100 billion to be spent to fix the infrastructure.
• In a previous post, we cited the reality that about 40% of L.A. residents are on the Medicaid roles, indicating a very low level of income for 40% of the city’s residents.
• High taxes, bad employment opportunities, high crime, bad schools etc. have resulted in a net migration out of California of about 5 million people in the past decade.
• I would assume that a high proportion of those moving out were not welfare cases but were likely highly productive, tax paying, working individuals, which if true, would put even more pressure on the state government’s tax revenue collections.
• The author cites his success in escaping California: a 25% reduction in the cost of living, a 15% decrease in income, a $2 a gallon drop in gasoline prices, and the purchase of a livable 3,200 square foot home for less than a third of the price of a comparable home in California, and no state income tax...and a new car every year if he wanted it.

Thus, only politicians can take the most beautiful piece of property in the country, have the most residents, have the most tax revenue, have the the built in, perpetual wealth of Hollywood and Silicon Valley but yet have some of the worst schools, the worst run pension systems, have the highest debt, have some of the worst public infrastructure, and the worst economic outlook of just about any state in the union. 

Economic ignorance is too tame a term to describe what the California political class has done to the state, its citizens, and its future. Let’s just hope that the cancer that is California economic ignorance can be contained before it spreads elsewhere in the country.

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

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

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

December, 2016, Part 2, Political Class Insanity: Child Abuse, Food Assistance Abuse, and Fiscal Abuse at the State Government Level

It has been almost a month since Donald Trump has been elected which means at some point in the future we may run out of material to talk about. With the demise of the Obama administration, eight years worth of wasteful and excessive spending for nothing in return, foreign affairs blunders, Obama Care disasters, and assorted other administration and government blunders and screwups might end with the onset of a new administration. Trump may usher in a new paradigm of government actions that are limited, effective, cost efficient, and protective of the Constitution. If so, then this blog would run out of material to discuss and would have to be shut down.

But I doubt it. Even if Trump is truly a different type of President, he is still fighting over 500 embedded and entrenched politicians in Congress and thousands and thousands of government bureaucrats who will not go peacefully into the night for the good of the country. I wish him well and hopefully he can fix at least some of the myriad of problems the American political class creates everyday but until then, enjoy the latest political class insanity from Washington and beyond:

1) Yesterday we reviewed how over time many Washington politicians have been charged and found guilty of crimes despite being a member of Congress. But it is not just actual politicians that are downright disgusting and criminal, many times it is the people they hang out with that are just as despicable. According to Brett Deckwer, writing for USA Today on November 20, 2016, Democratic Party operative Terrence Bean, likely possibly into this category: 

• Bean was recently arrested in Portland, Oregon and charged with two felony counts of having sex with a minor.
• Bean has solid White House and Democratic Party connections, having raised over half a million dollars for Obama’s 2012 election campaign.
• According to oregonlive.com: "Bean has been one of the state's biggest Democratic donors and an influential figure in gay rights circles in the state. He helped found two major national political groups, the Human Rights Campaign and the Gay and Lesbian Victory Fund and has been a major contributor for several Democratic presidential candidates, including Barack Obama."
• Bean has flown on Air Force One and has made contributions to such Democratic politicians as Hillary Clinton, Senate Majority Leader Harry Reid, Senator Dick Durbin, and Congressman Barney Frank, among others. Photos of Bean posted online show him flying on Air Force One with Obama.

Of course, Mr. Bean is presumed innocent until proven guilty. But I would bet that a lot of politicians are thankful that the mainstream press has not pursued such a sordid situation. More details from the story can be accessed at the USA Today website at:

http://www.usatoday.com/story/opinion/2014/11/20/kiah-lawson-terry-bean-human-rights-campaign-gay-sex-obama-prison-column/70021560/

2) We have never denied that the obesity levels in this country for both adults and kids, are a major, major driver of the ever escalating nd ahigh healthcare costs in this country. Obesity causes all kinds of health conditions to develop including heart disease, diabetes, joint degeneration, and other maladies, all of which require health care usage and expenditures. This situation is one of the reasons that Obama Care has been and will continue to be a failure in that it failed at addressing this root cause of high healthcare costs. 

In probably its only attempt to address obesity, we have been subjected to Michelle Obama’s fight to force American school kids to eat a balanced meal by dictating what kids should eat in school. Rather than launch a public health initiative to address the need to eat right, it tried to force kids to eat right by dictating school menus. This has resulted in massive amounts of school food being wasted and thrown out and causing school budgets to be strained to comply with the Federal regulations, all for no gain since kids are not eating right anyway.

Maybe her efforts should have been more focused on the bad eating habits of American families receiving Federal food assistance every month via the Supplemental Nutrition Assistance Program (SNAP). Terence P. Jeffrey, reporting for the CNS website on November 22, 2016, discussed the buying habits of people under the SNAP program at a major national food retailer:

• According to a new study from the Federal agency, the Food and Nutrition Service, more SNAP money is spent on soda at the retailer's locations used in the study, a major source of the nation’s obesity problem, than any other food product category.
• A whopping $357,700,000 of SNAP money was spent on soft drinks at the grocer’s stores in the study, accounting for over 5.4% of all SNAP dollars spent.
• This was almost 50% more than what was spent on milk ($253,700,000) and about 75% more than was spent on ground beef ($201,000,000).
• In addition to bad purchases from an obesity perspective, over 3% was spent on bag snacks (e.g. potato chips), 1.54% was spent on “frozen handhelds and snacks,” 1.46% on packaged candies, 1.31% was spent on ice cream and sherbets, 1.19% was spent on cookies, and 1.04% was spent on cakes.
• Thus, over 15% of SNAP money was spent on items that Michelle Obama would have NEVER allowed to be served in the nation’s schools for lunch.
• Compared to non-SNAP money spent, only 11.47% of the money spent was spent on the above listed obesity related food, far below the 15% that SNAP recipients spent at the same grocer.
• For example, SNAP buyers spent 35% more of their budget on soda than non-SNAP buyers and 25% more on bag snacks.

If we assume that this pattern is indicative of overall SNAP purchases, then we can easily see how the SNAP program is inducing behavior completely opposite of what Michelle Obama wants and what is good for the country from a health perspective. 

Thus, as we have often pointed out, the Federal government has gotten so large and out of control that one part of the government is working against another part of the government. In this case, the Department of Agriculture with its SNAP guidelines is causing the exact same type of behavior that Michelle Obama has railed against, soft drinks, candies, cakes, etc. when it comes to our kids’ eating habits.

Obviously, what Ms. Obama should be lobbying for is to make her targeted “bad” foods not eligible for SNAP and taxpayer subsidies in order to reduce the obesity levels in this country. Since in the first eleven months of fiscal 2016 (October through August), the average monthly participation in food stamps was 44,283,586 people and 21,815,990 households, taking soda, cakes, candies, ice creams and bagged snacks out of this process would positively affect a lot of Americans. In those months, the government paid out $61,110,832,720 in benefits. 

It would also save the American taxpayer well over $9 billion, money that could be returned to the American taxpayer or put forth into a real public health initiative to change the overall eating habits of all Americans, not just school age kids. So simple a change and yet so difficult for the American political class to do.

3) We have often pointed out how out of control the Federal government is when it comes to spending. Many times we have shown how the Obama administration has doubled the national debt in just the past eight years, adding more debt to the Federal government than ALL previous Presidential administrations combined. Each American household would have to put out over $100,000 each to cover the debt load today.

But Federal debt is not the only debt load facing every American household. The organization, Truth In Accounting, recently released its periodic study, "The Financial State of the States.” It’s findings are not pretty relative to the debt load that state governments have piled up:

• To pay off their debt loads, state governments need to raise man additional $1,328,204,440,079.
• 40 out of the 50 states currently do not have enough money to pay off their debts.
• The study found that all 50 states have racked up over $2.4 TRILLION in debt but only have about $1 TRILLION in revenue to pay off the debt, leaving the $1,328,204,440,079 unaccounted for.
• This state government debt load comes down to about $13,514 that each state taxpayer would have to put into the pot to pay off the debt.
• New Jersey is the worst state with an unaccounted for debt load of $59,400 needed from each New Jersey state taxpayer to pay off that state’s debt. 
• The total unfunded debt of New Jersey is a whopping $183 billion.
• Other so-called “sinkhole states” with the most debt load per taxpayer are Connecticut ($49,000 per taxpayer), Illinois ($45,500), Kentucky ($33,700), Massachusetts ($33,300), and Hawaii, California, New York Delaware, and Michigan rounding out the top ten sinkhole states, with per taxpayer debt ranging from $18,200 to $28,500 per taxpayer.
• There are ten so-called “sunshine states,” states that have no debt and actually have excess money that if spread across their taxpayers would give each resident of Alaska $52,600, North Dakota taxpayers would get $28,400, Wyoming - $26,400 per taxpayer, Utah - $4,800 per taxpayer, Nebraska - $3,500 per taxpayer, and New Mexico, Idaho, Tennessee, and Iowa taxpayers would get back anywhere from $3,300 to $1,100.

Three major takeaways from this in-depth study:

1. Politicians in forty states have dug deep, deep debt holes for their taxpayers that will require cuts in services, cuts in pensions and retirement payouts, a rise in taxes or a combination of all three acts to stay fiscally viable.
2. According to the study, these sinkhole states have hidden expenses and used accounting tricks to make their state look better financially than it actually is, essentially kicking the debt problem down the road to future generations of state residents.
3. The 10 sunshine states prove that you can operate a fiscally sound state government if you want to.

Always keep in mind that paying off debt does not result in increased freedom, it does not make schools better, infrastructure safer, or state government more effective, it only pays off the errors and fiscal irresponsibility of previous political acts.

State politicians running up uncontrolled debt loads, a government program making Americans less healthy and more obese, and more scandals from the American political class.  More insanity tomorrow.

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

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

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