Its a pretty sobering time.
"Under the Constitution, bankruptcy is a power entirely reserved to the federal government. An American bankruptcy is overseen in federal court, by a federal judge, according to federal law. That’s why federal law can allow U.S. cities to go bankrupt, as many have done over the years. That’s why the financial restructuring of Puerto Rico can be overseen by a federal control board. Cities and territories are not sovereigns. Under the U.S. Constitution, U.S. states are.
Understand that, and you begin to understand the appeal of state bankruptcy to Republican legislators in the post-2010 era."
https://www.theatlantic.com/ideas/archive/2020/04/why-mitch-...
These pensions and their medical side are the reason why the ACA did not touch golden medical plans because the vast majority are in this area along with certain other larger private pension systems. By the way, the House silently dropped that provision entirely from the ACA in 2019 so they any taxation of them is gone.
My favorite story to fall back on is provided below... and there are other states worse off. This type of largess should never have been allowed nor should the tax payer bail them out. People bemoan the pay of executives at private companies, well guess who is right up there in many cases.
https://www.forbes.com/sites/adamandrzejewski/2018/10/26/ill...
It is also kind of shocking to see how many employees actually work for city and state governments. And of course government workers have a strong reputation for not being incentivized to work very hard or do more than the bare minimum. I would think the bigger opportunity would be to reduce the size of local government payroll rather than lower everyone's salaries.
Related thought - I wonder, why aren't city and state governments more at the forefront of automating menial work away, given the perpetual costs of each worker on the pension system? It seems they'd have a lot to gain from it.
City and state governments don't pay the bills - that's the problems. Any cuts they make will hurt them in elections, so they just kick the can down the road to the next government.
it’s moral hazard
California is no longer a net contributor to the union[1], since SALT reform.
1. https://www.mercurynews.com/2020/04/23/newsom-responds-to-mc...
Also for 4 of the 5 top employers in Texas are oil companies. Oil production is subsidized by the feds. Texas is a taker. They also will all go bankrupt unless bailed out with California tax money.
There is no reason for people in other states to subsidize your California state tax payments with a federal tax break.
maybe think before electing politicians who raise them if youre upset
Funny I never hear the argument from red states "We don't want your federal money for all the poor, sick, disabled, in our state!" considering CA and NY pay WAY WAY more out than they get back in federal money
And it's mostly absurd, because it just looks at net transfers between the states and Feds without realizing who is actually benefitting from that money.
How many small family farms do you think are left in much of the Midwest, who are living high on the hog with government subsidies, as the left likes to imagine?
Is it a transfer to Iowa or Nebraska when the federal government pays out a few billion in farm subsidies, which then goes straight into the pocket of fund managers in Manhattan, sovereign wealth funds, or megacorps who actually own the farms
How bout when Wall Street got bailed out in 2009 to the tune of hundreds of billions of dollars? Do we count that as a subsidy to New York, Jersey, and Connecticut?
Even if the money was paid back, there's no way to calculate the trillions of dollars citizens of other states lost due to perpetually low interest rates or propping up houses in coastal areas at the expense of people living in low COL areas.
There's a dozen other ways we can measure these types of back door transfers, and I guarantee you, it ends up that those blue coastal states are getting a lot of extra subsidies that the silly stats that you guys use ignore.
It's just progressive taxes applied to the entire country, where NY and CA are "the rich" among the states.
After all, a staunchly republican poor individual in CA/NY still gets the same benefits as a poor democrat, because need (not opinions) dictates how much you get. Of course, Texas isn't exactly poor, my point is more relevant to states like South Carolina, Louisiana etc.
Look at the average retiree's 401(k) balance for comparison and it gets pretty clear how unfair this is. There's a huge political opportunity for someone to tell this story properly and get a restructuring done.
I live in a neighborhood with two firefighters who were captains, retired at 50, and make over $100K a year. It's totally unsustainable.
What about the pensions of workers (many unionized) which were obliterated by corporate restructurings during the financial crisis?
EDIT: The often worked much more hours.
To buy an annuity at age 55 worth $100k / year with guaranteed health, dental, long term care, etc. for an employee who's estimated to live another 30 years would cost a few million dollars. A quick Google search shows that the media 401k balance at 55 - 65 in the US is under $75k. The amount of non-guaranteed dividends, cap gains, and withdrawals made to ensure it lasts 30 years would probably not even cover the cost of Obamacare from 55 to 65 when they're eligible for Medicare.
The deal that was struck was between the government workers and the voters at that time. That deal, more or less, said that future tax payers would pay for their pension. As a group, those then future and now present tax payers don't have much of a moral obligation to follow a deal that they never agreed to. And the workers don't get to act indignant that their pensions are in question. Their unions negotiated the agreement and chose to let the buck be passed instead of insisting on pensions being fully funded.
The bargain was, at least in part, corrupt. The various public unions would campaign for and help elect those that would give them more money. An obvious conflict of interest that raises questions on why a shady deal should be upheld.
The pensioners are, in general, gaming the system. They artificially inflate earnings at the end of their career to pump up their pension. Nepotism is rampant and there are plenty of positions with absurd salaries for what they do. They've sold out new entrants in their field to protect their own pensions. In general they're a bag of dicks. Fuck them.
I've heard this claim many times before. Is there data supporting this or did a handful of people do it and word spreads like it is far more common that actual.
Pension spiking could cost CalPERS nearly $800 million
https://www.latimes.com/business/la-fi-pension-spiking-repor...
Now it comes time for due, we don't want to fund these anymore.
The entitlement in HN is just too much.
what about the police, fire department?
(This is true for all dangerous professions, BTW - not just law enforcement and medical personnel.)
There are outsized risks involved in both occupations.
I live in DC, and at my age many professionals who don't really have any lucrative skills or degrees are now hitting the 6 figure club in late 30s as GS13s. They'd be making less working at some private company without any pension, longer hours, less vacation, and worse benefits, and no guaranteed promotions.
In this town, a lot of people would be more than happy to get a nice office job working for the Federal Government, but it's not that easy anymore unless you're a certain special minority or other who gets pushed to the head of the line.
I didn't realize I was signing up for an "unstable retirement" by working in the private sector.
Perhaps you mean "stable jobs", which indeed was historically supposed to be biggest selling-point of govt jobs, and the trade-off for lower pay. Though now when you count benefits, apparently they get the best total compensation too.
On one hand, it's just part and parcel of politics, but there needs to be some kind of counterbalance to this. Maybe a taxpayer revolt would fix it?
The people who agreed to this never wanted to fund them in the first place. If they had, they would have increased taxes or reduced benefits. Instead, we are seeing guaranteed 3% pension increases annually when inflation is <2% and rosy projections about 8% stock market returns when in practice it's more like 5%.
They are asking for help due to hundreds of millions lost in tax revenue.
"71,000 public employees at every level of Illinois government received six-figure paychecks. Additionally, 23,000 retirees pulled down more than $100,000 in annual pensions."
There is nothing to applaud with his actions or statements. It’s just malicious and gives the rest of the world a chance to out compete America.
One fix would be to require that all future obligations be funded up front. Make the pension as generous as you like, but deposit the cash now. If you invest the money and do well, the state can just keep that, but don't assume positive returns.
Perhaps our political culture has changed and people used to be more honest, or far-sighted. But, given the world we live in today, especially given the pressure state and local governments are under, I think there really is no other option than a fully-funded 401(k)-style defined contribution plan, to finally force the issue into the open. There are plenty of well-managed 401(k)s and it's the only way to get "cash on the barrelhead" that keeps everyone honest, and doesn't allow the sort of absurd can-kicking so many governments (and their electorates) have favored for the past 30 years.
The problem is that this was not properly budgeted for when funding the pensions.
Give me a break.
If we're lucky, we find out about these things when a government changes hands and an audit is conducted - typically years after the fact. Also, one can start one's career under a sound system that is eroded through mismanagement.
A lot of the people who have these pensions took the jobs before google even existed, so telling them they should have googled this is ridiculous.
When the folks making crazy promises are dead and/or gone by the time their promises are broken when the funds come up short, the workers who took the good deal are left holding the bag.
We must retroactively assign blame to the worker who was lured into accepting obvious false promises. It is perversely the most compassionate thing we can do: blame and shame past workers for making stupid deals. We do this so that future generations will learn the hard lesson that governments cannot be trusted with their investments. There is no power in investment.
Blaming past politicians for their malfeasance is exactly how we enable today's politicians to keep kicking the can down the road.
That is no longer the case when compared with comparable private sector jobs since at least the early 2000s in many parts of the country.
The Federal government can easily tax /discredit those wealthy pensioners to fund unemployment insurance, if they do choose.
Airlines? Of course. Junk bond investors? Sure, why not? States? "We're not going to bail out Democratic-run states."
Now we have this bloc of red states in the South who are backward, racist, intolerant science deniers, and they've managed to get just enough on the winning side of the electoral map to make the advanced, multicultural, cosmopolitan science-respecting blue states' lives miserable.
That chunk of states should be a separate country. Then they can go their own way and the rest of us can carry on without them.
For example, take a useful look at CityLab's Congressional Density Indicator [1]. There are zero "pure urban" districts that are represented by Republicans, regardless of the state (red, blue, purple), and there are nearly none among the "urban-suburban mix" districts (again regardless of state).
Viewed through yet another lens, by percentage of landmass, Alabama is more is more "blue" than Illinois and Oregon [2]. Your characterization could use a little more thought and refinement.
[0] https://www.niskanencenter.org/wp-content/uploads/2019/09/Wi... (see section beginning page 12)
[1] https://www.citylab.com/equity/2018/11/citylab-congressional...
[2] https://www.nytimes.com/interactive/2018/upshot/election-201...
On the other hand, I really like the idea of splitting apart the country in a way that frees most of us from a large enough number of the people who are holding us back. I don't think that's possible to do in a fine-grained way. It only makes sense if done for some large contiguous regions. And the states in the southeast who actually did try to break away a few generations ago seems like an obvious way forward with that.
Here is another look at some of the natural regions within the country: [1]
I'm also aware that changing the voting systems we use holds a lot of promise for some of the same underlying problems we're talking about, and am completely open to that as an alternative to, or in addition to, my suggestion to break up the country. But that too seems very difficult politically.
[1] https://www.nytimes.com/2016/04/17/opinion/sunday/a-new-map-...
I'm not a political scientist, but at some point the increasingly larger 60% of the population is going to take this country back. I hope they're able to do it without a war.
Humans are happier if they're grouped together with their own tribe, and not with other neighboring tribes they don't identify with. In this way it's like some of the problems in Africa and the Middle East where the groups there had borders imposed on them that didn't follow this simple principle.
If each state has its own version of the CDC (and other similar agencies), then that's fine, but they also need to have a lot more sovereignty over things like (in this case) being able to close their borders to neighbouring states whose agencies may have come to differing conclusions about what measures are needed.
Commerce Clause of the US Constitution stands in a way. It (the Commerce Clause) has been a bedrock of the federal government pushing through progressive policies onto the states.
If you live in a house of five and each person buys their own groceries and cooks their own dinner, it does not matter how you scrimp and save. It is still cheaper on the whole to buy raw ingredients for dinner and make it for five people. The cost goes down dramatically>
Yes there is a CDC in every state. It would be utterly ludicrous spend of cash to have an independent, not cooperative CDC in each state attempting to manage and solve the same problems.
This makes sense, but what about one level up? I live in an apartment building, and in our building each family buys their own groceries and cooks their own dinner. It does not matter how much you scrimp and save, it is still cheaper on the whole for the building to buy raw ingredients and make dinner for all families. The cost goes down dramatically.
This also makes sense, but what about one level up? If each building buys groceries and cooks dinner for all of their homes, it does not matter how much they scrimp and save. It is still cheaper on the whole for the entire city buy raw ingredients for dinner and make it for all of the buildings and their families. The cost goes down dramatically.
This also makes sense, but what about one level up? If each city buys groceries and cooks dinner for all of their buildings and homes, it does not matter how much they scrimp and save. It is still cheaper on the whole for the entire State to buy raw ingredients for dinner and make it for all of the cities, their buildings and their families. The cost goes down dramatically.
This also makes sense, but what about one level up? If each State buys groceries and cooks dinner for all of their buildings and homes, it does not matter how much they scrimp and save. It is still cheaper on the whole for the entire Union to buy raw ingredients for dinner and make it for all of the States, cities, their buildings and their families. The cost goes down dramatically.
This also makes sense, but what about one level up? If each Union/country buys groceries and cooks dinner for all of their buildings and homes, it does not matter how much they scrimp and save. It is still cheaper on the whole for the entire world to buy raw ingredients for dinner and make it for all of the nations, States, cities, their buildings and their families. The cost goes down dramatically.
We both agree that at some point, this stopped making sense. The question is: is an ideologically divided Union of 330 million people across 50 states with their own Constitutions and governments equivalent to a “house of five”?
The current system is effectively all 50 states in an eBay-style bidding war over the same limited resources.
https://www.fsis.usda.gov/wps/wcm/connect/fsis-content/inter...
No EPA. No DOE. No equality under the law. No EOC. No NLRB. No Amtrak. No federal enforcement of consent decrees. No voting right act. No gay marriage, etc?
Edit: Thanks for downvotes. Every single one of these is enforced by federal and not state courts. It is federal court that gave us Roe v. Wade, for example. It is a federal court that prevents Alabama from running its own little fiefdom. It is a federal courts that gave us Brown v. Board of Education.
But alas, one of those founders, Jefferson, argued we should rewrite the constitution every 19 years.
And another founder, Hamilton, argued that ambition must be made to counteract ambition. And that government is a reflection on human nature, most directly its citizens. https://avalon.law.yale.edu/18th_century/fed51.asp
Politically, it moderated him significantly. He started off as very pro-revolution, pro “watering the tree of liberty with the blood of tyrants and patriots”, and by the end he ended up regretting France not shifting into a constitutional monarchy. This is after both witnessing The Storming of the Bastille in person (he was an ambassador then), defending the September Massacres[0], and knowing quite a few people who were executed during the terror.
There is a comfort that comes from the instability of party switches. The parties don't cooperate, which means less can get done. Anything that puts anyone in an area where one of the gangs of politicians can actually do something, is to be avoided. We've learned that the hard way in Wisconsin.
As a general rule, it's always best to split up your government as much as you can.
Your strategy is one guaranteed to ruin your country.
This opinion requires a great deal of justification.
The book American Carnage is a fantastic deep dive on this (and extremely fair and even-handed, despite the bombastic title).
If "that" is the cause-effect relationship claimed above, no we are not "seeing" this right now. There is a huge difference between events and the narratives, accurate or otherwise, which some people use to explain those events. The system under consideration is insanely complex, with an immense list of causal factors at play. To me, in my opinion, it's obvious that the causal relationship described above is at best a tiny contributor that is, itself, dependent on other factors also being present. At worst, it's completely wrong and a distraction from understanding the real causes.
Now there may be a point of diminishing returns. As in 5 parties are as good as 10, are as good as 15. But that's an academic question, and we're not even at 5 parties yet.
On the other end, maybe 500 parties is self defeating, as you say. But we're nowhere near that either.
On the other hand, too many parties becomes unwieldy, and I'd argue that 10 is already going to be too many in practice.
Historical experience in the early 20th century led many countries to develop minimum bars, e.g. parties with fewer than 5% of the vote not getting any seats in parliament.
At some point, those taxes would be so high, people would start leaving the state, and at the point of bankruptcy, the state would be a ghosttown.
A law would have to be passed and there would probably be a challenge to it that would eventually go before the US Supreme Court.
If that's so then he's had plenty of opportunity to make that known. Based on the media frenzy around this, it's quite clear that he meant and continues to mean a literal, actual, non-sarcastic bankruptcy.
I think the advocates for reopening the economy vastly overestimate the ability for political leaders to do that via dictat.
We just fired our cleaning crew this morning and cut hours for the entire shop floor. We are a mid-size, midwestern diesel repair shop similar to Western Truck Exchange. I used to just do valve work and major overhauls, now I carry garbage to the dumpster and fix the copiers in the front office too.
>alternative work is limited
non-existant out here really, but the real thing no one seems to be covering is crime seems up. We had two break-ins this month, one stole all our nitrile gloves, another took our air conditioner and a tool box.
>the unemployment systems in many states are either broken or running out of funding.
LOL this is a massive understatement. I applied a month ago for limited unemployment and got a voice message telling me the system was overloaded after I had completed the 40 minute call. the next day the line didnt even answer and the website was still down two weeks later. I finally stood in line for an hour at the unemployment office to be told I had to call the number "when it comes back up." Oh, those Trump Bucks? the $1200? Not me or a single person ive talked to has gotten that money.
>the federal governments indicated desire to let blue states go bankrupt
Just the blue ones? I'm in a red one and so far its starting to feel like we're all up shits creek. The local Sheriff wanted us to do oil changes on their patrol cars because we're part of a city contract for fire truck maintenance and they dont have the budget for regular service anymore. the motor pool for the county just cancelled their snow plow rebuilds, the county schools cancelled their bus maintenance and wanted to know if we would buy about 15 of them. The local water company asked if we could do their pump house generator maintenance on a net 120 or a payment plan.
>a depression.
I remember living out of my truck during the 2008 financial "downturn" and freezing all through November. I think the government may be vastly over-estimating the social credit they have with the people of this great nation if they think another round of "austerity" is going to sit right with us while all the banks get bailouts and the rich get richer.
That's awful. In Canada, most people got their CERB money within a week. It took 2 days if you already had direct deposit info on there. Some people are refusing to go back to work after the relaxed lockdown because the CERB is more than they make working a few shifts a week.
It's a bit frustrating that part-time workers are getting more than if they would work, but I'm happy that everyone is taken care of.
The Canadian move is, unsurprisingly, more forward-thinking than the usual US sleight of hand thing. But I wonder, in these conditions, with minimal incentive to come out, isn't the CERB inflating $CAD?
Has there ever been a time in US history that the federal government has been so openly antagonistic and overtly willing to attack opposite-party state governments? If so, what were the outcomes? If not, is there anything even close?
Current question - what is the endgame for those who what blue states to go bankrupt? What do they get if that happens, outside of talking points? I assume they profit off of it (because that's the reason anyone does anything that I can tell), but how?
Hah, this really puts it into perspective. Despite how bad things are now, it's not 1865.
Today's politics are positively gentrified by comparison.
GOP knows they're gonna lose the election. They want to hand the dems the worst economy possible.
Then, 4 years down the road, they can start campaigning against "do-nothing-dems" and point to the horrible economy they had to start fixing.
At the same time, we can't have this, "the world ends", at the end of every GOP administration either. So we really do need to fix this.
The alternative is we get some different parties, and I've seen little to no indication of that happening. The other parties have neither shown an ability to evoke a response large enough to get elected. Nor have they shown an ability to govern even in the extremely unlikely event that they were elected.
For the foreseeable future, we are stuck with the dem-rep dichotomy. Which can work. We just need for the reps to stop running the nation into the ground when it's their turn. Other nations have shown us that reasonable and effective responses to the pandemic were possible. Why are we here? What is the set of missteps or issues that got us here? We have to identify those issues, and fix them.
I just moved to California so I don't have too much of a personal opinion yet but that sounds like a bold claim. From what I've seen, people over the age of 30 seem split on whether or not it's an improvement. You look at mismanaged cities like SF where there's insane homeless budgets but very little action and results and wonder if the monopoly on political power has made politicians here complacent.
Then there's the whole NIMBY thing. There's a whole lot of Democrats (arguably DINO's) that are very anti-building. They run under the Democrat banner so they'll probably keep getting re-elected. Obviously a solution here is people getting involved in local party politics to primary these candidates out, but that sounds like a miracle that'll happen as soon as we get nuclear fusion power plants.
The whole thing makes me wish 3rd party candidates were more viable in the US. This flip-flopping really sucks and creates a lot of chaos but political monopolies, from what I've seen, are able to hide mismanagement and bad policies really well. (Texas is probably a similar example from the other spectrum.)
Homelessness is an infinite money sink coupled with very problematic civil rights issues. It takes a unified effort at the federal level when states are willing to just ship their problems to other states. It also requires a unified effort at healthcare--both physical and mental. Nobody has come up with a good solution to homelessness yet--anywhere. If you have one, put it out there as lots of governments are desperate for a fix.
While NIMBY is bad irrespective of party, the YIMBY movement only started gaining traction once the Republicans were purged as the NIMBY movement could COUNT on them as a unified bloc of obstruction. And, as for NIMBY, renters outnumber property owners, yet don't show up to vote. Well, then what results do you think you're going to get?
As for Texas, it isn't as uniformly Republican as you think. The major cities are gaining significant Democratic representation (the Republicans just banned straight ticket voting because it destroyed them in Houston last cycle). You can also see this in the Covid-19 response--the mayors for big Texas cities almost uniformly shut down--Austin declared very early in order to avoid the disaster that would have been SXSW.
Yes, the gerrymandering in Texas is horrific, and the areas outside the cities are as stupid red as it gets. However, Texas isn't as unified as you think--in spite of the human-shaped Senator known as Ted Cruz.
To a first order approximation, the majority of homeless are simply residents who lose a job or can't earn enough money, can't afford their rent, and end up on the street. Making a lot more housing available so it's not so impossible to afford is clearly an important part of the solution, which we seemingly can't do as long as progressive democrats are in charge.
[0] https://www.nytimes.com/2019/11/06/us/homeless-population.ht...
Some chunk are from out of state. Some chunk are mentally ill. Some chunk are addicted to drugs. Some chunk have physical ailments. Some chunk are fleeing abuse.
This is what makes homelessness so intractable. Even if you fix a chunk, that's probably less that 20% of the problem. Now, you've spent a lot of money, made no visible progress on the problem, and have a bunch of people clamoring about how you wasted money.
This is because of Democrat-voting people leaving Democrat-led states and cities that are no longer functioning well. If their policies worked, why would they leave (for example) CA in record numbers to move to TX?
Rent control, nimbyism, etc all backed by the current government have made the housing market a hellscape. Nothing has been done to address the education system and huge pension liabilities either.
The issue with Democrats in charge without any meaningful opposition is that none of the Democratic radioactive stuff gets touched (excessive regulation, entitlements, etc).
> Rent control, nimbyism, etc all backed by the current government have made the housing market a hellscape. Nothing has been done to address the education system and huge pension liabilities either.
Rent control and Nimbyism is not new in the last 10 years in CA. In fact, rent control in the state is less strong than it was in the past.
So you can't directly blame those for changes in the last 10 years.
What's changed in the last 10 years? A lot of incoming migration into high-paying jobs. And it largely sucks for everyone but those new residents who are making more than the existing residents. People who make less are increasingly starting to leave, but not enough to make a dent compared to the influx of newcomers with money. If you have money, you're still more likely to move to CA than away from it.
You think if all those people were wealthy Republicans instead of Democrats they'd be less-NIMBY? Right-wing suburbs in the rest of the country are NIMBY-central.
The question is if California is soooo bad. Why are smart, intelligent people coming here? Why does capital still invest here?
Part of the answer is other places in the US are slowly failing. So many of the problems have to due with California serving as a refuge from failed economic and social policy in other states and countries.
California is being propped up by the tech industry because historically the biggest tech companies are headquartered here, which caused all the talent to be clustered here, and then new tech companies were forced to be here to attract that talent. Obviously, smart, intelligent people move here because jobs are here, and capital invests here because talent is here -- but things are changing quickly and other cities are becoming tech hubs.
If these other states have such "failed economic and social policies", why are so many people moving there?
The worst will be when Californians move to other states and then vote for policies that ruined the place they just fled.
[1] https://www.ocregister.com/2019/10/31/190122-more-people-lef...
The state is bankrupt. It funds healthcare for illegal immigrants while being the only state that forces a fee for lack of health insurance for US citizens. It has the highest homeless population and wealth inequality with declining economic mobility, ballooning cost of living, and generally worse overall quality of life compared to other major metros.
If you think that is what the Republicans are doing each time it's their turn, not sure there is much hope in changing that pattern.
After all, they clearly think they are not running the nation into the ground when it's their turn.
Or another party will rise to power, and one of the current powerhouses will fade away.
It might be straight-up politics. But there is a real situation where state governments have been financially mismanaged. Should the "working class" person in Alabama without any retirement prospects be forced to bail out (via the Federal Gov't) the state of California's very generous pensions that were not fiscally sustainable in the first place?
The answer is of course not, they are states populated by real people who live under the laws and economic system of the United States Federal government. The government should ensure that all people are entitled to enough funding to provide opportunity, health and justice. We don't just leave people to suffer regardless of who they vote for. At least we didn't used too.
Hypothetical example: The DoE wants to build a supercomputer from XBox 360s (ASCI RRoD). They select UNM as the lead contractor and write a check for $101M. UNM buys $50M in XBoxes from MSFT in Seattle, and another $50M for compilers and professional services from IBM in Armonk, NY. Did NM get $101M for their taxes, or $1M?
I'd bet on it not being used on R&D. In fact, I'm betting most of that money never even leaves the state of New Mexico. Those contractors building roads aren't being paid with monopoly money.
I could be wrong, but I doubt it.
That's one of the reasons I'm such a big proponent of lower taxes. The tax resource allocation scheme is fundamentally unfair as currently structured. There are other reasons I support lower taxes, but you don't want to get me started.
I would say yes since the brain drain California has cost on other poor states has been significant.
Multiple citations needed. Alabama takes back a lot more than they pay into the federal government (CA not so much). It's easy to appeal to the "working class" people, but those people have been getting much more federal support relative to what they pay in, while states like NY pay in substantially more than they get back.
If there weren’t any blue states around to sign the red state welfare checks, they’d be in a pretty poor position.
https://www.mercatus.org/publications/urban-economics/state-...
Good read on the matter:
https://www.theatlantic.com/business/archive/2014/05/which-s...
The Federalist has done an analysis of federal aid per resident:
>Against a national average of $1,935 in intergovernmental spending per American, red states receive just $1,879. Blue states get considerably more, at $2,124 per resident. Purple states see the least of their money returned to them per capita, at just $1,770. Measured in this way, the blue states are getting quite a bit more than the red or purple.
https://thefederalist.com/2017/11/17/red-states-tax-takers-b...
Never lived there myself, but I know for a fact they're consistently in the top 5 of contributors to the federal kitty of all states both nominally, and per-capita. They get almost nothing back compared to what they put in. They are, arguably, the largest contributor to the nation if we're considering individual burdens. And a top 5 contributor by outright total aggregate tax contribution.
Illinois and New Jersey, by total outright tax contribution, are also consistently in the top 5 of states that contribute to the federal government. (And I'm from Wisconsin. I hate Illinois. But facts are facts man.)
Hate to tell you, but your source is bogus as far as analyzing the biggest contributors to the national kitty.
Paying out a lot more to the federal government than they receive back does not mean these states are doing well and others poorly. It really just a natural consequence of having a lot of high earners in a progressive tax system. The states in question have been racking up huge amounts of debt and/or have underfunded pensions funds, which is why they are consistently ranked lowly in terms of fiscal health. I am a little surprised you had you not heard of the financial problems coming out of Illinois, New Jersey and the like? There's even a dedicated Wikipedia article:
Sigh.
Even if we look at a list of states by GDP, Illinois, New Jersey, and Massachusetts would still be perennial top 10 states. Even a list of states by GDP per capita, they all still are perennial top 10s. Per capita, I would bet that Massachusetts is number 1? (Maybe NY might edge them out? But I'd definitely bet they're number 1 or 2.)
Listen man, I don't even like Illinois. I hate Chicago. But facts are facts. They make a $#!t ton of money. And not the easy way doing financial engineering like New York. They do it the hard way with a huge diversified economy. Few states are like that. It's just a fact man.
Are you going to say that GDP is not a good indication of what a state produces?
Do they? I'll grant you that nobody wants to live in Kansas. It had a net migration of −4.32% between 2017-2018. But California doesn't fair much better at −3.95%. People are also fleeing Illinois, Connecticut and Massachusetts (all in the bottom 5 as give by Mercatus) in record numbers.
https://en.wikipedia.org/wiki/List_of_U.S._states_and_territ...
As people leave these state, it certainly does impact their ability to raise revenue, and this is compounded by how many blue states rely on progressive taxation.
>I mean, the fact that Kansas is so high on this list should tell you all you need to know.
But Kansas is a special case. Their pension funds were crippled by particularly bad mismanagement and corruption. The question you should be asking is why are the other bottom 5 blue states?
If pensions or any other specific things are mismanaged - which IMHO is in fact the case in California - let's fix them together.
I dunno, that feels like that kinda matters, too.
There's a caveat here that the Federal laws will need to change a bit to allow States to go into packaged restructuring. And to ensure that we are bailing out specific individuals to ensure that they are not too negatively affected.
One of the strongest arguments against "bailouts" of large corporations is that it negatively impacts price discovery. More specifically, it removes a company's ability to thrive in certain extreme conditions from the pricing equation entirely. An example: Amazon is at all-time-highs right now, and it's because it's proven itself to be a hugely important institution, both during wartime and peacetime. Its market price should reflect this value. Airlines, OTOH, are an institution that can be prone to failure when some things go wrong (exogenous or otherwise), and the price should reflect that. A theoretical airline doing $1B in revenue should be worth less than a theoretical Amazon doing $1B in revenue, even if both have identical profits, growth, balance sheets, etc. The net effect of this is inefficient and poor capital allocation, where more capital would be allocated towards airlines than warranted, and that capital could be allocated elsewhere in more productive / less risky endeavors.
This may come across as overly fundamentalist about the market, but where this really manifests is in the Fed's bailout of junk bonds, which is absolutely nuts. The whole point of junk bonds (I.e. the type of a loan that WeWork would have to take) is that it's default risk is high, but the yield is also high. If junk bonds are bailed out, then that means that we all ought to go and buy junk bonds. High yields for everyone! The Fed is going to bail you out no matter what. This, then, overly inflates the demand (and price) for junk bonds, and you now have a total capital mis-allocation, with a lot of capital going into AirBNBs and WeWorks of the world, rather than the Amazons of the world.
How does this relate to States? Taxation is the price we pay to live in a society, and States are a really underrated way we can accurately come up with the correct "price" for the correct basket of services society might offer. This is the Charles Tiebout school of thought. Bailing out states with shitty fiscal policies is 1) a moral hazard and 2) messes with the long run calculation of the optimal level of taxation.
Okay great, so then what happens if we just let States "fail", like we might let Corporations fail? If we allowed States to declare bankruptcy, the bond-holders won't get paid, and the State credit ratings will shift to reflect their true creditworthiness. In this regard, bailing out bad States is no different from bailing out junk bonds — the only difference is that today State bond-holders don't know that they're holding onto junk bonds — most States have a generally high credit rating (except Illinois, because, well lol)[1]. The only mechanism we know of for the system to correct the ratings of these bonds is to 1) let States relieve themselves of their debt obligations, and 2) organically allow the bonds for those States to become more high-yield.
You might argue that this makes it difficult for States to fund infrastructure projects and safety nets. Yes, it makes it difficult to finance projects in the short run, because the bond failures are reflective of the quality of the current governance. Who comprises the government, who is running things can change democratically — if citizens want more infrastructure projects / better development, they will have to vote for better policies and better representatives. It's the democratic equivalent of swapping out the entire executive team at WeWork with the executive team at Amazon. The alternative is that you never see these governance changes at the State and local levels, and you have the same problems in perpetuity because the same people are always in power, and we never learn from mistakes — institutional rot. Better governance might be to restructure bad pension systems, or raise their own State taxes (IMO State taxes are far too low).
TL;DR — the best argument for letting States go bankrupt is that it's an effective way to weed out institutional rot in the long run, and come up with the optimal level of taxation for the optimal basket of State provided services. Such a scheme can only work if individuals continue to be bailed out so that they are not caught in the onslaught.
[1] https://en.wikipedia.org/wiki/List_of_U.S._states_by_credit_...
This is a great ideal, in theory, but the flip-side of it is that in reality if we don't have any sort of negative consequence for unsustainable policy-making, you have a moral hazard, and institutional corruption and rot. Heaven knows there is a lot of that at the State and local level. You ultimately need some creative destruction in the long-run to ensure that we have the best possible governments. I heavily caveated that we must make sure that, in the short run, the poorest are taken care of. Insofar as one would be in support of allowing States to fail in a "good faith" way, it would be if the Federal policy ensured that the poorest among us are bailed out and taken care of in the short run.
> These same states (often blue) have higher taxes to fund their barriers to entry with surpluses that give them the capital to weather aberrant situations like these.
Sure, and a lot of Blue states will be fine and not have to go into packaged restructuring / bankruptcy. For a lot of States (both Red and Blue), the most worrisome line item is the defined-benefit pensions — they promise a certain return that has never happened and will never happen. These pensions will _never_ be solvent. Most people in Illinois under the age of 50 know that they will probably never see a dime of these pensions, and that's terrible. You would want to push States to more sustainable pension systems, maybe a Sovereign Wealth Fund like Singapore / Scandinavian countries, or just raw publicly funded 401(k)s. If those same pension plans instead put the annual contributions into the S&P500, they would have been more solvent than they are today.
> In addition, it is difficult to argue that constituents will vote for their economic best interests if social issues are more top of mind in redder states.
I mean, you have to let constituents look out for themselves in a democracy. If they don't vote in their economic best interests, then that means those societies favor different outcomes. All of these states have republican forms of government with checks and balances to ensure that democracy doesn't turn into mob rule. Letting Blue states go into bankruptcy might even be better off for Blue states and worse off for Red states, but the underlying idea is that we need to let States test out different approaches to welfare and infrastructure and prevent long-term institutional rot.
> This will only exacerbate the problems without a federal solution in place.
Yes, hence my caveat to bailing out individuals.
States pay first responders - medics, firefighters, police, teachers - fund projects, and invest in their communities. State governments themselves employ huge amounts of people. They fund homeless shelters and food banks and all sorts of public services. It would be incredibly harmful to these communities to have their support systems that they depend on removed. Not to mention not being able to pay first responders during a crisis. Hows that for a moral hazard?
I also do not see how your post addresses the fact that blue states are overwhelmingly net contributors in federal taxes, and how red states are overwhelmingly net takers. It seems like it warps your view of price discovery, since the government has for decades guaranteed the bond prices of red states. The consistent federal allocation of tax money towards the everday failure of red states totally discredits your theory weeding out "institutional rot" during a crisis, and of optimal taxation.
Taxation and economic performance are essentially the 2 core predictors for any political entity's prosperity. This is true of any nation in the world, from Germany, Denmark, Belgium, France, the Netherlands, Sweden, Finland, Estonia, etc. The core thesis is that we want States to be as prosperous, if not more prosperous than those countries. There's no way to get there without digging ourselves out of the fiscal hole — or if you believe in it, MMT. And unless we totally swap out the governing decision-makers responsible for digging States into the fiscal hole in the first place, this will keep happening again and again. It's the same reason bailing out big banks and corporations is also bad.
> States pay first responders - medics, firefighters, police, teachers - fund projects, and invest in their communities. State governments themselves employ huge amounts of people. They fund homeless shelters and food banks and all sorts of public services. It would be incredibly harmful to these communities to have their support systems that they depend on removed. Not to mention not being able to pay first responders during a crisis. Hows that for a moral hazard?
Going into bankruptcy doesn't change any of this, it just means that they get to keep the funds that they borrowed in order to pay for all of those things without having to pay back bond-holders. The bond-holders lose. Then the next thing that happens is that the credit rating falls, and they would have to pay higher interest rates on future bonds. This is definitely painful in the short-term, but institutional investors will continue to have some appetite for higher-yield bonds for near-term projects. In the long-term, credit ratings can change if the people of a State elect better leaders, and the State can take out lower interest-rate bonds. California had a BBB credit rating in 2003, and through strong leadership and good policy, raised their credit rating up to an A+ rating in 2006.
Additionally, States can also raise revenue by raising taxes. State taxes are awfully low. Those services, while good and important, aren't free — and their societies need to pay for them through sustainable taxation. The marginal income tax rate in the US is lower than it was in a lot of the 20th century — Illinois, California, New York, etc can all raise taxes to fill in that void. In most European countries, the middle class income tax rate is what pays for most programs, and is far higher than the middle class tax rate in the US. Another avenue that States can look into.
> I also do not see how your post addresses the fact that blue states are overwhelmingly net contributors in federal taxes, and how red states are overwhelmingly net takers. It seems like it warps your view of price discovery, since the government has for decades guaranteed the bond prices of red states. The consistent federal allocation of tax money towards the everyday failure of red states totally discredits your theory weeding out "institutional rot" during a crisis, and of optimal taxation.
Yes, fiscally irresponsible Red states should also declare bankruptcy, and all of this applies to them as well. 2 things can be true at the same time: we should ensure that there is a mechanism to weed out long-run institutional corruption/rot in both Red and Blue states, and we should also reduce transfer payments from net contributors to net takers. If there is a net contributor that ends up having to go through bankruptcy restructuring they should be able to use their surplus to weather the short-run fallout.
There are a bajillion different variables that go into how we price corporations / assets in a decentralized way. This includes basic stuff like revenue, margins, balance sheets, growth, but can also include macro risk, which political party is in power, the current weather, etc. Apple isn't worth $1T because some schmuck decided it was worth that much, it's worth that much because we all play some part in the price discovery. When you remove some of the variables from this equation, the price becomes less reliable (mis-priced assets).
You might argue that it doesn't matter for most assets like airlines, and you'd probably be right about that, but there are certain types of assets like junk bonds where this has more negative consequences in the long run. We've been mis-pricing junk bonds to the degree that, at a macro level, there is way more capital being allocated to bad companies with poor fundamentals than there should be. We want more Amazons, Stripes, and Shopify's, and fewer WeWorks and SoftBanks.
States are similar, you have some States that are incredibly well run (Massachusetts, Washington) and some that are very poorly run (eg Illinois). We need some mechanism to nudge poorly run states in the right direction, and encourage well run States to keep doing what they're doing, and more.
Bottom line is that they want rich people (their primary donors) to get richer and don't care about poor or middle class. They are very open about it now and still somehow supported.
This is a good read on it:
https://www.theatlantic.com/ideas/archive/2020/04/why-mitch-...
Can states (or municipalities) not declare bankruptcy, and instead default on only the obligations they don't want to pay? That would be similar to how I as an individual can just stop paying one credit card but not the other. Or are those left holding the bag able to sue and force bankruptcy proceedings?
I don't understand this. What is the connection between pensions and union members?
I still don't understand. Surely almost every professional has a pension, but few people are in unions.
Companies used to have things like this - when my dad retired he had several pensions from multiple companies that worked like this. Nowadays government usually uses them to put off paying the full cost of employees.
Mainly pensions are available for state employees, or union members. And for that matter, state employees tend to be part of a union.
Unions are responsible for pensions, and the only people who have held onto them as the 401k has taken over.
Edit: Because I apparently can't reply to chriseaton below - 401k is defined contribution, you contribute $x which is a set amount and non-taxable. Pension is defined benefit; you receive $x, guaranteed, after x,y,z parameters are met (age, years experience, etc). They are not even slightly the same thing. Not even close.
The difference between a pension and 401(k) type plan is that pension is a defined benefit plan and 401(k) type plan is a defined contribution plan.
Which 401(k) plans are you thinking of require paying out to a retired employee if that employee has contributed 0%?
From https://en.wikipedia.org/wiki/Pension:
"A pension is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments. A pension may be a "defined benefit plan", where a fixed sum is paid regularly to a person, or a "defined contribution plan", under which a fixed sum is invested that then becomes available at retirement age.
The common use of the term pension is to describe the payments a person receives upon retirement, usually under pre-determined legal or contractual terms. A recipient of a retirement pension is known as a pensioner or retiree."
A 401k is a savings account, not a contractual obligation, so that's why it's not a pension in common usage.
If you plan to spend it when you're retired then it's a pension!
This is significant because the risk is on the employer to make up any short falls if the pension fund is not able to pay $Y because of market performance or underfunding. A 401K shifts the risk to the employee. If it's not enough to provide $Y per year, that's the former employee's problem to deal with.
Then I guess my savings account is a pension too as well as the jar of small change I keep on the kitchen counter.
Currently most of non-union ( and mostly non-government union ) employees have a defined contribution plan. A worker contributes a specific amount every year, a company matches some amount of workers' contribution. At the retirement worker's draw down is limited to the amount in that account. If the account did well. the maximum amount is that can be drawn is large and if it has not done well, it is not large.
Today, very few workers still have pensions, but the few that do tend to be those represented by a union. In many states, this includes government employees: teachers, firefighters, police, etc.
This is why traditional pensions were usually a better deal for most employees.
Exactly it means juicing the stock market, which the fed can do by lowering interest rates etc.
> If you happen to reach retirement age in a down market, you're kinda just screwed.
That's why you're supposed to allocate more of your money to bonds as you approach retirement.
I've never seen a professional job that didn't include a pension - certainly not in the tech industry.
Pensions are defined benefit. That is, it is specified exactly how much money you will receive in retirement.
A 401K retirement plan is not a pension. You save your own money and possibly an employer contribution, and you make your own investment decisions. The value goes up and down in accordance with what you invested in.
Are we both talking about https://en.wikipedia.org/wiki/401(k)?
"In the United States, a 401(k) plan is the tax-qualified, defined-contribution pension"
Vaccination certificates and debt forgiveness incoming? Who knows anymore - what harm is there in being ready?
It's all about the numbers. The first time I went looking for work, I literally sent out 500 resumes. ...had 10 call screens, 4 in-person interviews, and 1 job offer. And that was 1 month after 9-11.
Trump is just a spiteful moron but not even he would let New Mexico, Wyoming, North Dakota, Alaska, Louisiana, Oklahoma, and Kansas all fail.
Ultimately, no one knows what the best strategy is, maybe the 'Swedish approach' maybe right, or not...,time will tell.