Government Dependency

New Jersey, Florida, California, Illinois: Canaries in a Coal Mine

“We [Miami] are not the only city, municipality to be going through this. It looks like Los Angeles sometime next week or the week after will be going bankrupt. It looks like there will be 30 more cities following suit.”

May 30, 2010

The Coming Depression - New Jersey Governor Chris Christie said the state is “careening our way toward becoming Greece” and can’t afford the cost of benefits and pensions for current workers.

They’ll be back at the trough next month with yet more deficits. The assumptions they are using for tax receipts are preposterous. These people are incapable of thinking ahead more than 90 days. They all stand there smiling like they have actually accomplished something. It’s pathetic. Republican “spend without regard to debt, because debt-doesn’t-matter” ideology is driving this state into the ground.

Democrats are not doing any better. They want to “preserve the safety net.” The lavish and extensive safety net is what got them into these problems in the first place. You cannot reward laziness. People have said that for decades, but nobody believed them because it never seemed to matter. Now it matters, and they are so blind to the fact that it is the root cause of their problems that no actual solution is logically possible.

California is destined to become the new A-hole of the US. They might even surpass southern Texas for that mantle. California’s problems were created by the huge growth of cheap labour due to extremely high rates of both legal and illegal immigration. It is impossible to maintain or improve the social safety net on the backs of a growing pool of cheap labour. Simple growth produces both a lower per capita tax base and a higher demand for services. Taxes can’t be raised indefinitely to pay for this imbalance.

Is Florida the next Ponzi state?

Gary Mormino, a professor at the University of South Florida in St. Petersburg, tells the writer that,

“Florida, in some ways, resembles a modern Ponzi scheme. Everything is fine for me if a thousand newcomers come tomorrow.”

The state depends on real-estate deals and sales taxes for revenue. By 2005, the housing market in Florida was hotter than it had ever been. Flipping houses and condominiums turned into an amateur middle-class pursuit. Writer tells about Floridians with modest incomes who made money buying and selling real estate. Mentions one case in which a house appreciated in value by almost fifty percent overnight. According to an investigation by the Miami Herald, government oversight of the real-estate market was so negligent that more than ten thousand convicted criminals got jobs in the mortgage industry.

It would be great if we could disagree with the assessment of the good professor from USF but, sadly, he is on target. Many fifth generation Floridians have watched their state devolve into a third world country where the wealthy avoid all social responsibility and the poor bear the burden of the system. This has only accelerated under the rule of the Pubby Boys in our legislature and state house. Everyone demands services, but no one wants to pay for them. Indeed, it is so bad that schools have been deteriorating drastically.

It would be easy to blame those who have moved there, since three of four Floridians weren’t born there; and yet they came for a reason – no income tax, no death tax, low property taxes and regressive sales taxes which place the burden on those least capable of carrying it. It’s probably a good deal for somebody, but it’s a bad deal for the state. It would be admirable to believe Florida will grow up and become a responsible citizenry. But, frankly, this probably won’t happen without severe ‘austerity’ measures and radical changes.

Miami reportedly bankrupt

The city of Miami is in such dire financial straits that commissioner Marc Sarnoff is using the “B” word, bankruptcy.

“We are not the only city, municipality to be going through this. It looks like Los Angeles sometime next week or the week after will be going bankrupt. It looks like there will be 30 more cities following suit.”

Increases in public worker salaries is one of the main reasons why the budget is so tight. The average salary for a Miami city employee is $76,000. The average salary for a Miami city resident is $29,000.

Employee pensions are choking the budget too. In 2000, pension payouts cost taxpayers $16 million. In 2009 that number spiked up to $70 million.

Should the city go into bankruptcy, the commissioners and their politics would no longer be in charge of city finances, the judge would be.

[Sarnoff] “You no longer have 5 people making political solutions. You now have one person who is looking after the best interest of the taxpayer of the city of Miami, without any politics getting into his or her way.”

The Judge could order union contracts be renegotiated. He or she could decide what creditors get paid or not get paid…

Commissioner Sarnoff offers 3 options to avoid bankruptcy:

1. Renegotiate those union contracts
2. Layoff about 800 city workers
3. Raise your property taxes

New Jersey the New Greece

Inquiring minds are reading New Jersey Careening Toward Becoming Greece as Costs Rise, Christie Says.

New Jersey Governor Chris Christie said the state is “careening our way toward becoming Greece” and can’t afford the cost of benefits and pensions for current workers.

The governor, speaking today to members of the Manhattan Institute, said his state must reduce its tax burden and control government spending. He has proposed a constitutional amendment to cap growth in property taxes, the main source of funding for schools and towns, at 2.5 percent a year.

“Higher taxes are not going to solve the problem,” said Christie, a Republican who took office Jan. 19. “We’ve got to change the course.”

New Jersey, like Greece, has a high proportion of public workers who have been entitled to benefits such as free health insurance that outstrip taxpayers’ ability to pay for them, Christie said. In the past decade the state added 11,000 public- sector jobs as it lost more than 120,000 private positions, he said.

Politicians in New Jersey have bowed to public unions for too long, failing to cut teacher benefits and enacting civil-service laws that have tied governments’ hands in trimming workforces, Christie said. Over the last decade, municipal spending has grown by 69 percent, and property taxes have climbed by 70 percent, according to the governor’s office.

The average New Jersey household paid $7,281 in property taxes last year, the highest rate in the nation, according to the state Department of Community Affairs.