America’s Debts 2021: Z1 Data from the Federal Reserve and Related Commentary

Last Thursday the Federal Reserve released its 2021 Z1 data on, among other things, America’s debts.  There is some good news.  Sort of.  For those who are not average workers, not paying rent, not hoping to buy a house, and not hoping to invest their savings for retirement and have it be worth more than what they put in years later when they retire, rather than less.  Total U.S. credit market debt, after having soared from 330.3% of total U.S. GDP in 2019 to 374.6% of U.S. GDP in 2020, a shocking increase, then plunged to 361.1% of GDP in 2021.  It is still higher by 30.8% compared with 2019, and by 192.6% of GDP compared with 1980, before the “buy now and hope someone else will be stuck paying later” era began.  But the 13.5% decrease in debt as a percent of GDP is still the largest since at least 1953.

How was this accomplished?  Did Americans, American businesses, and American governments suddenly start reducing their debts by a massive amount?  Uh – no.  In straight dollars total credit market debt increased 6.1%, financial debt increased 5.8%, non-financial debt increased 6.2%, household/non-profit debt increased 7.3%, corporate debt increased 5.2%, other business debt increased 3.6%, state and local government debt increased 1.9%, and U.S. government debt increased 7.2%.   But in straight dollars, nominal GDP increased by 10.1%, even more, in part due to an expected snap back from COVID-19 shutdowns, but also in part due to soaring inflation.  The Economist magazine said years (decades?) ago that Generation Greed had run up so much debt that the choice was to inflate it away, default it away, or face stagnation for decades as it is paid back.  That was back when total U.S. debts were far lower than today.

https://www.economist.com/special-report/2010/06/26/in-a-hole

https://www.economist.com/buttonwoods-notebook/2013/05/22/can-it-be-inflated-away

No one is prepared to admit that today the goal is inflate away debts (and the buying power of wages and ordinary people’s savings).  Then again, would anyone have predicted 10 years ago, or 20 years ago, or 40 years ago that the Federal Funds rate (controlled by the Federal Reserve) would be at 0.08% at a time when inflation has soared to its highest level since 1982?

Sold Out Futures by State: Debt and Infrastructure for FY 1972 to FY 2019

The federal government just passed a $ 1 trillion “infrastructure bill” that, for a while, will increase the amount of federal funding for infrastructure.  Most of the actual spending, however, will be continue to be done by state and local governments, just as has been the case in the past.  The modest increase in spending, adjusted for inflation, is intended to address a backlog of needed projects.  But federal funding is only one source of money for state and local infrastructure.  State and local taxes are another, and bonds, usually paid off over 30 years, are a third. 

The extent of infrastructure varies from place to place.  In rural areas the only public infrastructure might be a county or town road, supplemented by power supplied by a rural electrification co-op, and telephone and postal service cross-subsidized by those in cities.  Instead of paying for public water, sewer, and solid waste collection, people provide these for themselves.  In cities, on the other hand, there may be mass transit, public sidewalks, airports, seaports, public water, sewer, solid waste collection, and in some places public electric utilities.  So do low-density rural states spend less on, and receive less in federal funds for, infrastructure?  Do states with low past infrastructure spending also have low debts?  How are the estimated $1.4 trillion infrastructure spending shortage and the $3.2 trillion in state and local government debt distributed around the country?  Read on and find out.

New York City Local Government Employment and Payroll: Could That Have Actually Happened?

Over the past few years, and especially during the pandemic, we have heard the same thing over and over again.  New York City public agencies and public contractors can’t possibly provide New Yorkers with decent public services because they are understaffed, underpaid, underappreciated.  And city residents are undertaxed.  You heard it from the cops as crime jumped during the pandemic, and from the teachers who needed more staff for hybrid learning – and now need even more without hybrid learning.  You hear it from the Department of Corrections, the judges, the public defenders and DAs.   You hear it over and over, and rarely does anyone threaten their own career by objecting.  Cheated out of $billions!

So I was shocked to learn that according to Employment and Wages data from the Bureau of Labor Statistics, from 2016 to 2020 New York City local government employment increased by 36,627 (8.1%) while local government employment in the rest of New York State decreased by 35,991 (6.2%).  That New York City local government payroll increased by fully 44.1% in four years!!!  Compared with an increase of 7.8% for the rest of the state.  I checked this against data reported to the Governments Division of the U.S. Census Bureau.  This source reports a mere 7.5% increase in “full time equivalent” employment (full time plus part timers converted to a smaller number of full timers based on hours worked), compared with a 1.1% increase for the U.S.  March local government payroll, according to this source, increased 22.0% for NYC, and 10.8% for the rest of the state.  Despite these differences NYC local government payroll, as measured by the two sources, ended up in about the same place — $40.4 billion for annual payroll based on employment and wages, and $38.8 billion for the monthly Census Bureau data multiplied by 12.  Which makes sense due to raises that might have occurred during the year, and seasonal employment in the summer.

All this makes me wonder – just what have two politicians seeking higher office with public employee union support:  Mayor Comptroller Scott Stringer, and President Governor Mayor Bill DeBlasio, been doing?

The MTA (and New York State and the New Federal Infrastructure Plan): Five-Plus Decades of Investing in the Suburbs and Disinvesting in the City

The era of large-scale federal infrastructure investment, from the 1950s through the 1970s, coincided with the era of suburban development and urban decline.  I don’t think that was a coincidence.  Cities had paid for their own infrastructure with local money, were still paying bonds for that infrastructure, and it was aging. The federal government then paid for brand new, up to date infrastructure for suburbs, and for rural areas that became suburbs, with taxes collected in part in cities, even as urban infrastructure declined.  Federal investment was limited to new infrastructure only at the time.  Most older central cities never recovered, and those that did only began to do so in the early 1980s, after the Reagan Administration cut federal investment and added local flexibility to how it was used.  More of it was then used to fix existing infrastructure, not just subsidize new suburban and exurban development.

Now it is 50 to 70 years later and the infrastructure of the suburbs is aging.  And because of lower densities, and thus more liner feet of road, water pipe, and sewer pipe per taxpayer, it will be more costly to replace with local taxes.  Some in the Strong Towns movement believe the suburbs are facing the sort of infrastructure decline the cities faced 50 years ago as a result. 

https://granolashotgun.wordpress.com/2016/01/12/teachers-pipes-and-pavement/

An issue that will be most acute in private communities responsible for their own local infrastructure, where people live so they can control who walks on their streets and not share a tax base with pre-1960 neighborhoods. Who will pay up when private sewage treatment plants fail and have to be replaced?  Did you hear about what happened at that collapsed Florida condo, where residents had argued for years about paying for fixes before disaster struck?

The older generations who live in these suburbs are used to getting things, but not fully paying for them.  The “I’ve got mine jack,” tax cut generations.  And here we have another federal infrastructure bill, enacted by suburban and Sunbelt Baby Boomers according to their preferred lifestyle, a lifestyle that poorer Millennials cannot afford and the global environment cannot sustain, to be paid for by those Millennials in the future, because most of it going to funded by soaring federal debts. With higher levels of governments (federal and state) making the choices as to how even the future money of city residents will be spent, how will New York and other older cities fare this time?

As an analogy this post will compare the suburban and city projects that the MTA promised in the Program for Action, released in early 1968 when it as formed, with the system expansions and maintenance of existing infrastructure that actually took place in the five-plus decades since.  And go from there.

Taxes & Generational Equity in 2020: An Updated Turbo Tax Analysis of Three Prototypical Brooklyn Couples

It’s tax time, and it has been six years since I last compared the federal, state and local tax burden on two prototypical Brooklyn couples using Turbo Tax and other information:  the Senior Voters, home-owning former NYC public employees who got to retire at age 56, and the Young Hopefuls, a couple trying to get by while renting and working.  Now that the Senior Voters are age 69 and receiving Social Security, and the Young Hopefuls are age 41 (with Baby Hopeful reaching age 15), it’s time to find out what has changed.  

In the past I showed that the Young Hopefuls, despite much being poorer, would pay a much higher percent of their income in taxes.  A large share of those taxes would go to pay for the pensions and senior benefits of senior voters.  When the cost of health care, child care and housing were included, the Senior Voters would have enough money left for a very affluent, high consumption lifestyle.  The Young Hopefuls would have barely enough money to get by, despite matching the median income of NYC households.  Worse, given soaring public and private debts, the Young Hopefuls will not be getting the same benefits when they are old themselves. Poorer than the Senior Voters had been in young adulthood, and also now in middle age, they will be even worse off at the end of their lives, due to deals a generation of senior voters cut with themselves to put in less and take more out.

As a new twist I have added a third couple:  Chad the Private Equity Guy and his new wife Trixie, originally from metro Chicago and the Chicago Merc, but now working in private equity in NYC while living in a luxury condo in Dumbo.  While the difference in the tax burden on the Young Hopefuls and Senior Voters shows how harshly work income is taxed compared with retirement income, especially public employee retirement income in New York, Chad and Trixie’s tax bill shows how much investment income is favored at the federal level.   And the deals for seniors and the rich have just kept getting richer, even as later born generations of ordinary Americans, on average, keep getting poorer and deeper in debt.   Both political parties have contributed to the trend, a reality that belies their alleged increasing partisan warfare.

So what percent of income would these three couples pay in taxes?

Federal Reserve Z1 Data for 2020: The King of Debt Went Out With A Bang, and Our Children and Grandchildren Will Be Poorer for the Rest of Their Lives to Pay For It

The Federal Reserve released data on U.S. credit market debt for 2020 last week, and after putting it into charts what I found was shocking. In just one year, total U.S. credit market debt increased by 42.7% of GDP, total non-financial credit market debt increased by 38.4% of GDP, federal government debt increased by fully 23.9% of GDP.  The amount borrowed by the federal government last year was equivalent to nearly a quarter of all the money earned in the U.S. economy.   During the Great Depression and World War II, the national debt never increased by more than 7.5% of GDP in a single year.  The federal debt alone is now approaching its level at the end of World War II, even as old age benefit programs such as Medicare and Social Security are expected to run out of money and face huge automatic cutbacks in a decade.  And total credit market debt now exceeds the level of 2008 and 2009, when high debt levels led to a devastating financial crisis.

For all this debt, public and private, to be paid back, taxes would have to rise so high, and consumer spending and public services and benefits be cut so much, that the economy would collapse.  The American standard of living, which has been falling gradually generation-by-generation, is set to fall much further, and perhaps much faster.  And yet that isn’t the worst news.  Things have now gone so far that the economy may collapse even if total debts don’t continue to increase at a rapid pace, let along being repaid.

The One-Way Check Valve of New York City’s Fiscal Relationships

The tax revenues from the wealth of New York City are not only for the benefit of people who live in New York City.

That’s what Governor Andrew Cuomo said in 2014 when New York City was booming, Upstate the Downstate suburbs were declining, and newly-elected Mayor Bill DeBlasio wanted to raise the New York City income tax to increase revenues specifically for the city budget.  Cuomo has made the “temporary” higher “millionaires” state income tax rates permanent instead, and sent the money to the rest of the state.  

Money is fungible.

That’s what the Governor said when the “dedicated” MTA tax revenues, collected only in Downstate New York, were transferred to the state budget and spent, in part, in Upstate New York.  Even as the subway system went into deferred maintenance, and most of the MTA capital plan was unfunded and never took place.  The MTA still refuses to publish a 20-year needs statement, showing this planned decline, today.

There is plenty of money, it’s just in the wrong hands.

That’s what Mayor Bill DeBlasio said, before signing labor contracts that ensured that those who benefitted from one retroactive pension increase after another wouldn’t be asked to make any offsetting sacrifices to help to pay for it.  Those members of the political/union class in on the deals could take more without anyone else other than a small number of $billionaries being left with less, he wanted to pretend. 

No blue state bailouts.

That is the attitude of Kentucky Senator Mitch McConnell’s view of the federal money being sent to “fiscally irresponsible” declining Blue States, perhaps at the expense of “self reliant” Red States.   

All but the last of these statements were made at a time when educated and talented Millennials, and the businesses that sought to hire them at low wages, were pouring into a small number of large central cities, including New York, even as the cost of real estate soared and the standard of living fell, creating a gusher of federal, state and local tax revenues pushing outward.  The reversal of this started slowly in the mid-2010s, after subway service decline to a “state of emergency” level as inflation-adjusted rents and sales prices peaked in NYC – and then surged during 2020 in association with the pandemic.  

So now, will money flow in the opposite direction, from other parts of the U.S., New York State, and from the political/union class to ordinary New Yorkers?   Or are New York City’s fiscal relationships a check valve that only allows money to flow in one direction?

Remember This Day

For 40 years, the trends have been as follows:

1) The generations born in 1957 and earlier get richer and richer, and freer and freer of obligations to others (including family obligations and taxes), while those born later get progressively poorer and more burdened by responsibilities to those older.

2) The executive/financial class and political/union class cut deals with themselves, and use control of the federal, state and local governments, and private sector organizations, to get richer and richer.  And the serfs get poorer and poorer, and go deeper and deeper into debt, to pay for it.

3) The connection between those who are taking more and putting in less, and those who are forced to put in more and accept less, is disguised by separating them in time via debt.  The media refuses to allow a discussion of the link between the two.

When this crisis is over, how do you think these various groups will have turned out? What will each lose? Will some actually gain?

In five or ten years…

1) Will the rich be richer?

2) Will executive pay be this high or higher?
3) Will the former middle class be poorer?
4) Will taxes be higher?
5) Will public services be worse?
6) Will old age benefits for later-born generations be reduced?
7) Will the life expectancy of those born after 1957 be lower, and/or the death rate higher?

8)  In NYC, will mass transit service and other public services degrade even more, and will state and local taxes, having been repeatedly increased, increase yet again?

Will all this happen yet again?  These are the questions. Remember this day, years after the virus is in the rear view mirror.

The 2020 Federal Election: Another Exercise in Bi-Partisan Gaslighting by Generation Greed and the Media

The U.S suicide rate had increased 13 years in a row – even before the coronavirus, shutdowns and economic collapse hit.

https://www.economist.com/graphic-detail/2020/01/30/americas-suicide-rate-has-increased-for-13-years-in-a-row

As I noted here…

https://larrylittlefield.wordpress.com/2015/11/08/death-is-the-ultimate-statistic-ii-the-most-important-news-in-ten-years/

Although this increase in suicide is terrible enough as it is, what is worse is that while most people don’t kill themselves, a higher suicide rate is an indicator of other things.  How most people feel about life. Their health and psychological well-being.  Their economic circumstances.   Their sense of inclusion in family and community. And those who have been committing suicide in larger numbers – since the early 1980s in fact — are the generations that followed Generation Greed, the richest and most self-serving in U.S. history, those who made the choices that led to the collapse of family and community, an increasingly worse economy generation by generation, and public policies that benefitted themselves in the present (now the past) by cashing in the future (now the present).

But you won’t hear about this massive economic, social and spiritual catastrophe during this federal election.  Not one word about the real lives and future of more than 200 million people, a number that keeps growing.  It is under Omerta, part of a seemingly shared conspiracy by both political parties and the media.  Instead what you get is tribalism on both sides, meant to distract the victims and give them someone else to blame – each other.  Increasingly marginalized people yelling “Black Lives Matter” and “White Lives Matter” at each other, when the reality is that to those who have been taking more and more and putting in less and less for 40 years, none of them matter.  No wonder we also have a political catastrophe.

To read anything about the actual lives of ordinary people, especially all those born after 1957 or so, you have look all the way across the Atlantic Ocean.  After the jump I will repeat a post by the U.K.’s Intergenerational Foundation, with its permission, in full.

https://www.if.org.uk/2020/10/01/pandemic-testing-intergenerational-solidarity/

And add some commentary.   Because as bad as it is there, it is worse here.  Here is the reality of a nation in decline that our leaders, pundits and journalists won’t tell us about, because it doesn’t fit the approved narratives.

Big Government? Where it is By State

As the future of later born Americans continues to get cashed in to benefit Generation Greed, the executive/financial class, and the political/union class, with no commentary or acknowledgment in this phony, tribalist political campaign, there isn’t much left to say that I didn’t say four years ago.  The “revolutionary” Donald Trump kept things going in the same direction, but an accelerated pace, with more tax cuts for the rich, more debt, more benefits for his generation, and an ever-diminished future for those coming later.  This followed the Obama Administration, perhaps the most conservative (with regard to the original meaning – trying to keep things the same) since Hoover in the face of an economic and social collapse. The system was preserved, so the winners on the inside were protected.  The average life expectancy of those born after 1957 fell.

At this point, it’s all about keeping the privileges for your interests while using tribalism to shift the blame.  Since federal elections are decided by state, however, it might be illuminating to show which states had the “biggest government” in 2018, according to data provided by the Bureau of Economic Analysis.  It was the very states where a majority of the people will say they are against big government.  They are actually in favor of big government for themselves, against having to pay for it, and against any services and benefits for anyone else, particularly the later-born generations who will be left with their debts.