Category Archives: generation greed

Aid to the Needy: 2017 Census of Governments Data

For the past 25 years, there has been a bi-partisan consensus in favor of unlimited spending of later-born generations’ future income to meet the ever-escalating perceived needs of those who perceive themselves to be needy.

Executive pay had soared during the late-1990s stock market bubble, as executives had claimed to have personally created “shareholder value.” Since then every time stock prices have gone down toward something like fair value, the federal government has intervened to keep them inflated, so huge bonuses based on “shareholder value” could continue, even as the overall economy rotted away.   Because that’s what rich and older asset holders needed and deserved.

Unionized public employees had already been promised retirement benefits far in excess of what other Americans were going to receive.  But in many locations, such as New York, these were repeatedly enriched, because such employees need to do less for other people and for a shorter period of time.  While retirement benefits for others were cut, because unionized public employees and retirees need lower prices for better goods and services, and that requires other workers to be lower paid.

The richest generations in U.S. history, those now over age 62, needed to be able to sell their houses to poorer later-born Americans for high prices in order to live in the style to which they had become accustomed. So every time the cost of housing threatened to fall to a level that reflected the lower incomes of later-born generations, the government intervened to keep prices high.

And since those over 62 and the rich expect to get benefits out of society but don’t want to pay for them, their taxes have been repeatedly cut, with lots of special deals for capital and retirement income and property taxes for seniors.  Even as spending on everything other than seniors, retired public employees, and bailouts for the rich and big businesses have gone down, both at the federal level and in states where seniors are a higher share of the voting population.

It has been an era of unlimited generosity for those who have enormous perceived needs, the cost to everyone else and the future and those who live in it be damned.   Massive income redistribution upward to the already better off that isn’t even allowed to be called what it is, so the entitled beneficiaries don’t have to feel bad about it.  But what about state and local government spending on people who are objectively worse off, those who were once thought of as the needy?  Well, that’s another thing entirely!

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State and Local Government Revenues Other Than Taxes: 2017 Census of Governments Data

When many people think of government, the first thing they think of is taxes, the subject of the previous post in this series.  Taxes, however, account for only 47.3% of U.S. state government revenues, and 38.0% of local government revenues.

One reason is the role of the federal government.  Of the three levels of government, it collects the most in taxes, but it pays most of that money right back out again to individuals (Social Security), businesses and other organizations (Medicare), and as aid to states, and actually does very little directly other than national defense and the post office.  Some of the money paid to states is then passed on to local governments, along with substantial state aid.

In addition, both state and local governments organize some of their operations as enterprises that are funded, at least in part, by charges for services.  The utilities that run on or under public streets, in fact, are a mix of public and private-but-regulated enterprises, with the mix varying around the country.   So are higher education and hospitals. Finally, the Census Bureau collects data on various “miscellaneous revenues” — special assessments, the sale of excess property, interest earnings, fines and forfeits, rents, royalties, donations to the government, net lottery revenues, and the largest miscellaneous category of all, “not elsewhere classified.”  Most of these may be thought of as “enterprise revenues” as well.

It is these state and local government revenues other than taxes that are the subject of this post.

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State & Local Taxes: 2017 Census of Governments Finance Data

In FY 1997, New York State’s state and local government tax revenues totaled $132.88 for each $1,000 of state residents personal income, far above the U.S. average of $102.80, and second in the country behind Alaska, where revenues were inflated by state taxes on oil and gas extraction.  And yet by FY 2017 New York State’s tax burden had increased further, to $138.22 per $1,000 of personal income, now first in the nation.  The District of Columbia and Vermont also had above average tax burdens in FY 1997, and saw those burdens increase further by FY 2017.  In FY 1997, Arizona, Colorado, Florida, Georgia, North Carolina, Oklahoma, Tennessee, Texas, and Virginia all had state and local government tax burdens that were below the U.S. average, though all but Tennessee were above $90.00 per $1,000 of personal income.  And yet by FY 2017 the tax burden in each of these states had fallen further, in some cases plunged, and now all are below $90 per $1,000 of state residents’ personal income, in some cases substantially.

Nationally, the overall state and local government tax burden increased from $102.80 per $1,000 of personal income in FY 1997 to $106.92 in FY 2007, but then fell sharply to just $97.77 per $1,000 FY 2017.  It has been in the vicinity of $100 per $1,000 of personal income for decades.  Almost all of that 2007 to 2017 decrease was at the state government level, with the overall state tax burden falling from $63.11 per $1,000 to just $55.89, and with nearly all types of tax revenues falling relative to income, but corporate income tax revenues falling (on a percentage basis) most of all. State aid to local governments also fell sharply from $37.95 per $1,000 of personal income in FY 2007 to $32.41 per $1,000 in FY 2017, due in large part to fewer children in school (relative to the number of adults with income) as the large Millennial generation exited.  On the other hand, federal aid to state governments increased from $33.90 per $1,000 in FY 2007 to $37.86 per $1,000 in FY 2017, due in large part to soaring Medicaid expenditures, which are substantially federally-funded, and go mostly to the old.

Posts on state and local revenues other than taxes and spending by category will come later.   A detailed discussion of state and local taxes follows.

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Imported Oil: American Gutlessness Means Perpetual Slavery

Did you hear about the United States finally becoming energy independent again thanks to our great President Donald Trump, the guy who has essentially declared war on mass transit and alternative energy?  Actually, he didn’t just promise energy independence. He promised energy “dominance.”

https://www.cnbc.com/2017/06/28/trump-america-energy-dominant-policy.html

Here’s how Energy Secretary Rick Perry explained energy dominance to the White House press corps on Tuesday: “An energy dominant America means self-reliant. It means a secure nation, free from the geopolitical turmoil of other nations who seek to use energy as an economic weapon.”  “An energy dominant America will export to markets around the world, increasing our global leadership and our influence.”

You might have missed it, but the Saudis didn’t.  So OPEC has done it again. Jacked up production and sold below cost so the price of oil and gasoline plunge to $20 per barrel. They can count on the neediness, whining and shortsightedness of the generation that is still in control of the United States, the Baby Boomers, and the gutlessness of U.S. politicians, to stand aside yet again as the domestic fossil fuel industry, alternative energy companies, and conservation are wiped out and replaced by cheap foreign oil. And then, when our dependence and vulnerability have been fully re-established, OPEC will again slash production and jack up the price of oil to $100 a barrel, causing another recession and another avalanche of U.S. dollars out of the country.  As they did in 1973, and 1981, and 1990, and 2008, and 2011-14.   Ah, but that’s the future, and we can’t think about that now!  What about my need for cheap gasoline!  I want for me now, and now, and now, and again now!

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Federal Reserve Z1 Data for 2019: The Debt-Driven Party Had to End Eventually, Coronavirus or No Coronavirus

“If something cannot go on forever, it will stop,” Herbert Stein

“Markets can stay irrational longer than you can stay solvent,” John Maynard Keynes

Federal Reserve Z1 data for 2019 was released on March 12, and it shows a continuation of the post-1980 trend.

https://www.federalreserve.gov/releases/z1/default.htm

For the past four decades businesses have paid most Americans less and less, working its way up the income and education scale.  With progressively lower pay and benefits by generation, and Millennials paid 25 percent less, on average, than Baby Boomers had been at the same point in life.  But for most of that period Americans still spent more and more, with the difference between lower labor costs and higher sales showing up as higher profits, converted to higher executive and financial sector pay, and inflated asset values.  That difference was bridged by more household members in the labor force, then by reduced retirement savings, then by soaring personal debt, then by soaring government debt. The result has been a global crisis of demand, and an unsustainable debt-driven economy.

It would have collapsed in 2008 without massive government intervention. That intervention meant the fundamental problems were never solved. Instead, asset prices were re-inflated, to the benefit of older asset holders and the rich, and to the detriment of younger people saving for retirement or seeking to buy a home. Even as most people became worse off, and U.S. life expectancy began to fall.  The global economy has been poised at a precipice ever since, with only interest rates near zero and soaring public debts deferring collapse, even as aging populations seemed sure to cause the whole thing to deteriorate eventually.  In 2019, total non-financial U.S debt increased 4.8%, and federal debt soared 6.7%, but nominal GDP increased just 4.1%, and inflation-adjusted GDP increased just 2.3%.  Not the 3.0% to 8.0% real growth The Donald has claimed yet another tax cut for the rich and corporations would produce.  The question for 2020 is whether the coronavirus will change eventually to immediately.

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MTA Signals: Can Technology Save Us From Politics?

Most of those who will read this post know the financial issues with New York’s Metropolitan Transportation Authority.  Decades ago, funding for the agency’s capital plan was cut, and some capital funds were diverted to the operating budget as “reimbursable expenditures.” At the same time, effective fares were cut when the Metrocard was introduced, and current and – in particular former – MTA workers benefitted from a huge pension increase in 2000. The cost of capital construction contracts soared, due to pension increases for union construction workers and managers, and construction union pension underfunding, at about the same time.  It was a political win for everyone – who is no longer around.  The cost of all of this was borrowed or deferred, and today much of the money being paid to the MTA, in taxes, tolls and fares, is being sucked into the past.

As the years pass, meanwhile, major systems and components of the subway and commuter rail network continue to age, and eventually reach the point where they will either have to be replaced or start to fail and disrupt service more and more frequently.  Perhaps to the point where entire lines have to be abandoned for years or decades, as two tracks on the Manhattan Bridge were.  Or permanently, as the West Side Highway was.  One of those systems is the signal system on the New York City subway, which is aging even as the cost of replacing the signaling on a line has exploded.  The plan had been to gradually replace conventional railroad signaling with Communications Based Train Control (CBTC).   But after decades of borrowing the MTA Capital plan came to a near halt after the Great Recession, and compared with the plans in place 17 years ago the MTA is way behind, without any hope, at recent prices, of ever being able to catch up.  Can technology provide a way out?

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New Yorkers Are Going To Pay More and Be Forced To Expect Less, But Shouldn’t Let Them Say It’s Fair or Blame Circumstances or Scapegoats

I was in Target the other day and noticed their motto:  “Expect More, Pay Less.”   That sure is a hell of a lot different from New Yorkers under the age of 60, and in particular under the age of 40, will be paying into and getting from the federal, state and city governments over the next 20 to 40 years.  At the federal level because of four decades of future selling by Generation Greed that have left us with a massive national debt and underfunded old age benefits – underfunded despite later-born generations already being required to pay in more while being promised less.  At the state level because New York City shares a tax base with Upstate cities and rural areas with extensive needs and dwindling resources, and suburban areas with more power and greater entitlement. And at the city level because one politician after another has cut deal after deal to cash in the future, to further benefit already-advantaged unionized public employees and contractors, who are cashing in and moving out.

The theft has occurred, the money is gone, and “Expect Less, Pay More” is inevitable.  In fact a New York City in the 1970s-style institutional collapse is highly likely, and not just in New York City.  So what will our “leaders,” still beholden to the same interests and generations and still promising to hand them even more, say about this?  I want them to be forced to admit the truth.  And let me tell you what I don’t want to hear.

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