All across the country, despite an economy that has been officially out of recession for half a decade and record stock prices, Americans are being subjected to one round of state and local government tax increases and/or public service and benefit cuts after another. In many cases the pay and benefits of younger and future public employees has been slashed, and in a few cases even existing employees and retirees have also been hit with reductions in retirement benefits. The reason is the soaring cost of public employee pensions, but that cost should not be soaring at all.
Most public employees are promised a set of retirement benefits when they are hired, in exchange for choosing a public service career, and those benefits are supposed to be paid for gradually over the years when each employee is working. At first the politicians and public employees unions blamed the post 2000 and 2008 stock market crashes, following stock market bubbles, for the harm they were imposing the rest of us. But now that the zero interest rate policies of the Federal Reserve have inflated another bubble, they are silent.
The fact is U.S. state and local governments are facing a public employee pension disaster not because of the ups and downs of the stock market, but because of thefts by older generations through retroactive pension increases, spiking and fraud, and taxpayer underfunding of the pensions public employees had been promised to begin with, which is the equivalent of wage theft. The extent of the problem, and the distribution of guilt between public employee unions and past taxpayers, varies from state to state. This post will use Census of Governments data to show who has robbed the future from younger generations, to what extent, with regard to public employee pensions. Continue reading →
When people think about America’s debt problem, they generally think about the national debt, which is to say the on-the-books debts of the federal government held by the general public. U.S. debts in general, however, have soared from a total of less than 170 percent of GDP from the 1950s to the early 1980s to nearly 350 percent of GDP in 2008, as I noted here.
Consumer debt soared. Business debt soared. And state and local government debt soared, from 12.4% of GDP in 1980 to 20.6% of GDP in 2009, before dropping back. While state and local governments are generally required to run balanced budgets, they also tend to have separate capital budgets, under which money is borrowed for long-term capital investments. While state and local government debt has been trending up, however, infrastructure expenditures have trended in the other direction. The result is a sold-out future.
For nearly 30 years Americans, individually and collectively, have sold the future to live for today. In the private sector each generation of Americans since those born in the mid-1950s has been paid less on average, and yet has spent more, failing to save for retirement and borrowing to make up the difference. Corporate executives had their firms borrow, not to invest in income producing assets, but to buy back stock, temporarily increasing stock prices so they could cash in on bonuses and options. Despite future financial strains on Social Security and Medicare from the retirement of the large Baby Boom generation, the federal government cut taxes drastically in the early 1980s and again in the early 2000s, while spending with abandon on health care for older seniors, ultimately leaving behind a pile of IOUs that someone else will have to pay somehow.
At the state and local government level infrastructure investment was cut but debts were increased, leaving behind roads, bridges, water, sewer, and transit systems and schools in need of repair with no money to pay for this. And pensions for older public employees who were cashing in and moving out were retroactively increased even as pension funding was cut, leaving a financial disaster behind. The state and local government aspect of this future selling, however, varies in severity from place to place. Using an analysis of Census of Governments data from the U.S. Census Bureau, this post will rank the extent to which each state’s future has been sold by its current and past politicians and the interest groups that supported them.
The United States, based on press reports, is heading for an infrastructure crisis that today’s politicians are desperate to ignore, in the hopes that their generation can avoid paying for it and pass on before the consequences hit those coming after. In the suburbs and Sunbelt the post-WWII infrastructure, often built with federal money redistributed from older cities, is reaching the point where substantial rehabilitation and replacement will be required. But no one wants to pay. In New York State, one sees this in the financial drama over the replacement of the 1954-built Tappan Zee Bridge, and the insistence that tolls be kept far lower on the new bridge than in the Port Authority Crossings to the south, or the Triborough Bridge and Tunnel Authority crossings within New York City.
Even where the infrastructure has been maintained money has been borrowed for past maintenance, and the interest on that debt now consumes revenues that were supposed to be reserved for transportation. There is no real money for the next MTA Capital plan, most of which is maintenance. Almost all the money being paid into the New York State transportation trust fund for roads and bridges is going to past debts, as is all the money going in to the New Jersey transportation trust fund. Twenty years of selfishness by Generation Greed politicians has come home to roost, and the wolf is at the door. And yet their more recent replacements – New York City Mayor DeBlasio, New York State Governor Cuomo, New Jersey Governor Christie, President Obama, and whoever will follow the indicted and should-be indicted members of the state legislatures and Congress – want to do nothing but close their eyes and hope it goes away. It is in this depressing context that the following post will review data on Infrastructure revenues and expenditures from the U.S. Census Bureau’s Census of Governments.
It was only a couple of decades ago that aid for the needy, and resentment of that burden by everyone else, seemed to be the biggest issue in public policy. It was an issue that swept the Republicans into control of the U.S. House of Representatives in 1994. With New York City widely believed to be America’s welfare capital, it helped to make Republican George Pataki Governor of New York State that year, one year after Republican Rudy Giuliani became the Mayor of New York City. This anti-welfare reaction followed by three decades the “welfare rights” revolution, a brief period during which the needs and problems of the poor placed a greater claim on America’s then-growing public resources.
Today, however, public discussion of the needs, problems and costs of the poor seems to have essentially disappeared. So what is being spent on the needy, in New York City and other parts of New York State, when compared with other places today? This post uses Census of Governments data to find out.
In FY 2012 the State of New York spent $99.9 billion directly (excluding insurance trust expenditures), including $38.6 billion on Medicaid, and sent $56.7 billion in aid to local governments, including $26.6 billion in school aid. But it only collected $71.6 billion in state taxes. New York State’s local governments spent $170.5 billion directly and sent $10.6 billion back to the state, but only collected $80.2 billion in local taxes. For the states and, more importantly, for the local governments that do most of the work of government, taxes are just one component of their revenues. Money received from higher levels of government, and fees charged for services, amount to larger share of the total.
This posts uses 2012 Census of Governments finance data to show how New York City, other parts of New York State and New Jersey compare with each other and with local governments elsewhere, with regard to intergovernmental revenues, fees for services, and miscellaneous revenues, and how this has changed over time.