Monday, September 21, 2009

Mencius Moldbug as Governor

"State government finances are a wreck. ... Only an emergency infusion of printed federal funny money is keeping most state boats afloat right now. ... What the radar tells me is that we ain't seen nothin' yet. What we are being hit with isn't a tropical storm that will come and go, with sunshine soon to follow. It's much more likely that we're facing a near permanent reduction in state tax revenues that will require us to reduce the size and scope of our state governments. ... The coming state government reset will be particularly wrenching after the happy binge that preceeded this recession. During the last decade, states increased their spending by an average of 6% per year, gusting to 8% during 2007-8. Much of the government institutions built in those years will now have to be dismantled. ... But the dominant reality is that even assuming the official revenue projections are accurate ... the state of Indiana will have fewer dollars to work with in 2011 than in did in 2007. ... The 'progressive' states that built their enormous public burdens by soaking the wealthy will hit the wall first and hardest. California, which extracts more than half its income taxes from a fraction of 1% of its citizens, is extreme but hardly alone in its overreliance on a few, highly mobile taxpayers. Both individuals and businesses are fleeing soak-the-rich states already. ... Unlike the federal government, states cannot deny reality by borrowing without limit", my emphasis, Mitch Daniels at the WSJ, 4 September 2009, link:

"California drivers can't line up to renew their licenses Friday. Wisconsin natives can't order copies of their birth certificates. Georgia consumers will have to postpone registering complaints with state watchdogs. And stranded motorists in Maryland may have to wait a little longer for highway-department help. ... State offices are shuttered Friday in California, Maine, Maryland and Michigan. Rhode Island had planned to join them on Thuirsday until a judge blocked its closure plan. ... But furloughs do little to address fiscal problems such as ballooning pension costs, and some policy watchdogs fret they are a short-term solution to what is likely to be a long-term problem. 'Many states expanded health-care funding over the last decades and are now having real trouble paying for it,' said Robert B. Ward, deputy director of the Rockefeller Institute. Educational programs and economic development also ballooned, he said", my emphasis, Leslie Eaton, Ryan Knutson and Philip Shishkin at the WSJ, 4 September 2009, link:

Do you still want to buy muni bonds? Insured or not? That waiting list for jail keep growing.

States have health-care cost problems. How will Obamacare be paid for?


OldSouth said...

Excellent post! It is refreshing to hear sober words of reality, even if the news is unsettling.

How do we ever get out of the mess, if we won't admit how we got here?

W.C. Varones said...

Munis? State GOs are probably a better buy than Treasuries.

The Fed/Treasury complex will print their way out of this mess before they'll let California go BK.

Anonymous said...

Treasuries or munis?

Good question.

Anonymous said...

Public pensions will bankrupt most small cities.

Independent Accountant said...

Old South:

Thanks. If you don't already, make it a habit to visit Unqualified Reservations by Moldbug. He originated the term "reset".