Big States Spend More Than Most Small States By Large Percentage

In Charts, How Big Blue States Outspend Red States

Posted Thursday, May 14, 2020   |   By Outside Contributor   |  104 Comments

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Speaker Nancy Pelosi and her fellow House Democrats are seeking a more than $1 trillion federal bailout for state and local governments. This is in addition to the unprecedented aid Congress already has sent.

Instead of waiting on a handout from Washington, states should clear the way for a more robust economic recovery by addressing their unsustainable finances.

States and local government spending has increased over the recent past, demonstrating room for targeted spending cuts.

After adjusting for inflation and increases in population, state and local spending (in constant 2019 dollars) has grown from $5,596 per person in 2000 to $7,268 per person in 2019.

That amounts to a 30% increase in the real cost of state and local government over just two decades, even without the thousands of dollars per person the federal government sends to states and localities through a wide variety of programs.

But not all states spend equally. As of 2017, Florida, Georgia, and Arizona spent about $5,800 per person on state and local governments, but New York spent more than $11,700 per person.

Financing state and local governments’ lost revenues would mean spending twice as much on New Yorkers as on residents in more frugal states.

The gap between big-spending states and fiscally responsible states has increased markedly over the last two decades, as this graph of state-level spending changes from 2000 to 2019 demonstrates.

California increased state-level spending by 52% and New York by 49% over the past two decades. Spending on health and education more than doubled in both states, yet health and education outcomes remain unremarkable compared to the rest of the nation.

Meanwhile, Texas has kept spending about flat, and Florida has reduced spending levels by 16%. Former Florida Gov. Rick Scott explained recently in The Wall Street Journal how fiscal discipline has set up his state for fiscal success amid this crisis.

States and localities could save more than $500 billion a year by trimming their per-person spending to where it was in 2000. This would more than cover any temporary reductions in revenue and help set the path for a stronger economic recovery.

During past recessions, countries that addressed their debt crises through spending cuts were able to return to economic growth more quickly. Those that relied on tax increases but did not reduce spending or address underlying fiscal problems, such as underfunded and overpromised pensions, experienced “deep and prolonged recessions.”

A federal bailout could prop up failing states temporarily but would not fix their underlying fiscal challenges. Instead, historical evidence suggests that every federal bailout dollar will increase state taxes by between 33 and 42 cents—the last thing residents in debt-ridden economically deprived states need.

Prolonged recessions and continued budget problems are the most likely outcome of a federal bailout for state budgets.

In addition to hundreds of billions in direct aid for the pandemic response and Federal Reserve loans for lost revenue, Congress has authorized more than $1.3 trillion in federal payments to businesses and individuals. These programs will help buoy tax revenues in every state, although much of the gains won’t be realized until states reopen.

States that still have shortfalls need to do what ordinary Americans and businesses do in such situations—make tough budgeting choices and reduce spending.

Rather than asking for a federal handout, California, Illinois, and New York should try to make their budgets look more like those of Texas and Florida.

Reducing spending in times of crisis will set up states for a successful recovery by keeping taxes low and ensuring confidence in the state’s financial future.

Reprinted with Permission from - Daily Signal by - Adam Michel

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The Way Congress Feels About Us Peons

These Four Suggestions Should Be Mandatory.

Ron Paul Suggests Four New Year's Resolutions For Donald Trump And Congress

by Tyler Durden

Dec 27, 2016 7:50 PM

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Authored by Ron Paul via The Ron Paul Institute,

In the spirit of New Year’s, here are four resolutions for President-elect Trump and Congress that will enable them to really make America great again:

1) Audit the Fed….and then end it: The Federal Reserve Bank's easy money policies have eroded the American people’s standard of living and facilitated the growth of the welfare-warfare state. The Fed is also responsible for the growth in income inequality. Yet Congress still refuses to pass Audit the Fed, much less end it.

During the campaign, then-candidate Donald Trump promised that Audit the Fed would be part of his first 100 days agenda. Unfortunately, he has not spoken of auditing the Fed or another aspect of monetary policy since the election. President-elect Trump should keep his promise and work with Congress to pass Audit the Fed and finally let the American people know the truth about the Fed’s conduct of monetary policy. Then, of course, end the Fed.

2) Bring the troops home: President Barack Obama has not only failed to withdraw American forces from Afghanistan and Iraq, he has further destabilized the Middle East with reckless interventions in Egypt, Libya, and Syria. The Obama administration has also brought us to the brink of a new Cold War.

President-elect Trump has criticized the 2003 Iraq war and promised to end nation-building. However, he has also made hawkish statements such as his recent endorsement of increased US military intervention in Syria and has appointed several hawks to key foreign policy positions. President-elect Trump also supported increasing the Pentagon’s already bloated budget.

America cannot afford to continue wasting trillions of dollars in a futile effort to act as the world’s policeman. Rejecting the neocon policies of nation-building and spreading democracy by force of arms is a good start. However, if Donald Trump is serious about charting a new course in foreign policy, his first act as president should be to withdraw US troops from around the globe. He should also veto any budget that does not drastically cut spending on militarism.

3) Repeal Obamacare: Obamacare has raised healthcare costs for millions of Americans while denying them access to the providers of their choice. Public dissatisfaction with Obamacare played a major role in Donald Trump’s election.

Unfortunately, since the election President-elect Trump and the Republican Congress have talked about retaining key parts of Obamacare! While it is reasonable to have a transition to a new healthcare system, Congress must avoid the temptation to replace Obamacare with “Obamacare lite.” Congress must pass, and President Trump must sign, a true free-market health care plan that restores control over healthcare to individuals.

4) Cut Taxes and Spending: President-elect Trump and Congressional leadership both favor tax reform. However, some leading Republicans have recently said they will not support any tax reform plan that is not “revenue neutral.” A true pro-liberty tax reform would reduce government revenue by eliminating the income tax. Fiscal hawks concerned with increasing federal deficits should stop trying to increase tax revenues and join with supporters of limited government to drastically cut federal spending. Congress should prioritize ending corporate welfare, reducing military spending, and shutting down unconstitutional federal agencies like the Department of Education.

If President Trump and Congress spend the next six months passing Audit the Fed, ending our militaristic foreign policy, repealing Obamacare and replacing it with a true free-market health care system, and cutting both spending and taxes, they will begin to make America great again. If they fail to take these steps, then the American people will know they have been fooled again.

Until Government Realizes Their First Obligation Is To Their Citizens, Our Country Will Continue To Decline. Trump MAY Be Able To Reverse That Trend.

Article 1 Of 3 Showiing Economy Is Not Working

Yardeni: US Operating on 2 Cylinders

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By Dr. Edward YardeniTuesday, 31 May 2016 08:21 AMMore Posts by Dr. Edward Yardeni

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The demand side of the GDP accounts shows that the U.S. economic engine has six cylinders: consumer spending, residential investment, capital spending, inventories, net exports, and government spending. In recent quarters, it seems like most of the torque has been provided by the first two cylinders, while the others have been sputtering.

On the income side of the GDP accounts, there are also six cylinders: labor compensation, dividend income, rental income, interest income, and corporate profits. Actually, there are only five cylinders on a pre-tax basis; on an after-tax basis, the sixth cylinder is income redistribution. In recent quarters, four of them have been humming along just fine, while interest income and corporate profits have been sputtering.

Ideally, all the cylinders should be well tuned. However, this rarely happens, and when it does, it doesn’t happen for very long. Nevertheless, if the economy gets enough power from enough of the cylinders, there’s no need to worry about stalling out, though the economy’s cruising speed may be somewhat disappointing. Debbie and I think that’s the current situation.

Let’s look underneath the hood:

(1) The new cruise speed. Real GDP was revised higher for Q1 from 0.5% (saar) to 0.8%. On a y/y basis, it rose 2.0%. That’s more or less what it has been doing since mid-2010, when the bears started growling that 2% was the economy’s stall speed. That was true in the past--whenever growth slowed to that speed, a recession followed. So far, 2% appears to be the “new normal” economy’s cruising speed. Today’s economy hasn’t been able to travel in the old normal’s fast lane of 3%-4% growth.

The big drag on growth during the current business cycle has been weak government spending on goods and services. Excluding this category, real GDP grew in a range between a low of 1.8% during Q2-2013 and a high of 4.0% since mid-2010, and averaging 2.9%. However, currently, it is back to the bottom of that range.

(2) Wages accelerating as profits slow. The National Income and Product Accounts (NIPA) show that the demand side of GDP must be equal to the income side of GDP, i.e., Gross Domestic Income (GDI) plus a small statistical discrepancy. GDI is equal to National Income plus Consumption of Fixed Investment. The statistical discrepancy between nominal GDP and GDI has been negative since Q1-2011, and hovering around 1.5% of GDP since 2012.

During the current economic cycle, the share of pre-tax labor compensation in national income fell from 66.2% during Q4-2008 to a low of 60.9% during Q3-2014, which matched its Q4-2011 reading--with both the lowest since Q1-1955. Over the past six quarters through Q1-2016, this share has risen smartly back to 63.1%.

Meanwhile, the share of pre-tax corporate profits from current production (i.e., on a cash-flow basis) in national income jumped from a cyclical low of 8.4% during Q4-2008 to a cyclical high of 14.5% during Q4-2011, which was the highest since Q4-1950. It remained around there, but then dropped down to 12.0% during Q1-2016, mostly over the past six quarters.

On a y/y basis, labor compensation is up 5.0% while profits are down 5.8%. Workers finally may be gaining income share as the labor market has tightened, boosting both employment and hourly pay. This development is squeezing profit margins.

(3) Consumers on a healthy joy ride. This certainly explains the strength in real consumer spending, which rose 2.7% y/y during Q1, outpacing overall real GDP growth. In current dollars, that growth has been led by consumer spending on health care, which is up 4.8% y/y, while total consumer spending is up 3.8%. The rising share of consumer spending in nominal GDP over the past four and a half decades is all attributable to health care. The overall share of consumer spending has risen from a series low of 58.5% during Q1-1967 to 68.6% during the first quarter of this year. Excluding health care, the share has been hovering in a range between 53% and 56% over this entire period!

Real consumer spending excluding spending on health care goods and services has slowed recently, and may continue to do so as the average age of the US population increases because people are living longer and the fertility rate is relatively low. Older people are likely to spend more on health care and less on everything else. Health care spending, in current dollars, now accounts for a record 19.0% of disposable personal income, up from 14.4% 20 years ago.

(4) Business tapping the brakes. The recent downturn in the profit margin and the long-term uptrend in consumer spending on health care may weigh on business spending. Nonresidential investment is driven by profits. A profits squeeze attributable to rising labor costs could dampen business enthusiasm to increase plant and equipment capacity. If the economy’s fastest growth comes from consumer spending on health care, that might not have multiplier effects on business spending as large as we would see from lots of spending on autos, say.

The recent data on nondefense capital goods orders excluding civilian aircraft have certainly been disappointing. In April, this series was down 5.0% y/y to the slowest pace since April 2011.

Inventory indicators also may be signaling an overhang of materials and merchandise. Commercial and industrial loans have soared 10.1% y/y ($190 billion) through mid-May. Intermodal railcar loadings have been seasonally weak recently, suggesting that inventory levels may be bloated. The ATA truck tonnage index, which spiked in February, reversed the jump in March and April.

Four of the five Fed business surveys are available for May, i.e., Kansas City, New York, Philadelphia, and Richmond. We average them together and found that they are relatively well correlated with the national manufacturing PMI. The latest available data for the three available surveys show that the average of the composite indexes fell from 4.5 last month to -4.2 this month (Fig. 15). The average of the orders indexes fell from 6.8 to -2.6. The employment index edged up from -5.1 to -2.6, remaining below zero for the 11th consecutive month.

Dr. Ed Yardeni is the President of Yardeni Research, Inc., a provider of independent global investment strategy research. To read more of his blogs, CLICK HERE NOW.

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Read more: Yardeni: US Operating on 2 Cylinders
Important: Can you afford to Retire? 

Finally A Senator Tells The Truth

Former lawmaker blasts Congress: America doesn’t trust you

Posted on April 27, 2016 by Sam Rolley

Former budget hawk Sen. Tom Coburn visited some of his old colleagues on Wednesday to talk about something with which he’s very familiar: How wasteful congressional spending is killing the country.

Coburn, famous for the annual government waste reports he produced in Congress, joined the head of the Government Accountability Office to talk about the massive amount of money currently being wasted on duplicative federal programs.

More on that here:  Common sense could save taxpayers billions

“In 2015 I spent my time in 21 different states,” Coburn said during his opening remarks. “And America doesn’t trust you anymore. That’s the truth. Because they don’t see the actions coming out of Congress that should be coming out.”

The retired lawmaker went on to note that a huge part of the problem is Congress’s failure to force federal agencies to comply with the recommendations of GAO reports which routinely unveil ways that boneheaded bureaucrats are wasting tax dollars.

“You’ve lost their confidence,” he said. “And that’s not one party, that’s both. And so when you have hundreds of billions of dollars that could be saved and aren’t, and they know it. You know, they actually read your reports. People online, and then they use social media, pass it around.”

Coburn noted that median family incomes, stifled by “too much government” and “too intrusive government,” haven’t budged since 1988.

The lawmaker added that Congress’s failures to shrink the size of government are going to cause the stagnation to continue.

“The unfunded liabilities of this country, with its debt, is $142 trillion,” he said. “That’s $1 million per family, or that’s $1 million per taxpayer. Nobody knows what a trillion is but when you’re telling a young family with small kids, ‘Oh, by the way, here’s the debt burden that’s coming to you over the next 25 years, you better be prepared for it.’”

Coburn told the lawmakers that it’s time to stop worrying about offending different groups of voters and get busy correcting economic problems.

“Here’s what I’ve discovered, all this waste, all this duplication, all this fraud has a constituency. And so a lot of people don’t want to take a vote to eliminate it because it will offend a group of voters or a group of contributors.”

“I think you ought to offend them all,” Coburn said.

Coburn is currently working with an organization calling for a Convention of the States to force Congress to balance the budget. Learn more here.

The Detroit Story.

The following post comes from the Federalist Papers Project and it leaves out a point that we wish to comment upon. Yes, Detroit did go bankrupt and yes, it was unrestrained spending that brought the city to its knees.

However, the City Council seems not to have received the message. Since emerging from bankruptcy last December, it did not take long for the Council and City Clerk to ask for a pay increase. In March, they asked for (demanded) an increase in their salaries and benefits as they had been level for several years after taking a pay cut in 2010.  (http://www.clickondetroit.com/news/detroit-city-council-president-clerk-want-raise/31617634)   How out of touch do you really think these people are?  How long will it take for the city to be in the mess again?  Probably in the near future!

There is NO financial control gene in any Democrat.  One only has to look at these cities as an example or to look at the first debate where the Dems were tripping over each other giving things away.  Democrats only know how to give things away, not build anything.

If we want the US to look like Detroit, Baltimore and Philadelphia, just elect Democrats, your wish will be granted.

Conservative Tom

From The Federalists Papers Project:

THIS is What Happens When Democrats Take Over American Cities

BY BRITTANY SOARES - LEAVE A COMMENT · IN US

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Townhall gives 5 ways liberalism destroyed Detroit:

Detroit was once one of the world’s great cities. It was the 4th largest metropolis in America, jobs were plentiful because of the auto industry, and Motown even kept it on the cutting edge musically.

Unfortunately, from 1962 until the present day, the mayor of Detroit has been a Democrat.

The result?

Detroit’s population has dropped from 1.8 million to just over 700,000, the unemployment rate is over 50% if you count the people who’ve given up on finding jobs, property values have dropped so much you can buy homes in the crime-ridden city for $500, and Detroit has gone bankrupt.

How did Democrats kill one of the most prosperous cities in America? With the same sort of unfettered liberalism that Democrats like Barack Obama, Harry Reid, and Nancy Pelosi want to foist on the rest of the nation.

1) Unions crippled the auto industry: The Big 3 automakers could afford unions when they practically had a monopoly on auto production in the United States. However, once they started facing real competition from overseas, the unions made them less and less competitive. The unions forced the companies to pay out more than market value for their workers, put stifling work rules in place that made flexibility and innovation difficult, and created generous pension plans that are proving to be unsustainable.

This wouldn’t have been possible without a symbiotic relationship between the unions and the Democrats in government who tied the hands of the Big 3 automakers and simply wouldn’t allow them to get rid of the unions that were slowly strangling them to death. Eventually because of the unions, the Big 3 automakers had to deal with significantly larger costs per car than their overseas competitors and they took it out of the only place they could: the cars. As the quality of their products dropped, their competitors took an ever larger share of their market, and there were fewer jobs to go around. If you want to know why the “Motor City” is up on cinder blocks in Michigan’s front yard, this is where it started.

2) White citizens were demonized until they left: Detroit was a heavily segregated city and in 1967, there were black riots. After that, white flight to the suburbs began. This was dramatically exacerbated when Coleman Young became Detroit’s first black mayor in 1972. Young was cut from the same cloth as men like Al Sharpton and Jesse Jackson, but unlike the two of them, he actually had power. Young systematically drove white government employees out of their jobs so they could be replaced by blacks, was hostile to the white suburbs, and was generally perceived as anti-white. Naturally, a lot of white people just left, which reduced the population and significantly cut into the tax base. Today, Detroit is a 7.9% white city, and if he were alive and kicking, that would probably suit Coleman Young just fine.

3) Out-of-control crime helped drive much of the black middle class out of the city: Ever heard of “Devil’s Night?” It’s the night before Halloween and in Detroit, fires are set all over the city. Combine the sort of criminal mentality that produces an unofficial “holiday” like that with a sky high unemployment rate and Draconian laws designed to make it difficult for law abiding citizens to arm themselves, and it’s not a surprise that crime is a problem in Detroit. However, the issue goes much deeper than that. In case you haven’t noticed, in a conflict between a cop and a criminal, the hearts of liberals almost always seem to bleed for the thug. Combine that with the liberal tendency, when money gets tight, to cut essential programs instead of their perks and the goodies they hand out to their supporters, and you end up with a police department that is both dramatically underfunded and completely incompetent.

How bad has it gotten?

“The size of the police force in Detroit has been cut by about 40 percent over the past decade,” “it takes (the police) an average of 58 minutes to respond” to a call and the “police solve less than 10 percent of the crimes that are committed in Detroit.”

4) Reckless government spending bankrupted the city: Detroit’s tax base has been plunging like an anvil dropped into the Marianas Trench and so, in true liberal fashion, liberals have raised taxes to make up for it instead of cutting spending. “The city’s per-capita tax burden is the highest in Michigan. Detroit has the country’s highest property taxes on homes, the top commercial property tax and the second-highest industrial property tax.” Unfortunately for Detroit, you can’t get blood from a stone. As jobs and wealth fled the city, there was simply less cash available for big government programs, pensions, and the incredibly generous, but almost completely unfunded union health care program. It’s fantastic that the city paid “80 percent to 100 percent of retirees’ medical costs,” but 99.6% of those costs were unfunded. As Obamacare supporters should have learned by now, it’s a lot easier for politicians to make big promises about what they’re going to give you than it is to back them up in the real world.

5) The government is completely incompetent: Ever notice that the bigger government seems to get, the less it does anything well? Citizens of Detroit could tell you all about that. The school system is horrible, which explains why a staggering 47% of the population is illiterate. In addition, 40% of the street lights don’t work, only about 1/3 of the ambulances are running, and 2/3 of the parks have been closed since 2008. Just to give you an idea of its priorities, an independent report in 2012 suggested the city fire 80% of the Water and Sewage Department including a horseshoer” that it has on staff even though it has NO HORSES.. How did the union respond to that report? “They don’t have enough people as it is right now. They are just dreaming to think they can operate that plant with less.” Detroit may not have enough police, ambulances, or competent teachers, but if you ever need a horseshoe in the Motor City, they’ve got you covered.