Don’t buy a house in a state where private sector workers are outnumbered by folks dependent on government.
Thinking about buying a house? Or a municipal bond? Be careful where you put your capital. Don’t put it in a state at high risk of a fiscal tailspin.
Eleven states make our list of danger spots for investors. They can look forward to a rising tax burden, deteriorating state finances and an exodus of employers. The list includes California, New York, Illinois and Ohio, along with some smaller states like New Mexico and Hawaii.
If your career takes you to Los Angeles or Chicago, don’t buy a house. Rent.
If you have money in municipal bonds, clean up the portfolio. Sell holdings from the sick states and reinvest where you’re less likely to get clipped. Nebraska and Virginia are unlikely to give their bondholders a Greek haircut. California and New York are comparatively risky.
Two factors determine whether a state makes this elite list of fiscal hellholes. The first is whether it has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector.
Let us give those takers the benefit of our sympathy and assume that every single one of them is a deserving soul. This person is either genuinely needy or a dedicated public servant or the recipient of a well-earned pension.
But what happens when these needy types outnumber the providers? Taxes get too high. Prosperous citizens decamp. Employers decamp. That just makes matters worse for the taxpayers left behind.
Let’s say you are a software entrepreneur with 100 on your payroll. If you stay in San Francisco, your crew will support 139 takers. In Texas, they would support only 82. Austin looks very attractive.
Ranked on the taker/maker ratio, our 11 death spiral states range from New Mexico, with 1.53 takers for every maker, down to Ohio, with a 1-to-1 ratio.
The taker count is the number of state and local government workers plus the number of people on Medicaid plus 1 for each $100,000 of unfunded pension liabilities. Sources: the Bureau of Labor Statistics, the Kaiser Commission on Medicaid and a study of state worker pensions done in 2009 by two academics, Joshua Rauh and Rovert Novy-Marx. Professor Rauh estimates that the shortage in pension funding is on average a third higher today.
The second element in the death spiral list is a scorecard of state credit-worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios. Conning’s analysis focuses more on dollars than body counts. Its formula downgrades states for large debts, an uncompetitive business climate, weak home prices and bad trends in employment.
Conning rates North Dakota the safest state to lend money to, Connecticut the most hazardous. A state qualifies for the Forbes death spiral list if its taker/maker ratio exceeds 1.0 and it resides in the bottom half of Conning’s ranking.
It’s easy to see how California got on our list. It has pampered a large army of civil servants while using every imaginable trick to chase private-sector jobs away, the latest being a quixotic scheme to reduce the globe’s atmospheric carbon. A City Journal essay by Victor Davis Hanson notes that the state spends $10 billion a year on entitlements for illegal aliens.
Illinois is especially known for its dishonesty, whether among officeholders (future license plate motto: Land of Corruption) or in the habit of under-accounting for promises to government employees. The Rauh study counted $66 billion in the till to cover pension obligations of $233 billion.
Last edited by ICCrawler - ICjobs on Wed Jan 27, 2016 7:03 pm, edited 2 times in total.
And when the confederates saw Jackson standing fearless as a stone wall the army of Northern Virginia took courage and drove the federal army off their land.
~Those who benefit from the status quo always attribute inequities to the choices of the underdog.~Ann Crittenden ~The Goddess is not separate from the world-She is the world and all things in it.~
The CCC wrote:California is arguing on how to spend its surplus.
California can start spending their surplus money by building a new stadium for the Chargers to stay in San Diego. The Chargers need to stay in San Diego.
It's hardly fair to count all government employees and public servants as "takers." Government employees still pay taxes on their wages and provide needed public services without which most states would be a mess. Same with pensioners. Minus the highly-publicized cases of pension-spiking and other abuses, pensioners earned those pensions through years of service and need them as part of their retirement income. Without them, there would just be more people drawing welfare.
That said, Illinois is probably the most fiscally screwed-up state in the nation. Worst pension crisis in the nation and we've been running for 7 months now without a budget. Likely state worker strike on the horizon. I'm moving back to Seattle this summer if I can. Abandon hope all ye who enter here.
"It seems to me that these women were the head (κεφάλαιον) of the church which was at Philippi." ~ John Chrysostom, Homilies on Philippians 13
It's hardly fair to count all government employees and public servants as "takers." Government employees still pay taxes on their wages and provide needed public services without which most states would be a mess. Same with pensioners. Minus the highly-publicized cases of pension-spiking and other abuses, pensioners earned those pensions through years of service and need them as part of their retirement income. Without them, there would just be more people drawing welfare.
I agree. I don't think the author was using "takers," in the sense that I would usually use the word, a.k.a. people living for free off the taxpayer. What he did mean was that even though many of these "takers" work, these salaries are still reliant on government taxation of the private sector for their income. Hence, if you're working in the private sector or own something the government can tax, you're likely to loose a big portion of that if you move to one of these states.
And when the confederates saw Jackson standing fearless as a stone wall the army of Northern Virginia took courage and drove the federal army off their land.
No, I live in a death spiral country if we don't do something about the growing income inequality, citizens without health care, climate change, or ridiculous campaign finance/lobbying groups.
God belief is for people who don't want to live life on the universe's terms.
It looks like that California won't have a Pension Reform initiative on the ballot next November.
A California Public Vote on Pensions Initiative (#15-0033) did not make the November 8, 2016 ballot in California as an initiated constitutional amendment.[1]
The measure would have required a public vote on "the amount of and manner in which compensation and retirement benefits are provided to employees of a government employer."
In early October 2015, backers decided to drop the measure after the California Attorney General determined the measure would take pension benefits away from current employees. The campaign would have been led by a collection of politicians, businesspersons, former San Diego City Councilman Carl DeMaio (R) and former San Jose Mayor Chuck Reed (D).[2][3]
Former San Diego Councilman Carl DeMaio and former San Jose Mayor Chuck Reed, who pushed pension overhaul measures in their cities, have been trying for years to get traction for a statewide pension reform ballot measure.
On Monday, they suspended their latest effort, citing a lack of several million dollars to qualify a measure for the November ballot and tens of millions of dollars more to campaign for it.
Brackite wrote:California can start spending their surplus money by building a new stadium for the Chargers to stay in San Diego.
What's wrong with their old stadium?
The Chargers need to stay in San Diego.
Why?
"Finally, for your rather strange idea that miracles are somehow linked to the amount of gay sexual gratification that is taking place would require that primitive Christianity was launched by gay sex, would it not?"
The CCC wrote:California is arguing on how to spend its surplus.
California can start spending their surplus money by building a new stadium for the Chargers to stay in San Diego. The Chargers need to stay in San Diego.