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State Deficits - Wars
On NY's Spending
NY State’s new Governor Andy Cuomo came out with his 2011 budget. The
Gov. referred to it as an austerity budget. Amazing what austerity looks
like these days.
The total austerity spending in the plan comes to a tidy 133 billion. A
very big number these days. But really it is much worse for those long
suffering New Yorkers. They also have to pay city, town and county
taxes. The 2011 budgets for a few of the other big spenders:
NYC………..…$65b
Nassau county….$2.8
Westchester……..$1.8
Buffalo,
Syracuse,
Yonkers.
Rochester……….$2.0b
On top of this you have hundreds of other smaller cities, towns,
villages that also are collecting taxes and spending money. The numbers
I’ve provided for 2011 equal more than $205b. The total is at least
$225b.
The census put NYS GDP at 1.09 trillion in 2009. It will be higher than
that in 11’. Call it 1.2T (generous). The conclusion is that NY State’s aggregate public sector spending to GDP is 19%. But, of course, it's worse than that.
NY’s citizens also pay federal taxes and share in the federal budget.
What is NY’s share of that? Total federal spending will come in at
around 3.3 Trillion and GDP around 15T. Federal spending is 22% of total
GDP. Does this mean that the combined (state/federal) spending to GDP
is ~40%? No, there are some double counts as some federal money actually
goes back to NYS. But the number is certainly not less than 30%. It is
at least one-third of state GDP.
Unsustainable is the word that comes to mind. And this is an austerity plan.
**************************************
State Wars
The BLUE/RED state politics are interesting to watch. The Reds killed
the Blues over BABS. The impact on the Muni market has already been
felt. The Blues are at it again. The issue this time? Deductibility of
state income and local property taxes (“SALT”) for IRS calculations.
This is a big deal. It will hit those Blue states very hard. Total SALT
taxes were $700b in the last fiscal year. Using a federal rate of 25%
you get total deductions of federal taxes of $175B. Which state’s
residents will be whacked on the head with this plan? Blue states, of course.
State sales taxes can also offset IRS liabilities. They have fallen into
the category of “other taxes paid”. Therefore it would be “logical” to
eliminate the deductibility of sales taxes as well. It would be a huge
“stealth” tax increase. But we might not get a logical outcome. Once
again, the Reds are trying to screw the Blues. Congressman Kevin Brady
(R., the very Red State of Tx.) has proposed that the deduction for
state sales tax be made permanent.
Something along these lines is in the works. There will be limitations
on the deductibility of SALT. Sales taxes will be fully deductible. For
Texans who pay large sales taxes but pay no income taxes it results in a
big win over the poor slobs in NY, CA, and IL who will have to foot the
bill. In 2007 the 19 big blue states levied property taxes of $241b. This came to 65% of the US total. In 2011 both the raw numbers and the percentages are higher. Meaning a loss of property tax deductions hits the blue states disproportionately large.
So the Reds will “win” again. This is about politics, not sound tax policy. This is about the next election.
There is going to be a big conflict between Red and Blue states. There
already is the basis for a war. What the Reds keep forgetting is that a
substantial portion of federal revenue comes from the Blue states. So it
is really not clear who is holding the best cards. A possible outcome
could be that California, NY and Illinois band together and invade
Texas. Texas will prove to be the balance of power as the “beggar my neighbor’s state” policies unfold.
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Just have to worker harder top!
good content, appreciate the colorful graphic at the end.
Sorta hillarious here. NY reliefers cannot invade Texas because they cannot afford the bus ticket!!!
Hopefully we can forgo another civil war. I've always loved that term; 'civil war'. We've all heard the song by G & R.
hasnt Texas (and others) learned anything yet......The fiscally Conservative, Prudent and savers are all getting kicked in the teeth by those who spend as much as they possibly can !
The whole purpose of the QE concept is to get Blue Staters to think and act like Red Staters. QE is a failure if the Blue Staters continue along on their merry way.
I like. Responsibility, the forgotten virtue.
Be quiet! You are giving away the plan!
Thinking of the blue states brings to mind the idea of sleeping in the bed you made -pandering to the unions to win votes. Of course the real losers are the residence of said states but really, who can they blame if not themselves and their complete apathy and willingness to be won over by retarded attack ads.
Elections in America are always the best, its like watching a circus except with more clowns.
Wow, this could be a good one...
Anyway, you get the drift
In the battle for the brightest headlights there are no winners - just idiots
LMFAOROTF!
bruce, let's do it peaceful. just kick us texans out of the union. we promise to go peacefully. we will dutifully sell to you oil and gas and food, if you want it.
we should trade oil and gas for nukes and the gold in ft knox!
(j/k. in Texas, we all know there is no gold in ft. knox).
You're right. If Texas were a country it would be doing okay. But Texas has 49 "equal" partners. In world history situations like this have lead to war. This will not.
My/your point is that there are some very big conflicts of interest going on. Beggar my neighbor policies are on the increase. That feature is here to stay. What will give?
you mean as the economy tanks war tends to break out... the socialist States are bankrupt, run out of others money again (dumb eh?), so if they kick off i'm all for it, no qualms kicking whining lefties when they're down
good points of course.
keep in mind that there are "elements" back east (and in the leftist world) that want to do away with the electoral college, turning the presidential election process in the favor of the northeast corridor and the west coast of california where the blue cities dominate in numbers. that, of course, would undermine the notion of equal partnership of the smaller states as the founders wanted.
The real scary thing is that Texas can legally leave the US (it is part of the original agreement when they entered the Union as a Sovereign nation). Even with much less oil than in the past, what the economic impact would be for the US if it had to IMPORT TEXAS OIL!
I believe the original agreement also allows Texas to split up into FIVE states... Imagine that, 3 MORE red states and 1 more blue (South Texas).
Before he became a Bearing and rolled out of the state, I lived there. Texans bluster about their state with good reason.
Attitude, that is not true at this point in time. In Texas' original constitution Texas could leave the Union at any time. That was changed after the Civil War.
There's a lot of oil left in Texas. Wait and see.
Now if only we could get Western Canada to separate too, that would be something great.
News flash from Austin - the invasion of Texas began several years ago. New Yorkers and Californians are moving here in droves, fleeing the high tax regimes and unhospitable climates (business and otherwise) in their prior state of residence.
"Happy cows come from California"
Then they move to Texas and artificially escalate property vales.
And they are doing the same in OK. I watched 'em do it in AZ way back when.
No, the reason is RE in Texas is dirt cheap.
Well f*ck y'all, I live in Texas. We are not one of those commie states who hand out endless welfare to useless citizens.
no the reason is nobody wants to live near nasally-voiced liberal yanks who think stealing more from productive people is the key to prosperity.
Bruce wants more regulation, more keynesianism, more taxation. Not an appealing crowd to say the least.
yeah this red state blue state thing is interesting. It's been amazing how the red states have been playing the blue states for dupes and bagholders for so long. However any good con man knows the best way to set up your mark is to make him think he is smarter than you. We play the dumb helpess hicks pretty well down here.
this is how the balkanization of america begins cuz what do californians have in common with texans? not much. and yes the tax dollars california pays does benefit texas more than california
That's an often repeated lie by broke clownifornians. Texas pays more in federal income taxes than it receives in benefits. The two biggest federal welfare states are Maryland and Virginia. NY took 1st place in 2008-2009 with the bailouts
Don't worry, the Great Rebalancing will end all that subsidy. Just keep sending that great california wine and pot my way.
Pretty funny, I live in a red state and my friends have a shitload of gold/silver/palladium/cotton/soybeans and ammo.
You liberal yankees believe in buying us debt, fiat currencies. We would rout you out in the event of a conflict.
with a mass civil unrest its not going to be easy to defend what you have, in that situation its probably better to be nomadic, raping and pilageing as you go. So have fun lookin over your shoulder lololol
It will be much tougher for the libs who live in la-la land and aren't physically prepared for such a scenario.
Texas #3 in the union for obesity. Put down the BBQ, Hoss.
Says pton in her pink tutu.
Yea okay....
I hope you are using the general "You." We pretend to be helpless hicks and in need of subsidy and the blue states play along. They just now realized that the tax credit for state sales taxes is a blue state subsidy? (well if you include Washington as a blue state, they are sorta blue).
btw if you are calling for a war im sure you will be joining your blue compadres. I'll be on the other side, good luck. Shouldn't be hard defeating scrubby keynsenians old folks calling for a war. Be careful what you wish for Bruce.
For the most part the blues are lawyers. That probably plays to their advantage in the war. That's not to say there won't be some hard feelings. Judging from the comments here I would say it already exists. That's interesting.
I live in NY. We finance everything. Without us the clock stops. California on the other hand.....
Bruce,
You are funny, arrogant and stupid.
You have not worked out in the real world much. The most vulnerable man is the one with exclusive abilities. I bet China could handle the finance biz cheaper and more profitably, with impeccable english and math. NY is a ghost of what it was. The smart money moved out after 9/11.
Thank you. Countries and locales are rich because they produce value, not because they push papers.
NY is done and Bruce thinks he is invaluable because he writes mediocre finance articles for a living.
Arrogant, stupid and now mediocre. Glad you enjoyed the piece... As for doing this for the big bucks? Well, that's not what it's about at all. I make no money at it.
So, not much left to do after this. Fortunately the roads are very icy right now. Should be no problem to slide headfirst into some bridge abutment....
Some of the happiest people I know are arrogant, stupid and mediocre. Just sayin'. Yo da man, Bruce.....love all your stuff !! :>)
Bruce--Its a tough crowd. I've noticed a big uptick in violent and downright hostile rhetoric on ZH. I'm not some crybaby over people doing there own thang, but geez, calling someone these sorts of names over an article when Bruce is doing this on his own dime and not making one cent?
Pretty lame of them.
Anyway, always looking forward to your columns, Bruce.
PS- People you can disagree without being douches.
PSS-- and fuck the people who will junk me. ;)
Promise??
you are a self-important fuck, without new york the clock stops? That's a joke, without the food from the south and midwest you starve.
It is clear that the Red states are much better armed, and won't have to buy ammunition on credit.
Sorry Bruce: you had me laughing at "fairness". All shades of irony there.
Ps-Texas wins in the end.