Here is an inconvenient truth for the Democratic socialists that control New York City: Gotham is "careening closer to all-out financial bankruptcy," according to New York Post.
Mayor Bill de Blasio is expected to add billions of dollars more to the budget, amid a slowing economy and outward migration caused by tax reform, a recession would send the city into a "fiscal disaster," according to the report.
"New York City could go bankrupt, absolutely," American Institute for Economic Research economist Peter C. Earle told the Post. "In that case, the city would get temporary protection from its creditors, but it would be very difficult for the city to take on new debt."
Financial analysts warn tax burdened businesses and individuals would flee in droves, and public spending would have to surge to record levels, which would set off a fiscal nuclear bomb.
Long-term debt is about $81,100 per household, and Mayor de Blasio will spend as much as $3 billion more in the new budget for a total of $89.2 billion.
Analysts said Mayor de Blasio had detailed $750 million in savings for the preliminary fiscal 2020 budget, but that amount won't be enough to create a soft bottom during the next recession. Gov. Andrew Cuomo’s preliminary budget has $600 million in cuts for the city in 2020.
Spending is up 32% since Mayor de Blasio took office, the analysts told the Post that more spending cuts would be needed to get the fiscal house in order to avert bankruptcy during the next recession.
NYC's long-term pension obligations have also expanded to levels that may not be manageable.
New York state is ranked No. 1 in the nation for the highest taxes, and the top 1% of NYC earners pay some 50% of income tax revenue, per the Post. If businesses and people continue to flee to lower tax states while spending continues to rise, it could lead to financial hardships for the city, analysts warn.
"The city is running a deficit and could be in a real difficult spot if we had a recession, or a further flight of individuals because of tax reform," Vested's chief economist Milton Ezrati told the post.
And how close could the bankruptcy of the NYC be? Well, it depends on when the next recession strikes. For more color on timing, New York Fed President John Williams has signaled a slowdown in U.S. economic growth has already started, as the Federal Reserve is in “wait” and watch mode on incoming data.