Steven Malanga has lots of depressing news.
New York City’s average pension contributions have risen from 6.1 percent of its budget in 2005 to 11.5 percent today, according to a recent paper by Manhattan Institute scholar Daniel DiSalvo. In 2005, pension payments consumed 43 percent of income-tax revenue; in 2013, “every penny in personal income tax we collect will go to cover our pension bill,” Mayor Michael Bloomberg recently complained. America’s second-largest city, Los Angeles, has seen its pension payments rise from 3 percent of its budget to 18 percent today. Atlanta’s pension payments increased from $43 million annually in 2002 to $144 million in 2010, consuming 19 percent of its budget, before the city finally initiated pension reforms that capped costs and began reducing debt.
Read the whole thing. The way I see it, public employee unions are the 800-pound gorillas of state and local politics, at least in the blue states.
While at the same time the amount of wealth accumulated in major cities is increasing rapidly (at least in New York). Seems to me a simple issue of under-taxing.
Right.
When I read that part about New York City, with some of the highest municipal income tax rates in the country, creating an independent agency beyond the reach of constitutional debt regulations, ‘selling’ Attica prison to it (like it’s some kind of for-profit enterprise with dividends and return-on-‘investment’) for cash that the agency raised by selling loads of bonds backed, in the final analysis, by the taxpayer, that’s exactly what I thought too.
“You know what the real problem is here, a simple issue of under-taxing.”
Good grief.
Attica is a state prison. The “selling” of the prison was done by New York State, not New York City.
Democracy eats it’s young.
It selects for those politicians who promise their constituents the largest amount of other people’s money. The easiest money to promise is future money that must be paid by people who cannot vote against the promise So, the winning promise is retirement benefits paid by those under voting age. If we could tax all foreigners living abroad that would the winner. Only constant, surprisingly high growth rates can stave off collapse. Which has worked so far because people are so pessimistic about the future.
Exit > Voice
See Detroit, Vallejo, Europe, et al..
Great article. I’ve been sharing data and charts on pensions and other problems in our cities but missed this.
Not many are talking about the backdoor bailout that Obamacare offers cities on unfunded retirement health care costs, but this is sure to be yet another large expense that we haven’t yet seen in fed. govt. debt estimates. Malanga mentions Chicago pushing retirees onto the govt.-subsidized insurance exchanges. Recent reports (New York Times and Zero Hedge) cite Detroit and other cities looking into doing the same thing.
One of the most important statements in that article is the following, which also applies to any so-called “Debt Ceiling.”
“Reform should also cap state-supported debt by tying it to some flexible measure of economic or revenue growth, such as state personal income, rather than just stating a dollar limit.”
The same consideration is desperately needed to control increases in federal debt issuance. The “Debt Ceiling” has proven to be completely artificial, actually, non-existent.
A recommendation has been made to limit the authority of the Treasury to increase the federal debt in any four fiscal months in excess of specific percentages of collected revenues measured as the greater of the average of 4 months collected revenues in the preceding fiscal year or in the immediately preceding 4 fiscal months, absent application to, and approval by Congress. Those specific percentages can be determined and adjusted for future fiscal periods in order to *decrease progressively* the *rate of increase* in the federal debt.
The authority for increases in federal debt should be tied to the sources for ultimate payment which, absent debasement and inflation, are the revenues that can be, and are, collected by extractions from the private sector.
We blow past every single statutory ‘debt-limit’ and raise it the minute it threatens to actually bite. The City Journal article demonstrates how states and localities have proven adept at circumventing their constitutional debt requirements.
In other words, I am skeptical of any attempt to constrain debt by legal means in a democracy. The only thing that seems to work is for creditors to finally balk which precipitates a crisis. Like Greece or Detroit, we’re not good at avoiding such predictable crises.