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Please consider what would happen if the state unemployment, and all the other so called “welfare” programs were ended. What would happen to the price of housing in your town?.... Many small business selling things to “welfare” customers would collapse.
If unemployment and other welfare programs were ended, then taxes would go down and people would have more money to spend on housing. The values would go up...
As for small businesses selling things to welfare recipients, wouldn't they be able to sell more if those welfare recipients were gainfully employed and made more than they get from welfare? They'd have more money to spend... Put another way, I can't imagine a small business owner saying 'gee, I wish we had more welfare recipients around here so my business would increase'... If anything, their business would go down when people with jobs become unemployed and go on welfare...
Hmm. That '60 Minutes' program on state finances is rather sobering:
60 Minutes Video - State Budgets: Day of Reckoning - CBS.com (http://www.cbs.com/primetime/60_minutes/video/?pid=5aqxjXF2pG9wdYB8F5rq_3j6tN4i_j6v&vs=homepage& play=true - broken link)
It seems unless a State's economy is separate from all others in this nation, and the broader world, then consequences to one degree or another shared.
One trillion in unfunded health and pension benefits across this country? No way around it, many people are going to see their standard of living reduced. If arguing the merits of various pensions, they were entered into in good faith, promises made, often decades ago, and now this. If New Jersey didn't fully fund its pension program in the last 13 of 17 years, no less than theft, promises made not fulfilled. But we've seen the same disregard for a long time now from other States and corporations. Just now, all these birds coming home to roost.
Also mentioned all the coming municipal defaults within the next year, amounting to hundreds of millions of dollars. Something until now considered one of the safest investments? There is no way that is not going to have widespread repercussions. Even if not a single community in New Hampshire defaulted, if the general market suffers this, good luck trying to get new financing. Since co-joined, such defaults will probably help to depress the overall housing market. This housing market which may not bounce back as most would prefer. It is based on an ever expanding economy and paradigm no longer extant.
What chance the States can expect more stimulus money when that currently given expires come spring? From a Federal government which currently funds about 40% of its expenses through loans, mostly from China? That is predicated to large extent on the historical strength of the US dollar as a reserve currency. But the basis for that has diminished, with China and other countries beginning to look elsewhere.
Our national debt is somewhere around 11 trillion, with total Federal obligations in health and pensions more like 50 to 60 trillion. Due in a matter of decades. Add to that the State's, and neither they or our Federal government solvent. Not if all their markers were called in tomorrow.
My hope that New Hampshire might weather this coming storm relatively well. Hopefully better than many others in having a tradition of thrift and self-reliance to turn back to. But you will have a lot of neighbors in desperate shape, and possibly not much of a market beyond to sell your goods and services, or, if so at less.
The governor of New Jersey is surely right, the money just is not there. Not what was promised, or we assumed. That only in the continuance of a national Ponzi scheme, unsustainable. Now over.
Great post Idunn. There is no way for many of these staes to fund these future obligations. NH is going to have trouble with its pension system somewhere down the road unless measures are taken now.
[quote=GregW;17070442]
Please consider what would happen if the state unemployment, and all the other so called “welfare” programs were ended. What would happen to the price of housing in your town? I don’t think it would ever recover to pre boom values. Privately owned apartment houses would also decline in value. The stability of the mortgage holding banks would decrease. Eventually populations would decrease starting in the smaller depressed towns in upstate NH. Many small business selling things to “welfare” customers would collapse.
No not really.
1) First of all the housing market has been in a bubble for quite some time now. We're not going to go back to pre boom values simply because there's less of a reason to have a house. Cities are where most people live and few people live in the same place for 30 years. Houses also require maintenance so the long term costs are higher than apartments (equity is a thing of the past outside of the northeast) There's 19 million empty homes in the country. We simply overbuilt and until we have another 15 million or so people in the country to at least half fill that amount prices cannot logically come back.
2) Subsidising the demand of anything simply leads to higher prices. Cash for clunkers lead to the used car market going UP in price since it took decent cars off the market rather than having them up for sale. FAFSA with college tutition gives free money to anyone (no credit check required!) so most colleges easily have filled classrooms and since competition does not expand the only incentive is to expand the campus and raise tuition..think about it this way. Since the Red Sox broke the curse Fenway park constantly sells out. There's no incentive to lower ticket prices but there is an incentive to expand the stadium..eventually people will be on top of each other. Another example is the health care in massachusetts. In mandating insurance for everyone it creates a higher cost of living. Because there was no creation of more supply (i.e. doctors, nurses etc) it meant that most that could afford health care were actually punished with longer waiting. There's no incentive in treating more people.
3) Your last comment does not make any logical sense. No business in their right mind would cater to the poor in terms of a long term demographic. While there are businesses that can cater to lower incomes it does not mean it is sustainable. For example a Salvation Army or Good Will store does not sell stock items, it resells donated goods! You cannot use walmart an example as there are retailers that are cheaper than walmart and price matching policies by retailers are akin to nearly price fixing. I've toured factories in China and much of what is produced is by oem's (original equipment manufactures) I saw Ronco made next to Black and Decker made next to walmart brands. It actually makes more financial sense to sell products in other countries than those on assistance in the USA. Other countries have much higher savings rates and a lack of automatic and easy credit (for example in Mexico 90+% of people that have homes actually own them outright). Small businesses are not apt to want people on assistance as a key demographic for the same reasons, it simply is not sustainable.
Great post Idunn. There is no way for many of these staes to fund these future obligations. NH is going to have trouble with its pension system somewhere down the road unless measures are taken now.
Potentially but I think NH is in a unique spot. Basically it has no income or sales tax but uses a statewide property tax.
In the USA there is no direct taxation on wealth unless someone died (estate tax). We tax the means of which it is to become wealthy (income and in terms of assets sales taxes).
Income taxes are odd because frankly it is easy to get out of paying them. If someone is poor and does not work then they don't pay. If someone is rich and simply banked money they STILL don't pay because they don't have to work. Bill Gates doesn't have to pay a income tax because he hasn't worked. Once someone makes enough they simply stop working. Sales taxes can be avoided by shopping online. Excise taxes can be avoided by making your own alcohol, rolling your own cigs (or buying on a reservation/military base). Eventually it becomes evident that there is no safe tax base.
The original concept of wealth was simply ownership of land which is what makes what NH does quite logical. If you want to get out of paying a property tax you have to sell the property in question. In order to sell it you must logically then make it sellable. So upkeep is maintained.
What really brings down value is lack of growth to the point of abandonment. On a domestic scale no building company in their right mind would want to redevelop Detroit. On a international scale that would be Russia.
I'm not trying to claim it will be easy for NH but it should be easier. Eventually other states will probably copy some of the policies here and there.
Potentially but I think NH is in a unique spot. Basically it has no income or sales tax but uses a statewide property tax.
In the USA there is no direct taxation on wealth unless someone died (estate tax). We tax the means of which it is to become wealthy (income and in terms of assets sales taxes).
Income taxes are odd because frankly it is easy to get out of paying them. If someone is poor and does not work then they don't pay. If someone is rich and simply banked money they STILL don't pay because they don't have to work. Bill Gates doesn't have to pay a income tax because he hasn't worked. Once someone makes enough they simply stop working. Sales taxes can be avoided by shopping online. Excise taxes can be avoided by making your own alcohol, rolling your own cigs (or buying on a reservation/military base). Eventually it becomes evident that there is no safe tax base.
The original concept of wealth was simply ownership of land which is what makes what NH does quite logical. If you want to get out of paying a property tax you have to sell the property in question. In order to sell it you must logically then make it sellable. So upkeep is maintained.
What really brings down value is lack of growth to the point of abandonment. On a domestic scale no building company in their right mind would want to redevelop Detroit. On a international scale that would be Russia.
I'm not trying to claim it will be easy for NH but it should be easier. Eventually other states will probably copy some of the policies here and there.
I should point out that when I said measures should be taken to address the NH pension problem i did not, nor do I support an income or sales tax as an answer. NH needs to get rid of ALL defined retirement accounts & go to a type of 401k system. no more 100% lifetime medical & dental, no more double-dipping pensions....not cause I'm mean, or a bad guy, but because we can't afford these things any longer. BTW I would honor all current pensions....if you're in, you're in. We should not take away what people have worked for, but these golden pensions many people in the "public sector" have need to be ended.
Bill Gates doesn't have to pay a income tax because he hasn't worked.
That is true if Bill Gates puts his money in a safe depost box or shoves it in the closet. In reality, he invests it which produces income sooner or later... Even though he does not have a salary, he's retired, he is probably paying some income tax....
This is also not news; public policy think tanks and organizations like the GAO have been reporting on federal and state fiscal stress/crisis for YEARS. The difference is that now people are starting to listen -- finally.
There is a lot of good information out there - try CRFB, GAO, Pew Charitable Trusts, Pete Peterson Foundation, Cato -- those are just a handful of sources to start with.
Even our public safety employee pension system needs reform, IMO. Pension is determined by the highest grossing years of earning, and it's pretty standard to 'bump up' those final years earnings by working as many overtime and especially holiday shifts as possible. Combined with the fact that by time you've done the years to earn that pension, your base pay grade is already 'up there' due to promotions, etc. I don't begrudge a good living to those who work to serve their communities, but I do think that their lifetime pension should be based on BASE pay, not highest year pay ever earned... Just MHO
Quote:
Originally Posted by Brave Stranger
No more 100% lifetime medical & dental, no more double-dipping pensions....not cause I'm mean, or a bad guy, but because we can't afford these things any longer. BTW I would honor all current pensions....if you're in, you're in. We should not take away what people have worked for, but these golden pensions many people in the "public sector" have need to be ended.
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Home to roost
