Even with a healthy national economy, New York state and its biggest city are facing serious fiscal challenges.
The setup appears in place for an eventual historic deflation.
Here's an excerpt from a June 23 article in The Hill:
Dragging business practices, skyrocketing taxes, telecommuting, and loss of special status is a toxic mix for New York. …
The Empire State budget is in near freefall, in no small part due to lower revenue from middle class and upper class workers, while growing states like Texas and Florida are in surplus. Governor Andrew Cuomo noted a $2.3 billion hole in the state budget earlier this year, caused largely by oppressive policies that have gutted the local population and economy. More than 450,000 people moved out of New York in the last year alone.
In the Big Apple, the tax burden on high earners is onerous. The local government relies solely on the top 10 percent for over 70 percent of taxes, with the top 1 percent paying more than the bottom 90 percent combined. Any efforts to assist the most needy individuals are heavily dependent on the city keeping its reputation as a driver of the national economy. The accelerating outflow of middle class and upper class residents will no doubt tarnish that. As steep declines in revenue hit, spending cuts will burden the urban poor rather than the bureaucrats.
The current spending levels are likely unsustainable for the Big Apple in the long term. The New York City Council passed a $93 billion budget, which includes spending hikes of 6 percent for salaries, 9 percent for other employee benefits, 9 percent for debt service, 11 percent for health insurance, 12 percent for public assistance funding, and more. This local budget also set aside a new line item for taxpayer funded abortions, an army of new social workers, and even a package for the Green New Deal.
If New York continues to lose taxpayers in droves, the city will not be able to fund its current initiatives, let alone new spending increases. As the exodus further dwindles local revenue, public programs will eventually require massive cuts. Meanwhile, increased pension spending will eat up any slack the city has left. The pension plans are already underfunded to the tune of tens of billions of dollars. Retirement spending comprises nearly a quarter of the annual budget and will only continue growing.
One can only imagine the dire straits that the Empire State and the Big Apple will be in when the next financial crisis strikes.
Here's what Robert Prechter's book, Conquer the Crash, noted:
Don’t expect government services to remain at their current levels. The ocean of money required to run the union-bloated, administration-stultified public school systems will be unavailable in a depression. School districts will have to adopt cost-cutting measures. Encourage independent, entrepreneurial, low-cost, free-market solutions, which will benefit both children and teachers. The tax receipts that pay for roads, police and jails, fire departments, trash pickup, emergency (911) monitoring, water systems and so on will fall to low levels, and some of these services will be curtailed. Look for ways to get better services elsewhere wherever it is legal and possible.
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