Why Are So Many U.S. States Facing Budget Deficits? 33 comments
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Many states in the U.S. are facing budget deficits this year. According to one estimate states collectively will face an estimated $80B in deficits. California is one of the states with a huge budget shortfall. Today the rating agency Fitch downgraded California to A-minus and is just eight days away from issuing IOUs unless lawmakers solve the crisis.
The following are some examples of budget deficit news headlines:
- Strickland: Ohio facing $7 billion deficit
- Michigan’s budget deficit gets deeper
- Florida faces $1.5 billion budget deficit
- State budget deficit grown to $12.5B, says Paterson
- Arizona Budget Deficit Worst in the United States
Faced with these shortfalls, many states are cutting services and increasing fees on items such as auto licenses, title, registration, etc. Some local governments are adding traffic red light cameras to catch speeders and generate additional revenue. One of the worst fees that is becoming popular is the so-called “crash tax,” which is basically fees charged for fire and police response when a person is involved in an accident. The logic behind this is that if one is involved in an accident he/she has to pay for the emergency services they receive. Mostly this fee is charged to the insurance carrier. However in some cases the drivers who caused the accident have been sent the bill.
I wanted to find out why many states are facing budget shortfalls now. The following graphs are the result of my analysis.
click to enlarge
The above chart shows that since mid-2006, state and local government social benefits spending as a percentage of current receipts has been increasing consistently while all four main type of tax revenues have been either flat to down or went up very slightly. Income, sales, and property taxes on corporate income have all been below social spending in 2008. Sales tax revenues and corporate tax incomes are on a downward slope due to the current recession. Property taxes for all states have stayed in the 20% range since 2002. Higher unemployment rates projected for the rest of this year will push social spending higher and cause other tax revenues to fall.
A historical graph of state and local revenues and social spending is shown below. This chart also shows that social spending as a percentage of current receipts has increased over the years.
There are other causes of budget deficits that are not addressed in the analysis. Some of them include reckless spending on wasteful projects, high salaries paid out to current government employees, liberal retirement benefits, health care benefits offered to retired workers, and more.
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This article has 33 comments:
At one time civil service was a lesser-paid profession but now these government workers earn MORE than private sector and are among the only defined benefit pension workers left.
Government workers across America are financially raping all non-government employed taxpayers.
Yeah but the banks - who steal everyone's taxpayer money - they're good for America?
If you have to relocate here and have a choice, move to Virginia instead of NC. Don't say I didn't warn you.
So it's just a matter of time.
On Jun 26 09:12 AM Tomcat101 wrote:
> I live in North Carolina. We have morons running this state. You
> can drive 45 minutes from here over the Virginian border and it's
> a whole new world. Virginia has lower taxes, better roads, etc.,
> and their budget is in good shape.
>
> If you have to relocate here and have a choice, move to Virginia
> instead of NC. Don't say I didn't warn you.
Would that be the liberals who built the research triangle, one of the biggest economic success stories of recent years? I suppose you prefer the freedom and prosperity of Bushonomics, the wreckage of which we are all floating around on right now. Maybe you prospered from those policies, but I sure didn't.
On Jun 26 09:54 AM John Bowman wrote:
> A friend of mine who moved from NJ a few years ago to southern Virginia
> commented about the situation there. He told me that the liberals
> were slowly destroying North Carolina. However, he noted that the
> northern Virginians near Washington DC with their liberal agenda
> would eventually destroy that state.
>
> So it's just a matter of time.
So Virginians and North Carolinians who are still Republicans, we did it your way for 30 years. You have already reaped what you've sewed. I would not be complaining so loudly now.
In a county where the average worker still makes under $30k, ALL the administrators in the Fire Dept make six figures. More than half of all six figure earners in my county are on the government payrolls.
Ever wonder where the fiscally irresponsible congress critters come from ? They get their start as fiscally irresponsible Republican and Democratic local and state "representatives".
So, yes, falling tax receipts are a problem, but the CAUSE behind the crisis is elected government officials at all levels with no concept of fiscal responsibility.
In CA 1000's of gov workers are paid $250,000, plus lavish lifetime retirement benefits.
My solution, 4 steps;
1-cut all state salary's over $100,000 to $99,999, no salary's over $100,000,
2-cut all state salary's under $100,000 by 10%,
3-eliminate 10% of all state jobs,
4-eliminate defined benefit retirement, convert to defined contribution, 401K retirement for all gov workers in CA.
these steps would go a long way to ending the budget crisis in CA.
Maybe add one more; freeze all gov compensation for 5 years, until we pay off recent borrowing. I really like that idea.!!
The top chart, if correct, clearly demonstrates that corporate income taxes are a fly speck in the overall revenue stream compared to income and sales taxes as a % of revenues, and the bottom chart would seem to indicate that corporate income tax contributions as a % of revenue have been essentially flat at absurdly minimal levels since 1929!
Meanwhile, state and federal income and sales taxes march ionexorably higher and continue to destroy the middle class's disposable income, and some folks seem to infer that we shouldn't be paying out "social benefits" such as unemployment benefits to those who need them the most - the unemployed of the disintegrating middle class.
I'm sorry, but will someone PLEASE PLEASE PLEASE explain to me how this dynamic will prevent the major contributor of America's past economic growth, namely the middle class consumer, from continuing to experience a terrible collapse in their household net worth and disposable income - thereby keeping household spending, foreclosures, credit defaults of all types and the myriad of other problems overwhelming a huge percent of the population in the death spiral we see day after week after month - despite the nonsense coming out of the media and pundits and special interests about how the bottom is in and its onward and upward.
NO! Its NOT! Look around you people, this is an ongoing, evolving catastrophe of historic proportions that will forever change the socio-economic face of America, and its ramifications are still nowhere near being realized by most!
> jack
When the voters finally wake up to this fact elected officials will loose their jobs. Our country shouldn't destroy our future generation just to give a set amount of benefits to previous generations.
Somehow I see this as the big policital issue for the next 10-20 years. At what point do the Xers out vote the Boomers?
On Jun 26 02:02 PM Swashbuckler wrote:
>Anyone in the middle class who believes that members of either party give two $hit$ about them is in severe need of professional psychological evaluation.
On Jun 26 10:04 AM emilyx wrote:
> "He told me that the liberals were slowly destroying North Carolina.
> "
>
> Would that be the liberals who built the research triangle, one of
> the biggest economic success stories of recent years? I suppose you
> prefer the freedom and prosperity of Bushonomics, the wreckage of
> which we are all floating around on right now. Maybe you prospered
> from those policies, but I sure didn't.
People like to complain about the Mexicans coming here. They should be worrying about the Michiganians.
On Jun 26 10:33 AM WS1835 wrote:
> Out here in the northwest, ex-Californians have done the same thing
> to Washington, Idaho, Montana, etc. They flee California, then slowly
> institute the same crazy, tax-and-spend policy, liberal agenda in
> whatever locale they relocate to.
Pretty soon there'll be a civil service tax for when you go to town hall to ask about your water bill
We need to vote out anyone who was in favor of giving mtgs. to people with bad credit. They've got to go.
On Jun 26 10:36 AM Sunnsea wrote:
> Always through the lens of right-wing radio/cable TV talking points.
> Where would guys be without Rush, Savage, Liddy, North, Hannity,
> Fox? Where would you get your ideas from anyway? States that counted
> on financial services and real estate projected no crash would occur,
> but those of us who know how the game is played globally could see
> this coming for at least 10 years. It has nothing to do with "liberals"
> and has everything to do with deregulation and repeal of Glass-Steagall.
> Of course you guys must still think Clinton was a liberal, but he
> was nothing of the kind, he was one of you...he gave you everything
> you wanted: repeal of G-S, the Telecommunications Act of 1996 which
> concentrated more media in fewer hands, thus your love of Fox, etc..
> He gave you NAFTA, which gave America low wage competition to break
> the middle class, while at the same time forcing Mexican small farmers
> to come north by the millions in order to survive after being forced
> off their land by lower priced American agricultural products, and
> the de-industrialization of America including North Carolina and
> Virginia begun under Reagan accelerated under Clinton (and Bush)
> and then you had the temerity to impeach Clinton over sex. Not much
> in the way of gratitude I'd say...And as far as your "civil servants'
> " wages and benefits, the wage levels are what's needed in both private
> and public sectors in order to maintain a decent standard of living
> and the "benefits" are part of America's silly, byzantine private
> employer-based health payments system which would be much less costly
> under a single-payer system in which all would be covered and all
> would pay into. Had middle-class salaries and wages kept pace with
> CEO salaries from 1981 to now, the average annual income in the US
> would be $100,000 not $43,000 as it is today.
> So Virginians and North Carolinians who are still Republicans, we
> did it your way for 30 years. You have already reaped what you've
> sewed. I would not be complaining so loudly now.
On Jun 26 10:36 AM Sunnsea wrote:
> Always through the lens of right-wing radio/cable TV talking points.
> Where would guys be without Rush, Savage, Liddy, North, Hannity,
> Fox? Where would you get your ideas from anyway? States that counted
> on financial services and real estate projected no crash would occur,
> but those of us who know how the game is played globally could see
> this coming for at least 10 years. It has nothing to do with "liberals"
> and has everything to do with deregulation and repeal of Glass-Steagall.
> Of course you guys must still think Clinton was a liberal, but he
> was nothing of the kind, he was one of you...he gave you everything
> you wanted: repeal of G-S, the Telecommunications Act of 1996 which
> concentrated more media in fewer hands, thus your love of Fox, etc..
> He gave you NAFTA, which gave America low wage competition to break
> the middle class, while at the same time forcing Mexican small farmers
> to come north by the millions in order to survive after being forced
> off their land by lower priced American agricultural products, and
> the de-industrialization of America including North Carolina and
> Virginia begun under Reagan accelerated under Clinton (and Bush)
> and then you had the temerity to impeach Clinton over sex. Not much
> in the way of gratitude I'd say...And as far as your "civil servants'
> " wages and benefits, the wage levels are what's needed in both private
> and public sectors in order to maintain a decent standard of living
> and the "benefits" are part of America's silly, byzantine private
> employer-based health payments system which would be much less costly
> under a single-payer system in which all would be covered and all
> would pay into. Had middle-class salaries and wages kept pace with
> CEO salaries from 1981 to now, the average annual income in the US
> would be $100,000 not $43,000 as it is today.
> So Virginians and North Carolinians who are still Republicans, we
> did it your way for 30 years. You have already reaped what you've
> sewed. I would not be complaining so loudly now.
On Jun 26 10:04 AM emilyx wrote:
> "He told me that the liberals were slowly destroying North Carolina.
> "
>
> Would that be the liberals who built the research triangle, one of
> the biggest economic success stories of recent years? I suppose
> you prefer the freedom and prosperity of Bushonomics, the wreckage
> of which we are all floating around on right now. Maybe you prospered
> from those policies, but I sure didn't.
I may come off as a hard-line hard nose Republican here, but greed knows no party. We all blew it, and now we all suffer. Liberalism is a form of greed just as opportunistic capitalism is. But capitalism will get us out of this faster and better, and with our freedoms intact. I prefer to leave the basics alone and let the system reset itself. Get government out of the wealth redistribution business and stop making promises no tax payer can make it keep.
On Jun 26 11:55 AM wpdragon wrote:
> I love how the pro-business right always screams about how we are
> raping corporations with onerous income tax levels. They seem to
> conveniently forget how many pro-business tax incentives and initiatives
> the individual states have put into place to attract those very same
> businesses, while many of those self-same businesses have then off-shored
> many middle class jobs to Asia and elsewhere as gratitude for the
> largesse of the individual states.
>
> The top chart, if correct, clearly demonstrates that corporate income
> taxes are a fly speck in the overall revenue stream compared to income
> and sales taxes as a % of revenues, and the bottom chart would seem
> to indicate that corporate income tax contributions as a % of revenue
> have been essentially flat at absurdly minimal levels since 1929!
>
>
> Meanwhile, state and federal income and sales taxes march ionexorably
> higher and continue to destroy the middle class's disposable income,
> and some folks seem to infer that we shouldn't be paying out "social
> benefits" such as unemployment benefits to those who need them the
> most - the unemployed of the disintegrating middle class.
>
> I'm sorry, but will someone PLEASE PLEASE PLEASE explain to me how
> this dynamic will prevent the major contributor of America's past
> economic growth, namely the middle class consumer, from continuing
> to experience a terrible collapse in their household net worth and
> disposable income - thereby keeping household spending, foreclosures,
> credit defaults of all types and the myriad of other problems overwhelming
> a huge percent of the population in the death spiral we see day after
> week after month - despite the nonsense coming out of the media
> and pundits and special interests about how the bottom is in and
> its onward and upward.
>
> NO! Its NOT! Look around you people, this is an ongoing, evolving
> catastrophe of historic proportions that will forever change the
> socio-economic face of America, and its ramifications are still nowhere
> near being realized by most!
On Jun 26 10:33 AM WS1835 wrote:
> Out here in the northwest, ex-Californians have done the same thing
> to Washington, Idaho, Montana, etc. They flee California, then slowly
> institute the same crazy, tax-and-spend policy, liberal agenda in
> whatever locale they relocate to.
We have around 3 million population, Our mines grew FAT PROFITS for 3 years all of which has gone...somewhere,god only knows where.
Our State deficit is ..... 75 BILLION DOLLARS :-(
thats right,3 million Population,75 billion debt to the chinese banks.
The Premier( governor in US speak) has given her husband a job,"head of the office of climate change", and pays him $500,000 per year.
This Article could have been written for Queensland,especially when I go to pay my annual vehicle registration and it's $800. Go over the speed limit and the minimum I pay Is $300.
It's Global allright! More here if you really want to stir the pot and bring on real change.
animalspiritspage.blog...
NO governments did this - local, municipal, state or federal!
We get the type of government we ask for. When voter turn out is less than 40% of those eligible to vote. This is disgraceful!
So, if you are one of those that couldn't be bothered with voting, you have no right to bitch! Next time get involved.
On Jun 26 05:33 PM roywil wrote:
> Just as Mass., NJ, and NY liberals have infested VT, NH, and Maine.
> Sad, sad, sad.
>
> On Jun 26 10:33 AM WS1835 wrote:
Basically, we had a bubble economy for the last 10 years, at least, maybe more, going back to the start of the Reagan years, but I will need to research that further; but certainly for the last 10 years of asset inflation as a result of massive increase in the monetary supple by the FED.
However, you can increase the money supply, and have a temporary increase in asset values, which can then be accessed by consumers via massive increases in debt, but, since it was all fictitious capital to begin with, that is, not based on the productive forces, it had to collapse at some point.
Actually, when you think about it, the whole of the economic model of capitalism is mostly based on the absurd accumulation of fictitious capital, which inevitably leads to a crisis of over-production, when the velocity of money collapses b/c demand, fueled by debt of assets inflated by excess fictitious capital, can no longer be sustained...
Of course, if you know how the game of capitalism is played, you can make sure you take a chair when the music stops, so to speak. But, the masses still, by and large, buy into the illusory wealth effect of capitalism, as it has been practiced in the USA for the last 30 years or so, and are crushed when the fictitious capital wealth effect is removed.
Well, I hope that at least a few readers now know and don't buy into the propaganda about capitalism lifting all "boats", or even most boats , but instead, if they are young enough, make sure they take a seat before the music stops: sell your stocks, sell your property, sell your business, etc, before the ponzi scheme that is capitalism comes crushing down on the masses.
Thanks Al-USA.I agree many people misunderstand the mechanics of how capitalism works.