The US has a banking system, plus the FED understands what it means for a state to go burst... they won’t allow it. Europeans on the other hand, are ruled by semi-retards who believe that following the random rules made by someone 30 years ago, will save them from what is coming. It would funny if it wasn’t so tragic to be honest.
Without a Federal effort, people will just move in order to avoid the local taxation required to sustain cities and states. For those in the California cities, the triple whammy of city budgets, CalPERs, and fire recovery will only be solved by huge tax increases.
The Fed has changed policy, 2% is not a maximum anymore. With as much government debt as we have now, inflating it away is the only realistic way to get rid of it.
Higher inflation reduces debt over time. You take on a mortgage and 10yr later paying it is cake because the debt doesn't track inflation whereas your pay does.
Lot of countries around the world intentionally debase their currency to stay competitive. It's a valid monetary instrument. In the short term, currency debasement would lower the standard of living of Americans, but it would make their labor competitive.
Money is just a mechanism for resource allocation - there are many unemployed people, and there is much infrastructure that needs fixing (not just physical infrastructure, but also social infrastructure). Let's allocate those resources, through government direction if necessary, and sort out the money stuff later.
This is not guaranteed. Recall that in the 90’s Orange County - then a relatively affluent region - had to declare bankruptcy. Just because there are people who could foot the bill, does not mean that they will. If the surplus of wealth is in a community consumed by an inefficient urban structure then a financial crisis will arise just the same. In a lot of suburban areas the density is such that the infrastructure costs more and the property value is lower (on a per lot basis). The end result is that a lot of the wealthy suburbs will go broke.
https://www.strongtowns.org/journal/2018/9/5/but-rich-people...
In a lot of suburban areas the density is such that the infrastructure costs more and the property value is lower (on a per lot basis). The end result is that a lot of the wealthy suburbs will go broke.
If a suburb or ex-urb's liabilities exceed their assets, weren't they already broke? I'm trying to understand because I don't know a lot about this whole issue. But unless they charge people a whole lot in taxes to live in those areas, I'm not seeing how those places weren't poor in reality from the start? It seems to me those suburbs just managed to have other people pay for their infrastructure and services for so long that they never realized they were broke. But maybe there is some other source of money that they get from somewhere?
Most localities sell bonds, backed up by promise of future tax revenue. Eventually their bonds are downgraded and they have to pay higher and higher interest rates. Finally, the math comes crashing down and the game is over when the market has no more appetite for the bonds and the state and feds won't backstop them.
In some sense yes, but the bill doesn’t come until much later. A city can run a deficit for a long time before its debt payments become its biggest budget item (or second after its police department in many cases). This leads to cuts, austerity and the usual contractions to a more manageable budget.
And yes, in many cases the infrastructure for suburban development is initially paid for by someone else. Often some combination of federal and state programs to build roads and other public works projects along with subsidized loans.
If the county is bankrupt but the people in it are enjoying a high standard of living then I would call that "working"
Government's job is to provide for its constituents as prescribed by said constituents, not to collect taxes, sit on cash or build things. Being bankrupt or not doesn't really matter any more than it affects the government's ability to carry out the will of the people and if the will of the people is to do nothing then bankruptcy probably won't be much of an impediment.
Letting cities, business, and people fail provides opportunities for the true wealthy to corner more of the nations wealth. That's why they protected the banks and let 10 million families lose their homes in 2009. A lot of money was made off if that.
Wherefore in order that the happiness of the saints may be more delightful to them and that they may render more copious thanks to God for it, they are allowed to see perfectly the sufferings of the damned.
Seems wasteful to me to increase military spending beyond even what the Pentagon has asked for and then when we are hit with the worst economic downturn in our lifetimes to just go "oopsy daisy, you really should have considered that you wouldn't really get any help from us".
Doesn't the federal government owe at least that much to people??
The US is in a death spiral and the income bar required to ignore the problems in society will soon be high enough that nobody can pretend neoliberalism is working anymore. The question is will people see one another as allies and try to rebuild something more equitable that provides for everyone, or will working people remain divided. I’m optimistic but the corporate media wants to keep people mad at the “other side” instead of realizing the entire system is rigged and that all the wealth created under massive productivity gains since the 1970s has gone to the rich.
What neoliberalism? Actual neoliberalism worked pretty well. Reagonomics worked pretty well. The economics of today are not neoliberal, they're a charade where we pretend that we can have a market economy without market risk. Pushing through an actual neoliberal agenda in today's political climate would be unthinkable.
I'm struggling to see how you got this comment from the article.
The article is pointing out that loss in revenue becomes a death-spiral that causes a loss of jobs and a further reduction in revenues. And that cities are largely powerless to stop it because some state government officials, well, they are assholes who welcome the ensuing chaos.
If anything, it's merely a warning of what people in much of America should expect in the coming years. If you live in a flyover city, it's probably going to look a lot like Flint in the coming decade.
I live in NYC, and go the occasional reddit boards, and while some are worried that a lot of good jobs will leave, you also hear a lot of "good, let the gentrifiers leave" type of comments,
After some digging, I realized that just 10% of the population pays about 71-72% of the taxes.
If half of that 10% of the population leaves, the city will have 1/3rd less tax revenue (it will have less than 65% of the current revenue). Also, the city will be limited on what it can tax, as if it raises the taxes more, even more people will leave for low tax states and turn it into a death spiral. The only way to get out of the situation is to have help federally.
Meanwhile it will have to cut services drastically.... from trash collection, social services, schools, etc... Apart from the slow trash decay, I think the first shock from some of the folks will be when MTA is forced to raise fares to $4 or $5 (now it is $2.75).
As for those 'let the gentrifiers leave' populist folks, Sure, rents will go down by 15-20% but a lot of the folks will be jobless soon, and manny other things will get more expensive.
NYC is probably worth more as a largely uninhabited speculative asset, a collector's item if you will. There will still be jobs for people to keep it in mint condition.
29% Property Tax
17% State Grants
13% Personal Income Tax
10% Federal Grants
8% General Sales Tax
8% Fees and Fines (Non-Tax)
7% Business Income Tax
4% RE Taxes
4% Other Taxes
Some of these will hit the wealthy more than others (eg: Biz and Personal Income Taxes) but revenues aren't going to drop by 71-72%. I know in America taxes are super taboo but there's also nothing wrong with raising taxes on the rest of the city to cover any gap.
people typically only complain about them when they have caused damage to their vehicle. lazy evaluation of maintenance is more expensive in the long run.
That's the great thing about being NYC. That 10% of people funding everything are not the typical two or three hundred thousand a year guys that pay taxes in other cities. They are billionaires, most of whom are not even in real estate, who own skyscrapers, or the leases, all over Manhattan. Oftentimes just for vanity, or even just bragging rights over their wife's brother's skyscrapers. (I'm serious. This happened, I was there. And it was at that point I decided some people just had too much money.)
When money like that is available to a city, you end up with infrastructure projects of the scale NYC has, the ability to tell your state "thanks but no thanks", Oh, and police departments with intelligence units that outstrip the capabilities of the intelligence apparatus in most Asian and South American nations.
The average american has no frame of reference for the kind of wealth at the disposal of NYC. I say, let them fix all the potholes. Regular people may as well get something out of it.
A common misconception. You don't pay NYC income taxes if you don't live in NYC.
It also stands to reason that other tax receipts will go down if people move away e.g. rents go down -> propery values assessed downwards -> taxes decrease.
This is why local politics is generally defanged and powerless. Ultimately you cannot make much meaningful change on the local or state level that is hostile to capitals interests. If what you do is anti-business, even if its in the interests of your actual voting residents, the knock on effects of being "undesirable" for the large companies that largely prop up a lot of economic sectors can see the economic costs equal to or even greater than the benefits given to your community.
It actually looks even worse in Europe - not only is the continent hugely economically diverse in development and in governance structure (some are much less or more corrupt and more or less democratic than others) but the free movement and free trade has functionally taken every nations economic sovereignty. Its the only point on which I can agree with Brexiteers on because the EU is much less democratic an institution than a lot of its constituent national governments are.
Ultimately final power comes down to the purse. The EU uses the Euro to control economic policy across the continent, the US Federal Reserve uses the USD to control the US economy. There is nothing you can do as any regional or local power to oppose the will of those higher institutions. Especially if you work in the peoples interests, because then you have the joint problem of attracting the poor and downtrodden because you are trying to uplift your working class while losing the favor of the capital you would depend on to generate the revenues to afford anything.
My theory is that being king of the foreclosed feels better than being the poorest servant in the metropolis, so it’s still a net gain for these people. Just because status is all relative.
“If state and local governments are condensing their balance sheets, they’re laying people off. They’re cutting spending on equipment. Capital spending is cut early during downturns. All of that is sucking demand right out of the economy.”
Clearly, the US is suffering from the Dutch Disease, except instead of oil it's the dollar that is creating the problem.
So just let the government hire everybody. Build lots of stuff, housing and factories and infrastructure. Print the dollars to pay for all of it, until the dollar collapses. American labor is now cheap again, so those factories can produce at internationally competitive cost.
This is similar to how China does it. The key is that you can't devalue the currency if you have a service economy that relies on cheap imports, but that's exactly the way the US is headed right now.
> Last summer, the Republican speaker of the Texas House Dennis Bonnen was caught on tape gloating: “My goal is for this to be the worst session in the history of the legislature for cities and counties,”
Low service state rolls costs down to counties and cities and then kneecaps them.
Low service state makes cities and towns who want to be high service pay their own way.
Yeah the quote is pretty bad if you're on the business end of his proposed policies but whether or not those policies are good or bad totally depends on your ideology.
> Low service state makes cities and towns who want to be high service pay their own way.
In Texas, as in many states, municipalities are severely restricted in the types and amounts of taxes they can levy. And, especially in Texas (considering the fight over school funding), the propensity is to further restrict the types and amounts of taxes, not expand them. Most forms of business tax are flatly outlawed. And if a city tries to impose a fee of some sort, the legislature will quickly get around to cutting off that authority. Property tax limits are severely restricted, same for sales tax.
For example, transit districts in Texas may not exceed a 1% sales tax and that's only able to be levied in cities that have not used all of their 2% "local option" sales tax cap. Most cities in Texas, levy 1% of the sales tax cap for "general purposes" and then another 1% for "economic development," which should be read as basically giveaways of public money to induce private businesses to locate in those cities. Cities that can't or don't levy economic development taxes are seen as at a disadvantage to the cities with that pot of money.
So it's far more complex than "well, high-service cities should just tax more to pay for more."
This is a faliure of Keynesian economics. The moment the government had the privilege to spend beyond its means was the moment it ditched savings and high interest rates. Now that were actually in a crisis it caused us to have even less savings and more debt than without a federal reserve.
Can you explain what it is you think the government spent on beyond its means? ie is it one of these:
- trillion dollar wars, and in general, multi-trillion dollar military expenditure
- subsidized private health insurance (as opposed to a more streamlined/wholesale universal healthcare plan)
- social security fund that leaks value over time
- massively bailed out banks
- widespread quantitative easing
In my humble and probably misguided understanding of Keynesian economics, you would want the government to fund e.g. a federal jobs guarantee during a recession.
Like, if you had a recession, pay one set of people to dig a hole, and another set of people to fill it up again, because then at least money would still propagate throughout the economy.
But I'm not certain that these huge expenditures (above) really did much to help worker or city solvency. Basically unless you are one of the government's top clients, don't expect it to pick up a check pad.
I guess I can sort of see how you're saying that it may have been Keynesian-esque for all these various industries but it's certainly not that Keynesian for the little guy.
Just wondering why no one talks about shaving the fat - reducing the budget, lowering costs, being smarter with spend, etc?
Is it like some unwritten rule that the price we pay right now is exactly how much we need to pay for the quality of service we are getting? I know that countries like Taiwan have a 4-10x lower level of income as places like New York City and have the same quality of living. Can't we make the argument, in times of prosperity we all paid ourselves a little too much and now we just need to pay ourselves less? Companies do that all the time - they cut the fat in hard times. Why can't cities and societies do that as well?
Cutting the fat isn't letting poor people starve on the streets. It's an admittance that we feasted during the times of boom, and at that we can't feast at the same level in times of famine, from all levels of society.
Instead, the narrative is always we need to raise taxes, like our over-indulgence, inflated standard of living in times of abundance, and padding our pockets is some sacred right that can never be questioned.
68 comments
[ 2.7 ms ] story [ 140 ms ] threadThe new deal is "Don't be poor"
Lot of countries around the world intentionally debase their currency to stay competitive. It's a valid monetary instrument. In the short term, currency debasement would lower the standard of living of Americans, but it would make their labor competitive.
If a suburb or ex-urb's liabilities exceed their assets, weren't they already broke? I'm trying to understand because I don't know a lot about this whole issue. But unless they charge people a whole lot in taxes to live in those areas, I'm not seeing how those places weren't poor in reality from the start? It seems to me those suburbs just managed to have other people pay for their infrastructure and services for so long that they never realized they were broke. But maybe there is some other source of money that they get from somewhere?
Government's job is to provide for its constituents as prescribed by said constituents, not to collect taxes, sit on cash or build things. Being bankrupt or not doesn't really matter any more than it affects the government's ability to carry out the will of the people and if the will of the people is to do nothing then bankruptcy probably won't be much of an impediment.
--Saint Thomas Aquinas
— Gore Vidal
Doesn't the federal government owe at least that much to people??
Their book is a good, quick overview of what they're about. It's not perfect, but it has some ideas worth considering.
Psst: Your Scottsman isn't wearing pants.
The article is pointing out that loss in revenue becomes a death-spiral that causes a loss of jobs and a further reduction in revenues. And that cities are largely powerless to stop it because some state government officials, well, they are assholes who welcome the ensuing chaos.
If anything, it's merely a warning of what people in much of America should expect in the coming years. If you live in a flyover city, it's probably going to look a lot like Flint in the coming decade.
After some digging, I realized that just 10% of the population pays about 71-72% of the taxes.
If half of that 10% of the population leaves, the city will have 1/3rd less tax revenue (it will have less than 65% of the current revenue). Also, the city will be limited on what it can tax, as if it raises the taxes more, even more people will leave for low tax states and turn it into a death spiral. The only way to get out of the situation is to have help federally.
Meanwhile it will have to cut services drastically.... from trash collection, social services, schools, etc... Apart from the slow trash decay, I think the first shock from some of the folks will be when MTA is forced to raise fares to $4 or $5 (now it is $2.75).
As for those 'let the gentrifiers leave' populist folks, Sure, rents will go down by 15-20% but a lot of the folks will be jobless soon, and manny other things will get more expensive.
Keep in mind you're talking about a local municipality which is going to receive a large chunk of its revenue from property taxes, fees, sales tax etc. From https://www.ibo.nyc.ny.us/iboreports/understandingthebudget....
The breakdown is:
Some of these will hit the wealthy more than others (eg: Biz and Personal Income Taxes) but revenues aren't going to drop by 71-72%. I know in America taxes are super taboo but there's also nothing wrong with raising taxes on the rest of the city to cover any gap.Edit: the pothole was supposed to be a metaphor for something the city does but could do a lot less of without people actually being badly affected.
When money like that is available to a city, you end up with infrastructure projects of the scale NYC has, the ability to tell your state "thanks but no thanks", Oh, and police departments with intelligence units that outstrip the capabilities of the intelligence apparatus in most Asian and South American nations.
The average american has no frame of reference for the kind of wealth at the disposal of NYC. I say, let them fix all the potholes. Regular people may as well get something out of it.
From (biased but presumably factual): https://www.empirecenter.org/publications/nycs-high-income-t...
Edit: just trying to add info, not bias the conversation! Maybe also relevant: https://www.visualcapitalist.com/3d-map-the-u-s-cities-with-...
And if I'm not mistaken, the city still gets that money as long as the job is located there anyways.
It also stands to reason that other tax receipts will go down if people move away e.g. rents go down -> propery values assessed downwards -> taxes decrease.
Raising taxes does not necessarily increase tax revenue. Is the last guy on the sinking ship going to pick up the tab for everyone?
It actually looks even worse in Europe - not only is the continent hugely economically diverse in development and in governance structure (some are much less or more corrupt and more or less democratic than others) but the free movement and free trade has functionally taken every nations economic sovereignty. Its the only point on which I can agree with Brexiteers on because the EU is much less democratic an institution than a lot of its constituent national governments are.
Ultimately final power comes down to the purse. The EU uses the Euro to control economic policy across the continent, the US Federal Reserve uses the USD to control the US economy. There is nothing you can do as any regional or local power to oppose the will of those higher institutions. Especially if you work in the peoples interests, because then you have the joint problem of attracting the poor and downtrodden because you are trying to uplift your working class while losing the favor of the capital you would depend on to generate the revenues to afford anything.
Its by design, to be fair.
Clearly, the US is suffering from the Dutch Disease, except instead of oil it's the dollar that is creating the problem.
So just let the government hire everybody. Build lots of stuff, housing and factories and infrastructure. Print the dollars to pay for all of it, until the dollar collapses. American labor is now cheap again, so those factories can produce at internationally competitive cost.
This is similar to how China does it. The key is that you can't devalue the currency if you have a service economy that relies on cheap imports, but that's exactly the way the US is headed right now.
Low service state rolls costs down to counties and cities and then kneecaps them.
Low service state makes cities and towns who want to be high service pay their own way.
Yeah the quote is pretty bad if you're on the business end of his proposed policies but whether or not those policies are good or bad totally depends on your ideology.
But they already do. The difference is they get "back" less proportionally. Not a bad thing btw, that's the nature of progressive taxation!
In Texas, as in many states, municipalities are severely restricted in the types and amounts of taxes they can levy. And, especially in Texas (considering the fight over school funding), the propensity is to further restrict the types and amounts of taxes, not expand them. Most forms of business tax are flatly outlawed. And if a city tries to impose a fee of some sort, the legislature will quickly get around to cutting off that authority. Property tax limits are severely restricted, same for sales tax.
For example, transit districts in Texas may not exceed a 1% sales tax and that's only able to be levied in cities that have not used all of their 2% "local option" sales tax cap. Most cities in Texas, levy 1% of the sales tax cap for "general purposes" and then another 1% for "economic development," which should be read as basically giveaways of public money to induce private businesses to locate in those cities. Cities that can't or don't levy economic development taxes are seen as at a disadvantage to the cities with that pot of money.
So it's far more complex than "well, high-service cities should just tax more to pay for more."
- trillion dollar wars, and in general, multi-trillion dollar military expenditure
- subsidized private health insurance (as opposed to a more streamlined/wholesale universal healthcare plan)
- social security fund that leaks value over time
- massively bailed out banks
- widespread quantitative easing
In my humble and probably misguided understanding of Keynesian economics, you would want the government to fund e.g. a federal jobs guarantee during a recession.
Like, if you had a recession, pay one set of people to dig a hole, and another set of people to fill it up again, because then at least money would still propagate throughout the economy.
But I'm not certain that these huge expenditures (above) really did much to help worker or city solvency. Basically unless you are one of the government's top clients, don't expect it to pick up a check pad.
I guess I can sort of see how you're saying that it may have been Keynesian-esque for all these various industries but it's certainly not that Keynesian for the little guy.
Is it like some unwritten rule that the price we pay right now is exactly how much we need to pay for the quality of service we are getting? I know that countries like Taiwan have a 4-10x lower level of income as places like New York City and have the same quality of living. Can't we make the argument, in times of prosperity we all paid ourselves a little too much and now we just need to pay ourselves less? Companies do that all the time - they cut the fat in hard times. Why can't cities and societies do that as well?
Cutting the fat isn't letting poor people starve on the streets. It's an admittance that we feasted during the times of boom, and at that we can't feast at the same level in times of famine, from all levels of society.
Instead, the narrative is always we need to raise taxes, like our over-indulgence, inflated standard of living in times of abundance, and padding our pockets is some sacred right that can never be questioned.