New York City has long been viewed by many as a dumpster fire of fiscal irresponsibility with ridiculously high taxes and insanely excessive spending, and under the past few years of leadership by the socialist, er, Democratic Mayor Bill de Blasio, the situation has only gotten worse.
Recent reports citing economic experts have warned that the famed city could soon face the financial disaster of bankruptcy for the first time in more than 40 years, but it doesn’t appear that the city is doing much of anything to address that dire consequence, and instead is arguably making things even worse.
The New York Post reported last week that as businesses and residents flee the high taxes imposed on them by the city and state, resulting in entirely predictable tax revenue shortfalls, public spending has actually been increased instead of reduced as well, creating a sort of fiscal death spiral that could ruin the city.
Milton Ezrati, chief economist of financial communications agency Vested, told the Post, “The city is running a deficit and could be in a real difficult spot if we had a recession, or a further flight of individuals because of tax reform.”
“New York is already in a difficult financial spot, but it would be in an impossible situation if we had any kind of setback,” he added.
Such setbacks would include a financial recession, which could prove fiscally devastating, or even just a continuation of the exodus of taxpayers while spending continues to increase.
Indeed, Mayor de Blasio recently announced an additional $3 billion in new spending on top of a budget that already included $89.2 billion in spending.
Meanwhile, the mayor only found “savings” of about $750 million in his proposed budget for 2020 — obviously not enough to save the city in a disaster — and the state’s Democratic Gov. Andrew Cuomo cut roughly $600 million in city-related spending from his proposed state budget for the coming year.
The Post noted that the city’s spending has increased by 32 percent since de Blasio assumed office, about three times the rate of inflation, and has hired some additional 33,000 public sector workers who are paid with city funds and are granted long-term pensions and other city-funded benefits.
Peter C. Earle, economist at the American Institute for Economic Research, stated, “New York City could go bankrupt, absolutely.”
“In that case, the city would get temporary protection from its creditors, but it would be very difficult for the city to take on new debt,” he added.
City pensions, along with other long-term liabilities like bonded debt and other post-employment benefits for public workers, are estimated at more than a quarter trillion dollars, according to a 2018 report from the city’s Citizen’s Budget Commission, which placed the total liabilities held by New York City at roughly $257.3 billion for that year. That is nearly $5 billion more than the 2017 total of $252.5 billion, and works out to an astonishing liability per New York City household of $82,577.
The budget commission also noted that the city’s pension fund is only about 76 percent funded.
All of that news comes as residents are increasingly leaving the excessively taxed city and state for low-tax states like Florida and Texas, an exodus that has been partially blamed for the state’s announced $2.3 billion budget deficit caused by a shortfall in expected tax revenues, according to Fox News.
All the while, Cuomo is blaming the problem on the Trump administration and Republicans for the tax cut bill Trump signed in 2017, which reduced the amount of state and local taxes residents could deduct from their federal taxes and left some residents and businesses with a higher tax bill.
In response to the incredible shortfall, the state has decided not to reduce spending or do anything responsible like that, but to instead levy aggressive audits on the businesses and individuals leaving the state to try and soak them with a tax bill one last time for whatever they may be worth.
Unfortunately for New York, that aggressive effort will likely only encourage more top-earners and wealthy individuals to get out while they still can, and considering the fact that the top 1 percent in the state account for roughly half of all tax revenues, that could actually serve to hasten the potential financial disaster facing the city and state. New York City, and the state as well, were already fiscal dumpster fires.
But the financially irresponsible actions of their progressive leadership have only served to throw gasoline on the blaze, and the growing monetary inferno of high taxes, high spending and unfunded liabilities in the face of reduced tax revenues now threatens to engulf the city in bankruptcy.
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