If you keep spending more than you take in, you’ll go broke. Who knew? From John Aldan Byrne at nypost.com:
New York City is careening closer to all-out financial bankruptcy for the first time since Mayor Abraham Beame ran the city more than 40 years ago, experts say.
As tax-fleeced businesses and individuals flee en masse, and city public spending surges into the stratosphere, financial analysts say Gotham is perilously near total fiscal disaster.
Long-term debt is now more than $81,100 per household, and Mayor de Blasio is ramping up to spend as much as $3 billion more in the new budget than the current $89.2 billion.
“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,” said Milton Ezrati, chief economist of Vested.
“New York is already in a difficult financial spot, but it would be in an impossible situation if we had any kind of setback.”
De Blasio has detailed $750 million in savings for the preliminary fiscal 2020 budget, but that won’t be enough to stave off a bloodbath if New York’s economy is hit by financial shocks — including a recession, which some see on the horizon — analysts warn. Gov. Cuomo’s preliminary budget has $600 million in city cuts in the coming year.
But city spending, up some 32 percent since de Blasio took office — triple the rate of inflation — may need to be cut deeper, these analysts add. The city’s long-term pension obligations have escalated, as well, as its workforce has soared by more than 33,000 in the last five years.
Other startling indicators:
- New York state — and city — are ranked No. 1 nationwide in state and local tax burden.
- Property taxes, almost half of the city’s revenue, is rising faster than any other revenue source — squeezing businesses and forcing homeowners, already hit by federal property tax deduction changes, to relocate to lower-tax states.
- The top 1 percent of New York City earners pay some 50 percent of Big Apple income tax revenue.
“New York City could go bankrupt, absolutely,” said Peter C. Earle, an economist at the American Institute for Economic Research.
“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.”
New York City used to be synonymous with wealth and opulence. Not any more if it keeps demonizing wealth and promoting socialism. From Simon Black at sovereignman.com:
Last month, Chicago hedge fund billionaire Ken Griffin spent $238 million on a condo in New York City.
It was the most expensive home ever sold in the US (but only one piece of Griffin’s massive, luxury real estate portfolio).
Good for Ken… he’s incredibly wealthy and can spend his money however he wants. But most of society hates this kind of behavior.
Even if a guy has earned $10 billion through hard work and ingenuity, they don’t believe he can spend it freely… and those feelings have only been growing recently with the widening wealth gap and the rising, leftist presidential contenders.
And New York City is gunning for Griffin…
He’ll no doubt pay millions of dollars a year in real estate taxes and employ a team of people just to manage that property… and his investment firm, Citadel, has an office in NYC employing hundreds of people.
But NYC wants more, specifically for Griffin to pay more tax to fund the city’s affordable housing program.
Griffin’s purchase was the perfect backdrop for the government to bring up the “pied-a-terre tax”… the proposed tax would be up to 4% per year for people who own properties above $5 million in NYC but don’t permanently reside there.
So Griffin would be out an extra $9 million a year (on top of the 1% mansion tax New Yorkers already pay on home purchases above $1 million – mind you, $1 million in New York gets you a few hundred square feet)… and normal real estate taxes.
It’s an all-out war on the rich in New York… because the city (and state) are broke.
New York City has quietly stacked up a mound of promises it will never be able to repay. From John Rubino at dollarcollapse.com:
The “public pension crisis” is the kind of subject that’s easy to over-analyze, in part because there are so many different examples of bad behavior out there and in part because the aggregate damage these entities will do when they start blowing up is immense.
But most people see pensions as essentially an accounting issue – and therefore boring – so it doesn’t pay to go back to this particular well too often. Still, New York City’s missing $100 billion can’t be ignored:
(Bloomberg) – New York City faces future health costs for its retired workers of $103.2 billion, an increase of $40 billion over a decade. It has about $5 billion set aside to pay the bill.
The so-called “other post-employment benefits” liability was disclosed in New York’s comprehensive annual financial report released by the city comptroller’s office Wednesday. The city’s $98 billion unfunded liability for retiree health care exceeds the city’s $93 billion of bond debt and $48 billion pension-fund shortfall.
No city has floated on the debt bubble quite like New York City. From James Howard Kunstler at kunstler.com:
I took advantage of the calm before the storm, to pay a visit on Saturday to my hometown, Trumpville, a.k.a. Manhattan. My college buddy had a son who was acting in an off-Broadway play (closing night, so don’t bother asking). The city I knew as a kid — which, frankly, I never liked very much — seemed as lost and far away as Peter Stuyvesant’s quaint Dutch colonial outpost did to me in 1962.
That lost city of my childhood was one in which a boy could breeze right into the Metropolitan Museum of Art on a weekday afternoon — my school was one block away from it — without the least hindrance. The place was free. There was no “donation” shakedown at the entrance. And hardly anyone was there. Do you know why? Answer: because most of the adults on the island were at work. It was a mostly middle-class city back then.
I know. It’s hard to believe, given the more recent developments in American life — the salient one being the extreme and perverse financialization of the economy. That is actually what you see manifested on-the-ground (and up-in-the-air) when you visit New York these days. To be specific, what I saw sitting on a bench along the High Line — a walking trail built on an old railroad trestle through the former Meatpacking District into Chelsea — was all the wealth of the flyover states funneled into a few square miles of land on the edge of the Atlantic Ocean.
As I watched the endless stream of tourists and hipsters stride by in their selfie raptures, I pictured the various downtowns of the Midwest I’ve visited over the years — St Louis, Kansas City, Minneapolis, Detroit, Akron, Dayton, Cleveland, Louisville, Tulsa, and many more — and remembered the incredible desolation of their centers. There was no one there, certainly no tourists or hipsters, really no activity to speak of. They were ghost cities. The net effect of financialization has been the asset-stripping of every other place in America for the benefit of a very few cities on the coasts, and especially the financial engineers within them.
To continue reading: No Joy in Trumpville