Sunday, March 10, 2019

Is New York City on the Verge of Bankruptcy?

A fun story for a Sunday morning. Apparently, New York City’s profligate ways might be catching up with it. The Big Apple is one recession away from banktruptcy. It’s happened before, so it can happen again. If the city expects the rest of the nation to bail it out, the new tax reform bill should disabuse it of the notion.

The culprit. High taxes. In an internet interconnected world, more and more wealthy people have decided that New York City is not worth the tax burden. They are fleeing to warmer climes, to climes where the tax burden is far more agreeable. Worse yet, our mayor aka Comrade de Blasio has jacked up taxes and has hired a massive number of new government employees. But then, it has increased the city’s pension obligations to said workers.

For all of that spending, the subways suck. Among first world capitals New York City certainly has the most worn down public transportation. It’s a good thing that New Yorkers no long feel embarrassed, by anything.

Put it all together, and you have potential trouble looming. After all, didn’t New York State Governor Andrew Cuomo already let out one gigantic whine about the loss of tax revenue caused by the tax bill. Keep in mind, very, very few New Yorkers pay the largest part of its taxes, both state and city. 1% of New Yorkers pay half the taxes. It would not take too many departures before the city goes broke.

The New York Post has the story

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.”

It gets worse:

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.”

Without taking on more debt, with an ongoing exodus of the wealthy, with Amazon deciding that New York politics are not to its taste, and with leaders like Comrade de Blasio and Alexandria Ocasio-Cortez… thinking of bankruptcy is not alarmist. It is realistic.


Walt said...

Then, too, us un-millionaires are getting tired of paying for the city's, state's and MTA's mistakes. Billions were wasted on 30 blocks of a new subway line that's only two blocks away from the old subway line that, like the rest of the system, has needed major repairs for decades. Now, to pay for those repairs that should have been but weren't done, we're slapped with the "necessity" of astronomical tolls, "congestion pricing," and a $6 meter drop on a cab. Add all the nanny state bans and regulations and disgust is growing.

Anonymous said...

A medium of exchange.

Where is the medium of exchange when one gives out money with no real exchange. The government is NOT charity because it is not freely given.

NYC has at least 1M plus cases where no exchange happens. One cannot keep doing this without the sources of real exchange finding other outlets that provide an exchange.

NYC and most large urban centers have created this maladjustment to the economy without suffering the consequences.

It is time that those of us smart enough NOT to live with this stupidity, see AOC, to put an end to supporting these people. When is the last time anyone ever heard of NYC, Chicago, SF, et al., aiding those who reside outside the confines of large metropolitan areas? Fly over country anyone. Deplorable and irredeemable fellow citizens?

Illinois is trying to stem the outflow of people by utilizing confiscatory taxes. One wonders how long before New York does the same? Keep adding more immigrants to the population of the country, and it should surprise no one that "other peoples money" is going to eventually run out.

Money is a medium of exchange and larger and large segments are NOT providing any exchange. The Third World is eventually going to make us the Third World by killing the ideas that made us prosper as a country. So long apple pie and freedom SUCKERS!

UbuMaccabee said...

I love NYC and airplanes. I come in Friday afternoon on a free flight with miles, stay in a free hotel with points, and enjoy the Met, Smalls, and Dizzy's along with a half-dozen other nightclubs to choose from. Cross my fingers that maybe Jessica Molaskey & John Pizzarelli are playing in town. Sunday morning hangover at the Frick, and then Lyft to La Guardia early Monday morning. I leave the cleanup to someone else. I get all the benefits and none of the cost. Live someplace practical and come and go as you please. The most mobile people in the world are people with money. If Gotham becomes Dinkins redux, I'll fly to Boston. Good luck, and remember to live simply, so that others may simply live.