The Blue State Death Spiral

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Not surprising in the least, and I’m a Californian:

Eleven states made Forbes’ list of danger spots for investors including California, New York, Illinois, and Ohio. They warned (and with the cliff it is even more critical), if you have muni bonds in these states – clean up your portfolio; if your career takes you there – rent, don’t buy! Two factors determine their list of ‘fiscal hellholes’. The first is whether there are more takers (someone who draws money from the government) than makers (the gainfully employed). The second is a state credit-worthiness score (via Conning) based on large debts, uncompetitive business climates, weak home prices, and bad trends in employment. Conning rates North Dakota the safest state to lend money to, Connecticut the most hazardous. A state qualifies for the Forbes’ death spiral list if its taker/maker ratio exceeds 1.0 and it resides in the bottom half of Conning’s ranking. See below for the 11 states to avoid…no matter what Bob Toll, Larry Yun, Bob Pisani, or Alexandra Lebenthal tells you..

The report goes on to detail how these eleven states have more residents who get money from the government rather then from the public sector.

This means that roughly one-third of Americans live in states where more people receive tax dollars than pay taxes on non-government income.

And Victor Davis Hanson writes about California, probably the worst of the worst:

Meanwhile, business surveys perennially rank California among the most hostile states to private enterprise, largely because of overregulation, stifling coastal zoning laws, inflated housing costs, and high tax rates. Environmental extremism has cost the state dearly: oil production has plunged 45 percent over the last 25 years, even though California’s Monterey Shale formation has an estimated 15.4 billion barrels of recoverable oil, according to the U.S. Energy Information Administration.

…Between the mid-1980s and 2005, the state’s aggregate population increased by 10 million Californians, including immigrants. But that isn’t the good economic news that you might think. For one thing, 7 million of the new Californians were low-income Medicaid recipients. Further, as economist Arthur Laffer recently noted in Investor’s Business Daily, between 1992 and 2008, the number of tax-paying Californians entering California was smaller than the number leaving—3.5 million versus 4.4 million, for a net loss of 869,000 tax filers. Those who left were wealthier than those who arrived, with average adjusted gross incomes of $44,700, versus $38,600. Losing those 869,000 filers cost California $44 billion in tax revenue over two decades, Laffer calculated.

Worst of all is that neither the legislature nor the governor has offered a serious plan to address any of these problems. Soaring public-employee costs, unfunded pensions, foundering schools, millions of illegal aliens, regulations that prevent wealth creation, an onerous tax code: the story of all the ways in which today’s Californians have squandered a rich natural and human inheritance is infuriating.

It gets better:

California State Controller John Chiang has announced that total state revenue for the month of November 2012 fell $806.8 million, or 10.8%, below budget.

Democrats thought they could hammer “the rich” by convincing voters to pass Proposition 30 to create the highest state income tax in the nation. But it now appears that high income earners have already “voted with their feet” by moving themselves and their businesses out of state, resulting in over $1 billion shortfall in corporate and income taxes last month and the beginning of a new financial crisis.

And what do the liberals want to do at the federal level? Raise taxes. This will solve all our problems.

Give me a break.

Curt served in the Marine Corps for four years and has been a law enforcement officer in Los Angeles for the last 24 years.

13 Responses to “The Blue State Death Spiral”

  1. 1


    It is not like we didn’t see this comming? It looks like the laffer curve is a laugher on the blue states. Where is Larry on this issue. I am not sure which one of FA contributers said it, but the Uhaul rates leaving and going to a state seems to also indicate the health of the state.

  2. 2



    I was the one who showed the UHaul rates. Again, using Jan. 1, 2013 as moving date, and moving from Los Angeles to Houston, the cost of a 20 ft. truck (holds 3 bedrooms worth of furniture) is $1,550.00.

    The cost for the same truck, moving from Houston to Los Angeles, is $1,003.00

    UHaul bases their rates on whether they have to move that rental unit to a busier place. They don’t buy trucks to leave them sitting in a dealer’s lot, they know that there is less demand in Houston than in L.A., so the truck has to be moved back to L.A., or to some other area of high demand.

    UHaul is a good barometer of where the movement is by comparing cities to other cities.

  3. 3

    Nan G

    Voting with our feet works to get people out of California and those other 10 states.
    If and when Obama makes it necessary to vote with our feet all the way out of the USA there are few really great options.
    Israel is great if you (like me) have enough Jewish blood to qualify for all the language assistance.
    But there’s no guarantee as to where they might house you.
    It could be in a ”disputed” or border territory.
    Assigned housing.

    Australia and Canada each are already further in giving up freedom of expression than the US is.
    So, what’s your priority?
    Various islands are interesting, provided the warmists are wrong.

    As many here know, we are going to Utah.
    Our affairs are arranged so we minimize taxes for the rest of our lives.

  4. 4


    Fortuntely in Wisconsin we have a conservative Governor and legislature that has started dealing with reckless budgets and obscene public sector union costs.
    Now our state government needs to move forward with Right to Work legislation and continue the good work we have started…Even though we are on the right path in Wisconsin we have years of liberal blunders to undo.

  5. 6


    The only correction I might suggest is you said ‘California’. We all know it’s the Peoples Demokratik Socialist Republik of Kaliforniastan. I was born here at the end of WWII when it was a great place to life, now it’s a great place to leave. Liberals are a cancer, they destroy everything they come in contact with.

  6. 7

    Scott in Oklahoma

    And yet the Lib’s have mentioned how lost we would be if our states followed through with succession from the union. Here in Oklahoma, we have farms, ranches, oil, coal and wind. We also have an attitude of survival, an attitude of giving help to those who deserve it and an attitude of personal responsibility. Sure, there are exceptions, especially in the bigger cities like Tulsa and Oklahoma City, but they do’t compare to the cities in the Blue States. I really believe we could do quite well with out supporting the Blue States.

  7. 8

    Nan G

    Economists talk about the European Union quite a bit.
    But when it was looking successful the larger states were ”skimming” from the small ones.
    So, Germany and France benefited from the union with Greece and Italy.
    But when it came time to HELP Greece and Italy, the big countries had to be dragged kicking and screaming to cough up the funds.
    Now Germany is at the end of its rope after YEARS of ”bailing out Greece” have only led to Greece dragging its feet on needed austerity actions.
    When Greece tries to be austere there are riots, suicides and abandoned babies and grandparents.
    Would it have been better had Greece been weaned off the teat earlier?
    It is easier to snip new growth off a tree than wait and have to cut large branches.

  8. 10


    I have always said we need to do an experiment to see which would work better within our nation vis a vis collectivism versus capitalism. I wanted California to do all the whacked out leftist economic, fruitcake hippie collectivist stuff they want to do, and Texas to be allowed to go full capitalist – both states without restraints from the Federal government. Give it ten years for the concurrent economic experiments to run, then assess the results. Liberals don’t have the courage of conviction to compete in such a contest, because they know down deep that collectivism only works with the power of government coercion.
    Funny though how my imagined experiments seem to have occured anyway, with the entirely predictable results we are seeing in California and Texas. The only difference is that if the Fed would quit hamstringing Texas it would be even greater than the 13th largest economy in the world, and if the Fed would quit bailing out California it would already have collapsed into anarchy.

  9. 11


    Don’t be so quick to dis Canada and Australia. The top tax rate in Canada is 29%. Throw in provincial rates ranging from 12-14% and you’re still in the low 40s all-in. The top rate in Australia is 45%, plus 1.5% for their equivalent of medicare. All-in you’re still in the high 40s.

    A Californian faces similar rates today. Next year, though, they’ll be in the mid-50s (39.6% federal, 13.3% state, 1.45% medicare, plus 0.9% for the medicare surtax and another 1% for the federal deduction phase-out). More if you have investment income (thanks to O-care’s 3.8% surtax).

  10. 13


    Up here, outside of provincial and federal taxes we have three types of sales taxes. There are PST (Provincial Sales Tax varying from province to province), GST (Goods and Services Tax, a federal tax 5%) and HST (Harmonized Sales Tax). The HST is actually a combination of the PST and the GST should a province choose to lump their sales tax in with the feds. Some provinces or territories have no PST therefore no HST. Most provinces lump the PST and the GST together (the HST) and have items that are exempt. It’s kind of a dodgy way to gather up more tax and I suspect that the overall tax rates between the States and Canada (when you add up Federal, State/Provincial and Sales Tax) are probably pretty similar. For now anyway.

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