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State Fiscal Problems
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swchandler



Joined: 08 Nov 1993
Posts: 5756

PostPosted: Mon Jan 17, 2011 6:33 pm    Post subject: Reply with quote

No question, the Center on Budget and Policy Priorities' report paints a dismal picture for some time into the future. While all the numbers makes my head spin, I don't doubt that the conclusions reached are quite real and that they offer a formidable challenge on so many levels. No matter what tack that the states might take, the path is going to involve serious cuts and tax increases. In my view, it will not be possible to achieve a balance by just cutting spending or only raising taxes.

What I find so disturbing is that those on the right are so against any kind of tax increase on either the federal, state or local levels. We're deeply in debt, and unbelievably, they totally ignore the responsibility in addressing it directly. Somehow, like magic, the problem will solve itself without any kind of personal financial sacrifice. They simply think that government can cut the hell out of everything without any significant consequences.

Although I rail against those on the right, it also critical that those on the left realize that serious cuts will have to be made, and that many citizens, especially those least able to afford it, will suffer the dire consequences. In the real world, there is no way of avoiding significant pension reform. Realistically, one has to ask whether those who have earned their pensions will ultimately be denied to some extent. Surely if a state goes bankrupt, they will be unable to meet their pension obligations.

In a real effort to resolve our substantial debt and deficit problems, negotiation and cooperation between ideological extremes is paramount. There must be a recognition that shared sacrifice has to be embraced. I wonder though, whether we as a nation can overcome the selfish thought that "it's only about me".
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coboardhead



Joined: 26 Oct 2009
Posts: 1925

PostPosted: Mon Jan 17, 2011 6:42 pm    Post subject: Reply with quote

Well written swchandler.

Working together as a nation would, of course, be the best solution. Everybody come to the table, including pension holders?

I, honestly, don't see that happening until it is too late. Bankruptcy by a State is probably impossible, so pension obligations will need to be met.

I am afraid that inflation will be the misguided solution. Reduce the obligations by reducing the value? This will, ulitimately, weaken the dollar and reduce our ability to maintain world financial leadership.
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MULLDE102f



Joined: 15 Jun 1997
Posts: 88

PostPosted: Mon Jan 17, 2011 8:43 pm    Post subject: Reply with quote

Seven thousand posts to this website, Mike.

My god, do you do anything else?
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mac



Joined: 07 Mar 1999
Posts: 5112

PostPosted: Mon Jan 17, 2011 8:59 pm    Post subject: Reply with quote

coboardhead--interesting about carry over, I'll have to check into that. There are two other problems with California that I forgot to mention, and we can generalize them to the Federal budget too. First, many of the programs (safety net, social welfare, or in Iso's term socialism) primarily benefit the middle class. Public safety, public education, medicare, unemployment and social security. I think the primary payouts for those are in the middle class. But I'm not sure the middle class, writ large, actually pays their fair share. I would suggest it is time for some sort of means test.

Second, California's system is perhaps too progressive. The stock market crash, and attendant drop in capital gains, was, I believe, the biggest source of the drop in revenue.

It was much, much worse for State and local governments in the Great Depression. Their shrinking revenues--and workforces and maintenance and capital project outlays--were much greater than all the New Deal programs.
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coboardhead



Joined: 26 Oct 2009
Posts: 1925

PostPosted: Mon Jan 17, 2011 9:52 pm    Post subject: Reply with quote

Additionally, many states, such as Colorado tie their income tax to the IRS. So, when the Federal Government cuts taxes, allows accelerated depreciation schedules etc., it directly affects the state's revenues.

Problem is, the states don't get to borrow away those tax cuts the way the Federal Government does.

Add to that, unfunded Federal mandates.

Reducing middle class entitlements based on needs testing may make fiscal sense; but is not really fair either. If you retire from a large corporation, the military, or civilian government, your pension is set, and, in many cases, health care insurance paid. This would discriminate against other retirees who are using 401k, personal savings and SS.

Maybe states should sell some assets.
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swchandler



Joined: 08 Nov 1993
Posts: 5756

PostPosted: Tue Jan 18, 2011 3:01 am    Post subject: Reply with quote

"Add to that, unfunded Federal mandates."

While I don't know if this fits exactly, but the whole issue of illegal immigration hits hard on many states. California is especially hard hit trying to accommodate illegal immigrants with little support from the federal government. This issue is much bigger then simply the border control and deportation scenarios.
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isobars



Joined: 12 Dec 1999
Posts: 14024

PostPosted: Tue Jan 18, 2011 8:22 am    Post subject: Reply with quote

coboardhead wrote:
If you retire from a large corporation, the military, or civilian government, your pension is set, and, in many cases, health care insurance paid. This would discriminate against other retirees who are using 401k, personal savings and SS.


I don't know about you, but many people here wrongly think the military gets all that. On the contrary, we pay into SS and Medicare, we pay for much of our health insurance after retirement, we pay our own VA disability payments out of our other pocket (they are deducted, dollar for dollar unless we're very severely disabled, right out of our military pensions), our health care coverage is highly dependent on means testing, and our pensions do not put us on the same disposable income level planet with that of dropouts working for minimum wage. Then there's the real downer for the vets who can't afford additional insurance: they're dependent on the VA medical system for their health care until ... IF ... they live long enough to add Medicare.
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mrgybe



Joined: 01 Jul 2008
Posts: 2602

PostPosted: Tue Jan 18, 2011 10:28 am    Post subject: Reply with quote

coboardhead wrote:
If you retire from a large corporation, the military, or civilian government, your pension is set, and, in many cases, health care insurance paid. This would discriminate against other retirees who are using 401k, personal savings and SS.


This is not true for corporations. Only about 10% of corporations provide a "set" pension plan (i.e. defined benefit plan).......a large chunk of that 10% have a strong union presence. That number is likely to shrink as companies attempt to overcome union objections and move toward 401K or similar plans. Separately, most corporations in my experience, allow retirees to participate in their group medical plans until they become Medicare eligible. The retiree continues to pay the employee contribution.

Governments will try to move this way also, but unions will fight it tooth and nail. The bankruptcy of a State would be one way to enable this to happen. Don't hold your breath.
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jpbassking



Joined: 19 May 1998
Posts: 2361
Location: Leo

PostPosted: Tue Jan 18, 2011 3:05 pm    Post subject: Reply with quote

By and large company pensions have been replaced by 401K's. Show me a place that continues to pay for health insurance after you retire and I will apply.
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coboardhead



Joined: 26 Oct 2009
Posts: 1925

PostPosted: Tue Jan 18, 2011 3:09 pm    Post subject: Reply with quote

Mrgybe

You are correct, I should have said retired (past temse) from SOME large corporations.
My point is that means testing for social security could be very unfair given some individuals more generous retirement benefits and options.

Getting any defined benefit package from now on will be tough, as you say. But, the governments are still on the hook for those that have these plans for a long time.
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