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Springville Journal editorial: Living in a death spiral state

SPRINGVILLE — Suppose somebody dammed the Niagara River and diverted the water somewhere else. Suppose you watched thousands of gallons’ continuing to pour over the brink, without being replenished. Even a small child could predict the eventual outcome: Niagara Falls would become a dry, rocky crag; we would soon be calling it “Niagara Cliff.”

Imagine treating your bank account the same way. If you withdrew more from the ATM than you had in your account, you would quickly run out of funds and your bank would call foul on your transaction. That’s common sense, right?

Tell that to the 11 states that currently shelter more “takers” than “makers.” Forbes Magazine recently created a formula to determine the states where “private sector workers are outnumbered by folks dependent on government.”

A taker is an individual who draws funding from the government, whether that be “as an employee, pensioner or Welfare recipient.” A maker is a person who is employed in the private sector. Forbes dubbed the states with more takers than makers “death spiral states,” or areas that are danger spots for investors of any kind, whether they be home-buyers, business owners or financiers.

To be named a Forbes Magazine death spiral states, these locales also had to rank low on a state credit scorecard, which “downgrades states for large debts, an un-competitive business climate, weak home prices and bad trends in employment.” Sound like a state we all know and love?

Not surprisingly, New York and California are featured on the death spiral state list, joined by New Mexico, Mississippi, Alabama, Maine, South Carolina, Kentucky, Illinois, Hawaii and Ohio. “A state qualifies for the Forbes death spiral list, if its taker/maker ratio exceeds 1.0 and it resides on the bottom half of Conning’s ranking,” the magazine said.

The Conning’s ranking is a scorecard of state credit-worthiness, completed by money manager Conning & Co. Our state’s appearance at the lower end of this ranking means that we are living in a state that not only gives out more money than it takes in, it is in a huge amount of debt, is business-unfriendly, has a poor employment rate and has a horrible housing market. “I love New York” is sounding more and more like a mere T-shirt sentiment than an actual belief.

Yet, ignoring the financial crisis it has put itself in, New York continues to spend money. I am overjoyed that the arts are receiving attention, that small businesses are being helped and that burdened individuals affected by the recent super storm are being given assistance.

But, if we have no money left in our bank account, why is the spending not ceasing?

“Without drastic action, [death spiral states] are the first states that will likely collapse,” said Mark Hyman of Beyond the Headlines. “In the 1980s and 90s, it was business and the middle class who fled cities – leaving a dwindling number of makers who are paying for the takers. Now, it’s not just cities that will decay, but entire states. Middle class, businesses and other job creators are fleeing to better states.”

It’s all well and good to proffer a helping hand and a hefty payout, but what happens when those checks bounce? What happens when honest taxpayers finally get fed up with eking a living and seeing their money quickly siphoned off and move on to greener pastures?

Forbes warned against buying a house or purchasing bonds in New York and advised its readers to keep their capital out of the state, which it called “at high risk of a fiscal tailspin.”

That’s pretty strong wording. If I were employed in our state government, I would be working, night and day, to find even the beginning of a solution to this problem, one that could result in my being out of a job – and, possibly, a home.

“If you have money in municipal bonds, clean up the portfolio,” Forbes said. “Sell holdings from the sick states and reinvest where you’re less likely to get clipped.”

These resident “takers” are also legal voters, so officials are reluctant to impose stiffer regulations on Welfare, Medicaid and government pensions, for fear that they will be cast out of their seats at the end of their terms, by angry takers. Instead of being concerned with doing the right thing, more and more politicians are simply doing whatever they can to become reelected.

Is there a solution to this blight? Forbes simply said to get up and get out. Sadly, until our state government sees the bigger picture and begins the difficult task of rehabbing an entire state, it looks like we could be stuck in this situation for a very long time.
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