Friday, December 7, 2012

Do You Live In A Death Spiral State?

Thinking about buying a house? Or a municipal bond? Be careful where you put your money, says William Baldwin at Forbes.

And he is very right. Baldwin identifies two factors which make a state a Death Spiral State:
The first is whether it has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector... 
The taker count is the number of state and local government workers plus the number of people on Medicaid plus 1 for each $100,000 of unfunded pension liabilities... 
The second element in the death spiral list is a scorecard of state credit-worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios. Conning’s analysis focuses more on dollars than body counts. Its formula downgrades states for large debts, an uncompetitive business climate, weak home prices and bad trends in employment.

Here are the top Death Spiral States, according to Baldwin:


Ohio Taker ratio: 1.00
The battleground state has a fiscal standoff between takers (people collecting welfare, a government salary or a government pension) and makers (private sector employees).


Hawaii Taker ratio: 1.02
Dark clouds over Waikiki Beach: Hawaii has slightly more takers than makers.


Illinois Taker ratio: 1.03
Too many goodies promised to insiders. Unfunded pensions contribute to the balance of 103 takers to every 100 makers.


Kentucky Taker ratio:1.05
Twilight in Lexington. People drawing from government slightly outnumber people chipping in with private-sector jobs.


South Carolina Taker ratio:1.06
Riptides on Folly Beach.


New York Taker ratio: 1.07
Causes: taxes, unions and, regulations

Maine Taker ratio: 1.07
A beautiful coastline, but lots of takers.

Alabama Taker ratio: 1.10
The Mises Institute, located in Auburn, AL, is outnumbered. Send money, they need help.

California Taker ratio: 1.39
Now, we are talking serious takers--who all think they are givers.

Mississippi Taker ratio: 1.49
It's a deadly combo of welfare workers and state employees.

New Mexico Taker ratio: 1.53
The worst taker state in the country

(ht Joe Nelson)

34 comments:

  1. Simple question:

    How did the LP nominate former 2-term New Mexico Gov. Gary Johnson if that state is ”The worst taker state in the country”??

    No comprendo.

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    1. I'm not defending the choice of Johnson for the LP ticket, but rather sharing what I know about his time as governor. Prior to Johnson the state was run at a huge deficit and after Johnson, when I lived there, Bill Richards returned to the policy of entrenched welfarism. Also, the vast majority of the New Mexico economy comes from federal spending on research and welfare, something like 90% as I recall. So, an article that ignores federal spending may as well ignore New Mexico as well.

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    2. Gary Johnson entered office as Governor of New Mexico with a deficit. He left office with New Mexico having $1 billion surplus.

      That was nine years ago. New Mexico is a very liberal state. Governors & state legislatures since then have destroyed the surplus that Johnson left behind.

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    3. The takers elected him..............

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    4. as they do everywhere

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  2. Mises would say that the "correct" ratio between "makers" and "takers" simply isn't knowable, and that the question itself is wrong.

    Also, it certainly isn't 1:1.

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    1. Arthur Krolman, CFADecember 7, 2012 at 9:55 AM

      @DS: Agreed. Baldwin's words:

      "Let’s say you are a software entrepreneur with 100 on your payroll. If you stay in San Francisco, your crew will support 139 takers. In Texas, they would support only 82. Austin looks very attractive."

      ...made me want to cry. Imagine 100 young employees working for you, trying to enjoy the good things in life, trying to save up for a house and family, trying to pay off their student loans...and they've got 82 takers standing in their way: "Feed us first slaves!" Very attractive? No. Disgusting.

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    2. Exactly. It certainly isn't 1:1.

      Assuming a low state tax rate and that takers get their whole cost of living paid for by the makers the ratio of takers to makers have to be more like 1:50 assuming all the taxes went to takers.

      Not everyone except state and local government employees are getting enough to cover their monthly expenses so we have to factor in all the varying percentages or amounts the takers get, and the tax rate the makers are paying and the varying amounts they make.

      Maybe it's easier to just look at how much money is going out of the state budgets and how much money is going in? Very few states meet that test as most run deficits, so it looks like we are doomed.

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  3. Wow.
    New Mexico is a shocker.

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    1. I wonder if that is the Los Alamos effect. The national lab is huge, the state is puny.

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    2. Los Alamos is just the beginning. There is Sandia National Labs, Kirkland AFB, Cannon AFB, White Sands Missile Range etc. It's not necessarily that they are all wasteful, but that there are alot of people in NM that draw their income from these and other government sources, and that the population is very low relative to most other states.

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    3. The article stated that federal funds were not counted. This is entirely about the state budget, which comes from taxing people on the federal dole. New Mexico is almost entirely supported by federal spending.

      Is it wrong for states to tax federal money?

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    4. Don't forget Roswell & Area 51. It's aliens.

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  4. This is too funny:


    Speaker of the South Carolina House Bobby Harrell, R-Charleston, says the article from Forbes is wrong, especially in calling members of the military, public employees and retirees “takers”.

    “We have military installations all over South Carolina. Those folks are government employees, but they are certainly the kind of government employees that we want, because we care passionately about the military in South Carolina

    http://tinyurl.com/bqx6lys

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    1. Yeah, you never know when you might have an invasion of troops from Iran. Boy that could happen any day now. And all those troops are protecting South Carolina from drone attacks from the nasty Taliban. Sure is a good thing you have all those troops to protect South Carolina from all those nasty suicide terrorists. I wonder how that works... Oh well, I'm sure the military has that all worked out. We sure are paying them enough money.

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    2. I wonder then who pays for the salary of a military, is it not someone working in the private sector? Money from the private sector also pays retirees does it not. South Carolina would be a good state to stay out off or move from with such a high number of takers.

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    3. The military is only there to keep the South from seceding.

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    4. You are all missing something important. You can't say it's your tax dollars paying of military and Fed gubmnt when the Fed is giving them 2.5 Trillion above and beyond what you puny tax payers are giving!

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  5. Arthur Krolman, CFADecember 7, 2012 at 11:39 AM

    Does he also care passionately about the makers who pay the bills for his beloved military? Not so much, it sounds like.

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  6. Or the people they kill?

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    1. People likem you will be the first winnes when not protected

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  7. All I can say is that the collapse is coming; don't know exactly when but it is definitely coming and with a vengence!

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  8. The ONLY way to save California is to split it into at least 3 states. I would want the most southern split to be south of L.A. county. The OC (where I live), Riverside, San Bernardino, and San Diego counties. I'm guessing we could even accept 1/3 of the debt outright and still pay it off without the a-holes in Los Angeles, San Francisco, and Sacramento bleeding us dry.

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  9. Is there a complete list? one that has the ratios for all 50 states? I would be curious to hear the best states, and then be disheartened by how high even the best state's ratios are

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  10. How is a pensioner a taker? We paid into the system for all the years we were employed, and now you call us takers? I'd call that BS!

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    1. Are you only receiving what you put in plus interest or in addition to what was taken or stolen from others? Can the pension survive with only your contributions?

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  11. Are you suggesting that the government employees who repair our infrastructure, teach out children, safequard our food and water, catch criminals, put out fires, enforce contracts, etc. are "takers"?

    Indeed there are many people "gainfully employed" in the private sector who make nothing of value, like publishers of financial newsletters.

    This "statistic" is absurd!

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    1. Uh, it's NOT a "value judgment". It's just pure economics.
      It's wealth creation vs. wealth consumption.
      Look, I go out and mow a lawn for $50.00. I've improved the man's land value and he's paid me $50.00. THAT'S wealth creation.
      I get home and my boy is sick. I need to buy him medicine. It'll cost $50.00. That's consumption. Is it BAD? No! It will save my boy! But it's still consumption. All those righteous govt. workers are great folks, but they don't create wealth! When we pay them that's consumption. Do they provide valuable services? Maybe. Doesn't matter for this PARTICULAR equation.

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    2. Government employees regardless what "good" they do are recipients of stolen goods (income and property taxes) and therefore are "takers". At least in the private sector, there's a choice to subscribe to financial newsletters. If a private sector service has value, they command a price. The value of a government service can only be arbitrarily and politically determined, hence, the need to forcibly extract "revenue" from the public. Interestingly, insurance companies initially had their own fire departments.

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    3. Repair infrastructure? Shoddily, and at a cost far higher than what the market would support. Look at the badly designed roads, collapsing bridges and potholes. A private company would have to pay insurance for liability if someone could prove these things injured someone, but the government is immune.

      Teach our children...what? We spend 10x what they do in China and get poorer results. We employ NR adminsistrator for every teacher. We can't fire incompetnet

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    4. Incompetent teachers can't be fired.

      The FDA doesn't keep our food safe- the companies that will go out of business if they poison us will. The FDA just extracts their Vig.

      The police spend 90% of their time harassing people, putting people in jail for non-violent non-crimes, and acting like assholes.

      Fire departments in most areas are volunteer.

      Lawyers, judges and prosecutors as "protecting our rights"! Don't make me laugh you stupid fool.

      How do people as stupid as you find this site? I'm shocked you can even breathe without some government goon telling you to breathe in, breathe out. Learn some economics, and See You Next Tuesday.

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    5. If your salary is paid by taxpayers, you are a taker......Be it city, county, state, federal or military. You are a taker...

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  12. The system is going down! Simple math never lies. Even if u keep printing the money to keep things afloat for awhile at the end of the road inflation will destroy any value left in the dollar. Inflation comes and after that the whole thing IMPLODES. No way to stop it now, it has passed the point of no return.

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  13. In California there is help for small businesses. A map shows the way to start up a business. The map shows the way on I-5 to Oregon, the way on I-80 to Nevada, Arizona, etc. I myself am trying to get out of California. With the 2/3 vote to increase taxes needing no Republican vote, for instance, if the $150 per structure FEE for fire protection is found invalid, no worries, just vote it in as a t
    TAX! We are 1.49, third worst ratio.

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