Debt continues to plague Uncle Sam and city and state governments across the country, and big-government leaders continue to spend the people’s money without a care in the world. But eventually the bill comes due for even the worst pie-in-the-sky leftists. Which city will be next to feel the sting of bankruptcy?
Zero Hedge reports that JP Morgan has run the numbers and put together the following information on which municipalities are most likely to be the next to fall victim to the accumulated weight of their unsustainable spending:
As managers of $70 billion in US municipal bonds across our asset management business (Q2 2017), we’re very focused on credit risk of US municipalities.
The chart below shows our “IPOD” ratio for US states, cities and counties. This measure represents the percentage of a municipality’s revenues that would be needed to pay interest on direct debt, and fully amortize unfunded pension and retiree healthcare obligations over 30 years, assuming a conservative return of 6% on plan assets. While there’s no hard and fast rule, municipalities with IPOD ratios over 30% may eventually face very difficult choices regarding taxation, non-pension spending, infrastructure investment, contributions to unfunded plans and bond repayment.
Zero Hedge opines, with just a slight hint of sarcasm:
The results are staggering. To our great ‘shock’, Chicago residents win the award of “most screwed” with over 60% of their tax dollars going to fund debt and pension payments. Meanwhile, there are a dozen municipalities where over 50% of their annual budgets are used just to fund the maintenance cost of past expenditures.
Gee, who could have seen this coming?
Also to be filed under “not exactly a surprise,” TFPP has previously reported that on average, unfunded debt in Democrat-dominated states is a whopping fifteen times higher than that of Republican-run ones:
The difference between blue states and red states is dramatic. In states where Dems have control of the governorship and both legislative houses, there is an average of $22,214 in unfunded debt. In states that are controlled entirely by the GOP, that taxpayer burden is only $1,473.
States where power is divided between Republicans and Democrats is split down the middle at $14,963 […]
There are 41 states who do not have enough money to pay their bills. Almost every state has a law mandating a balanced budget, meaning massive tax increases or extreme budget cuts.
States use a variety of “creative accounting measures” to hide their debt, including moving their pension debt to “employee compensation packages” which are not counted the same way.
Accordingly, the country’s worst fiscal disasters are generally found in bastions of liberalism such as San Francisco and New Jersey (no, the latter isn’t an entirely blue state, but thanks to union influence, it might as well be).
Fiscal responsibility was not a new concept ten years ago, or twenty years ago. The arguments were surely made, just ignored more often and more completely than in most American cities because liberals’ control is more absolute. The Left cares only about making themselves feel “generous” today, not about providing for tomorrow. And this is the inevitable result.