Wednesday, June 7, 2017

Blue States Insolvent

What Happens When Liberals Make the Budget

Republicans and Democrats argue about virtually every political decision in existence. As diverse as those arguments can be, they inevitably return to a core principle: money. Even though the ultimate goals of the two parties often overlap, the dichotomy between their approaches to problems could not be more extreme.

With Trump in office, the left is relentlessly assaulting the fiscal viability of his aims. With that in mind, maybe it’s time to compare the fiscal success of liberal and conservative governing. Let’s look at deeply red and blue states and see which ones are in a better position.

Connecticut is a perfect case study. It is as blue as any state in the union and it has the highest per capita wealth of any state. Despite access to disproportionately large funds, the state-level government is in crisis mode. Over the last few years tax revenues have steadily declined even as GDP has risen. The bulk of revenue losses comes from middle-class job losses and an excessively top heavy tax structure.

While revenues are down, spending continues to increase, and the small state now faces a deficit in excess of $5 billion. The state is unable to pay commitments to pensions and healthcare subsidies, and the combined debt-to-revenue ratios make is the worst state in the country by fiscal status. Without unprecedented tax reform, the state will default on pensions and basic services in a few years.

New Jersey
New Jersey feels like a more impartial state to consider. After all, Chris Christie has had a few years in his run as governor. Don’t let that convince you that republican policies are what doubled the state’s debt in the past six years. Even with a Republican governor, the state has still been largely blue in almost all other positions. Like many blue states, New Jersey is struggling financially because of rising pension costs and healthcare burdens.

Like Connecticut, this is a state with some of the highest per capita income, but access to extraordinary income has not enabled the government to operate responsibly. What is worth noting is that Christie’s presence seems to have at least tempered liberal mistakes, and New Jersey is faring far better than any states that are run entirely by Democrats.

You knew this was coming. California is arguably the most liberal state in the country, and it sets the tone for an extreme example. With the largest population and greatest wealth, California has far more tax revenue than any other state. In fact, they have almost double what is available in Texas but only 50 percent more residents. The California GDP is so insane that if it was a separate country, it would be the fifth largest economy in the world.

On top of that, the California Constitution mandates that the annual state budget have no deficit. Even with those factors, California is still in dire straits — once again succumbing to exorbitant pension and healthcare costs. If nothing else, it shows that no amount of money is enough for a functioning government if the budget doesn’t work. California’s ineptitude is such that it is the sixth worst state fiscally.

Red vs Blue
The three states mentioned highlight the common and specific problems of liberal policy, but they could be cherry picked. If we look across the board, though, we find that red states outperform blue states regardless of population, income or any other standard diversifying feature. According to fiscal ratings, 9 of the 10 best states in the country are deep red (the top five are Alaska, Nebraska, Wyoming and the Dakotas). The only outlier is Florida (ranked 6) which is currently more red than blue.

On the other end of the spectrum, the bottom ten states are all dominated by the Democrats (the bottom five being Connecticut, Massachusetts, New Jersey, Illinois and Kentucky). The one red state in this mix is Kentucky, and it is the only red state below the median fiscal rating in the country.

There is no question that red states are dramatically outperforming their blue counterparts, and the chief issues that separate the winners from losers show up every time. Pensions and healthcare costs are the root of irresponsible government spending, and despite this indisputable evidence, the liberal camp continues to double down on unaffordable platforms. They will try to argue that red states get financial success through environmentally unfavorable means, but this only further highlights how untenable their approach to economics really is. Until they can learn to take an honest look at the bottom line, their policies will continue to hurt Americans. ~ American Liberty Report

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