Wednesday, July 12, 2017

Consumerism and State Psychology

The culture to satisfy present wants over future needs is pushed by US government leaders who can get reelected on the pseudo premise that things are better under so-and-so's leadership and our standard of living is rising. The media never shows the lifestyles of foreign nations because if they revealed the truth, our standard of living has been declining for decades. DECADES! This is not a misprint. We are not only not in the top ten, but not even in the top twenty. Our government does not include items like the quality of life with clean air, safe water, good schools and crime free environment. Why would they? Because citizens would realize that their formula's for wealth does not consider those abstract points that benefit citizens. Come on! Their formula considers credit which is debt, a positive. It is why we have a Flint, Michigan, Chesapeake Bay, Louisiana salt-water intrusions and many, many other violations of our environment. The news bytes that we receive never have follow up unless it is a murder or some other ugly sensationalist news item. It is no wonder then, when municipal workers go on strike, these same leaders would promise anything to end the disturbance, least they suffer a failed reelection like the Mayor of New York, John Lindsay, who failed to remove snow in a influential borough. The psychology to spend now and let somebody else worry about it, is the mainstay for reelection. The consumerism of politics. However, this policy is not only bad for individuals and unsustainable because that someday will come. It is now on hand for our states.
Many state budgets came due for July first and like I have been saying for the longest time, bond holders cross their fingers at the end of each month. Now, the meme is spreading to municipal workers. Eleven states failed to develop their budget on time and since they have to balance their budgets by law, phony accounting comes into play. The main point of contention in almost every state is pension funds. There are four states, Connecticut, New Jersey, Kentucky and Illinois who are seriously deficient in funding. They were in the news last week and they will be in the news many, many more times. The problem is contagious and like I predicted in my yearly forecast, six states raised their taxes on gasoline. Unlike cities and territories, states cannot move to bankruptcy court. If they can get their fellow corrupt leaders in Congress to change the law, municipal workers can forget their pension, period. As it stands, they still can default. The last state to default was Arkansas back in the Great Depression.  
The new poster boy whose rooster is calling is Illinois. Things have gotten so bad in the land of Lincoln that they had to suspend their lottery sales in Mega Millions and Powerball due to a lack of funding. This is unbelievable since the state makes $90 million profit on lottery sales. There are $15 billion in unpaid bills and with late fees and interest, you can add another $800 million.
What's their solution?
Debt! They issued $25B worth of new debt, raised taxes and corporate levies. This is what you do when you spend $6B more than you take in. At the moment the rating services have threatened to downgrade their status to JUNK! This would be a first. The market says there is no panic, but you can't see their hands behind their back with fingers crossed.
Many states develop "creative" ideas to cover their liabilities. California is borrowing form their investment fund to cover bills. New Jersey is thinking of directly transferring lottery sales to fund their pension plan. Let's hope people keep buying their dream with lottery tickets and maybe, the state will open the beaches again. Then again, if debt and taxes are the only solution, people can move and their goes your tax revenue and lottery buyers. Is it too late to remind these clueless fools what my mother use to say, "Save for a rainy day?"