US Territory Puerto Rico has declared bankruptcy facing $123 billion in bond and pension debts. WOW! This is not small potatoes. Detroit’s debt (resulting in numerous entire neighborhoods being bulldozed) was $7 billion by comparison. This could become the biggest Municipal Debt Market default in history. Who will pay? Well the recent budget passed in Washington had money in there for Puerto Rico. I don’t know how bad it will be, and the obvious question is:
Who will be next? The 5 worst states ranked fiscal condition at year-end 2016 are Kentucky, Illinois, New Jersey, Massachusetts, and Connecticut followed by Hawaii & California. This is based on their fiscal solvency in five separate categories:
- Cash solvency. Does a state have enough cash on hand to cover its short-term bills?
- Budget solvency. Can a state cover its fiscal year spending with current revenues, or does it have a budget shortfall?
- Long-run solvency. Can a state meet its long-term spending commitments? Will there be enough money to cushion it from economic shocks or other long-term fiscal risks?
- Service-level solvency. How much “fiscal slack” does a state have to increase spending if citizens demand more services?
- Trust fund solvency. How much debt does a state have? How large are its unfunded pension and healthcare liabilities?
These states could learn from Puerto Rico, but they won’t. For Puerto Rico with a population of 3.8 million the minimum wage increase caused the unemployment rate to rise from 9 percent to 17 percent, and its GDP per capita declined by almost 7 percent, over the next 5 years. But the impact is understated, because 350,000 mostly young and able-bodied people left for the U.S. mainland in search of employment. Hat-tip Breitbart.
“Fight for $15” campaigns are currently ongoing in several states. The campaign, which is organized by the Service Employees International Union (SEIU), started in the fast-food industry but has spread to home care, day care and airports, too. The movement’s stated goal is “$15 and a union” for all workers. California Governor Jerry Brown about a year ago signed a bill to raise the minimum wage in his state to $15 dollars an hour and yet the California legislature felt flush enough to hire former Attorney General Eric Holder’s Washington D.C. law firm to help the state with legal challenges against President Donald Trump’s administration, and it is costing taxpayers $25,000 a month, according to Judicial Watch.
BTW, guess who will bail out California, Illinois, NJ, etc., when they go the way of Puerto Rico? Every taxpayer, and it seems there are fewer and fewer of us.
Aloha, Mikie ~just a blogger (fightin’ like a girl)
~Psst, tired of politics? Check out Travel in the Categories drop down menu (right side panel) for my blogs posted from interesting locations during my travel adventures.