You're watching...
The Manhattan Institute’s Steve Malanga discusses the impact the federal debt ceiling deal will have on state and city governments.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Well to continue this discussion joining -- -- Steve maligned author of shake down the continuing conspiracy against the American taxpayer and I -- and I have.
Give you a little low blow your horn here but I think you are probably the expert on municipal finance of the -- written a lot about it.
Bit beyond all the stuff about the pension problems and everything else that they've still got up there we've got the city now.
In Rhode Island that went bankrupt until this past week and is O'Hare on -- on our entire.
Alabama yeah -- there's there's so many of the -- county Alabama you get the one in Michigan.
There's so many of these things Meredith Whitney talked about there's gonna be this huge amount of municipal bankruptcies.
She got a lot of publicity -- -- the very grand statement but do you -- That is -- there's going to be more.
And we're well I think there's gonna be more but I do think that the issue is that a lot of essentially the debt that we're talking about has been rolled over into pensions and what's happening.
Instead is that the politicians you can use a pension system essentially to stretch out.
And be more irresponsible.
What you're debt and so rather than seeing these things explode in the way that -- -- people end -- paying -- their bondholders what they're doing is they're just not contributing to the pension funds.
And so that is in some places where -- run out of room that is actually creating bankers are right now.
For the person that that listening to was watching does that is that municipal employee work for -- count -- -- airport district or whatever might be.
Are they should they be worried about their pensions.
Well it really personal depends on where York and -- -- like 141000 school districts alone in America but in a lot of places they do need to be -- You look at give you an exam -- mentioned central falls Rhode Island Providence, Rhode Island which is a big city.
-- bitter cost of annual cost of pensions and retiree health -- amounts to 50% of the taxes they told hello there's no way that you can actually run a city like they're not paying.
Did their entire -- just pushing them down the road at some point that explodes in your terminal.
Right the way it exploded in central fall to wait exploded -- Pritchard Alabama and other place that -- -- they were told they're gonna run on money 2009 and guess what they ran out of money 2000 enough until it can happen there other cities Detroit just did a big pension deal because they have a fiscal monitor there who said.
This is unsustainable and other city where we are basically almost 50% of the retirement costs were going to need it to go to the budget so.
So there are big problems in some places.
Are you -- not having heard you heard the bear much of Salinas and end He was talking about these these federal grants block grants -- -- you wanna call them.
That's going to brought out I presume.
Well.
Her personal -- block grant program has had many many lives it is basically a dysfunctional program was started as an anti poverty program in the seventies.
But basically is given to all kinds of cities right now it's essentially an earmark program because all kinds of things that really don't have anything to do with reducing poverty and there's no -- its ever reduce poverty.
Why does it stay in place because congress loves it.
But the problem is that you take this example OK He was given money to -- was given money to invest in the company.
Government has no business investing in companies -- government can pick winners why.
Well you know what what -- but that's that we He was trying to pick a winner He was trying to and like He said.
That's latest is -- beautiful agricultural community he's trying to diversify not very far from Silicon Valley to -- is not tech company that's it let's let's invest in this tech company that.
Worked out well didn't it happen there you got.
It's why and that's federal money plus date obviously that the city listening to his testimony He didn't didn't even understand that they when they were required to match -- money so it seems like they're gonna be out their money.
That's the kind of stuff that government has no business being involved in but the reason.
You know the reason this kind of program stays in place congress -- the earmarks.
Most people in congress have been either state senators or Citi.
Mayors and so -- -- come up through the system they keep these things and allies.
But what we got the debt deal where -- again the debt gonna go higher just not as fast as it was before and so are they going to -- though are the states going to get less money from the Fed less of these kinds of.
-- -- They -- and there's talk that they -- but I'm -- tell you what's gonna happen in the next six months you're gonna see every local newspaper around the country.
Stories -- gonna go to all these mayors and say what's gonna be cut.
And people are concerned we're gonna cut this program it's so valuable and reporters are never get asked that the program actually work reporters and never gonna ask what was this program designed to do.
Is it really gonna do that because a lot of these programs don't work federal job training programs which they share the states.
They don't work for the most part they've been they've been tested.
Years music that I I think they close fire houses just to basically yeah analyze yes analyzed it explains the real services to scare people but there are lots of programs that the Fed share with the states and cities.
That don't work there's no science behind them that shows they work and we ought to be shutting them down but they have a constituency.
-- That makes it -- -- actions being maligned always been I'm sure we're going to be talking some more all right next year for sure thank you that you.
