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The Manhattan Institute’s Steve Malanga discusses the states facing the greatest fiscal problems.
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One Forbes article suggests that we shouldn't even invest in certain states here in our own country.
Eleven states are in what folds -- calling a financial death.
Spiral when a -- when he wrote the report he says these states on the screen.
That more people dependent on the government and walking in the private sector -- other was more because then that make good news.
He suggests that we should not invest in these states shouldn't buy their bonds don't buy a house that rent instead.
Joining us now.
The -- he is with the Manhattan institute's OK that's a pretty broad rough statement don't buy a house that.
Don't invest in their bombs what the -- I guess -- about -- well.
I mean I think it is a broad statement however.
Let's take the house partners first -- also if your company investing in these states fund.
Politicians and the states themselves have said this Rahm Emanuel said earlier this year if we don't fix our pension problems.
You're not -- big get a failing to buy a house in Chicago you're not gonna get company to invest in Chicago why.
Remember what Milton Friedman famously said about government debt if nothing more than taxes that haven't yet been collected -- people understand that have they seen communities particularly local communities where most most -- pension funds are fund with property taxes.
They know property taxes are going up in Massachusetts the Massachusetts taxpayer.
-- association did this study calculating how much.
Property taxes have to go up in fifty communities in order to pay for retirement benefits it is clearly something is gonna influence taxes on the road.
The New York Times lead story yesterday front -- lead story.
Things -- -- -- -- in California they will -- a so -- a couple of years because they've raised taxes we -- laughs well I mean and California is one of these eleven EFS -- start asking California is a very very mixed.
Bag right now because their economy is looking somewhat better but that's relative to horrible they had you know 13% unemployment -- little while ago.
At the same time however they're doing this by raising taxes they have one of the worst.
Out migration problems in the country with a book not Willis will -- give them a -- But but but what's the -- it what's the good.
A short term surplus doesn't help you if you do long term damage to your economy market right now.
-- right they are losing jobs to other states we've calculated as Manhattan's did the study on job migration the number one place the California jobs are leaving and going to -- taxes that tells you something it's not delusional leader in these actual numbers so do you agree with the characterization a death spot -- -- that.
Obviously I dramatics right off right is one of the things that that would you go that far no I wouldn't go that far -- one of the reasons is because these states.
Have a lot of latitude including latitude to keep doing things like kicking the can down the road but probably the reason why you can't predict when it all -- is the way it ends is the way -- -- for New York City in the seventies suddenly.
Suddenly.
Bondholders stand up and say.
We can't take -- yeah.
What happens just like.
That's what -- just wanted enough water is the end game you can kick the can kick the can and he -- keep on doing athletes suddenly one day you wake up and you can't and it just happens like that.
And that as a risk that these -- beat these states take -- that's the end game.
Then but -- just say no -- -- you've had enough right you're not gonna regret this would not -- -- little alternates -- the end game for these states right now frankly is that we get an unexpectedly robust American recovery in the next ten years in the markets in the.
Economy -- you got -- bail them out yeah.
I'm saying I'm just saying that's alternates and how come up yeah.
I'll give -- the ultimate -- Hello my burger I didn't urgency about us right now there's not an appetite for that in Washington can't handle it -- that.
The second time you do have a Republican you do have a Republican House which would which would step in the way of administrative action to get you have like -- these.
According to voted for president Bob for a second to -- when people are like I think some reward is -- I -- just pulled almost seconds that I got I'm gonna do a news story here I would want your comment of Biotech.
What do you do without an insolvent Citi how -- This old thing it.
Some Michigan State Republicans and even the governor -- China.
That talking about giving Detroit the -- should devote itself into bankruptcy essentially dissolving the city.
That is a story which is it's an option and it is on the table full -- Detroit.
Well first of all Detroit is is looking at many different options and one of the options that the mayor himself -- -- Has suggested.
It's shrinking the city.
Another -- Detroit has gotten two million people to about 700000 -- -- 150000 people there are vast tracks of Detroit that they can't covering more that they're not using so they want to just close it down stop providing services shutdown that would Dave Bing has suggested.
So it's clear that some of these big big former markets -- -- not gonna come back the trick never going to be two million people got so you need some kind of alternative when you break Citi up into you know -- its parts and into smaller communities or you simply shut down parts of this bankruptcy.
It -- to -- other that are insolvent they -- insolvency so they have to do something like this.
This is what usually considered a giant corporate restructuring -- corporation that just doesn't it do you can't make it right.
Our key question if they declare bankruptcy back they often they choose bankruptcy that -- have to pay the cops and firefighters nobody else to pensions well that's up to the courts because of present oral arguments cases they wanted to depends on Michigan law.
Depends on Michigan constitution and how it's interpreted and it would go to the state I mean -- there's courts that you gotta pay and the state has to pass because this is that right.
Well I don't remember how good if there insolvent that that you know it raise taxes rats and you're on who got -- -- a very good.
You know this -- that -- had done for I expect Steve -- effective and much and its speak.
