Eleven states made it on the list of Forbes Death Spiral. What is does death spiral mean? It means that the state can look forward to a rising tax burden, deteriorating state finances and an exodus of employers.
Those eleven death spiral states are California, New York, Illinois, Ohio, Kentucky, South Carolina, Alabama, Mississippi, New Mexico, Maine and Hawaii.
What’s driving the Death Spiral in 11 states?
“There are a lot of economic factors that are built into the death spiral,” says William Baldwin of Forbes. “The essential one, is whether the state has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector. Let us give those takers the benefit of our sympathy and assume that every single one of them is a deserving soul. This person is either genuinely needy or a dedicated public servant or the recipient of a well-earned pension.”
The states and their taker/maker ratio, with the worst of the “death spiral” states was New Mexico, with 1.53 takers for every 1 maker.
Mississippi 1.49, California 1.39, Alabama 1.10, Maine 1.07, New York 1.07, South Carolina 1.06, Kentucky 1.05, Illinois 1.03, Hawaii 1.02, and Ohio 1.00.
If you live in one of these death spiral states, Forbes says to rent instead of buy a house because property taxes will inevitably rise. William Baldwin of Forbes also says to sell municipal bonds you have in those states because they’re more likely to default and restructure those bonds so that they pay back less.
The second factor that goes into whether or not a state is in a death spiral is a “scorecard of state credit-worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios,” says Baldwin. “Conning’s analysis focuses more on dollars than body counts. Its formula downgrades states for large debts, an uncompetitive business climate, weak home prices and bad trends in employment.”
Speaker of the South Carolina House Bobby Harrell, R-Charleston, says the article from Forbes is wrong, especially in calling members of the military, public employees and retirees “takers”.
“We have military installations all over South Carolina. Those folks are government employees, but they are certainly the kind of government employees that we want, because we care passionately about the military in South Carolina,” Harrell says. “We have retirees moving here from all over the country, so many that we’ve had to add a seventh Congressional district. We have, according to a tax group who studied this in Washington not too long ago, we have the lowest taxes in the country.”
Do You Live In A Death Spiral State?
Death Spiral States
New Mexico is at the bottom of yet another list, and this one has a grim-sounding name. Forbes Magazine calls us a “death spiral” state.
Forbes lists our state as one of eleven states whose economies are at high risk of going into a tailspin – a death spiral.
Forbes Releases List Of 11 “Death Spiral” States
A writer at Forbes Magazine has identified a phenomenon called the “death spiral states.” The category includes 11 states where private sector workers are outnumbered by people who are dependent on the government. That number would include state workers, and people who are receiving welfare or pension.
What’s Driving “Death Spiral” in 11 States?