Three years ago, I put together a “Moocher Index” that measured the degree to which non-poor people in a state were benefiting from redistribution programs.
As you can see if you click on the nearby table, Vermont was the worst state, followed by Mississippi, Maine, New York, and Massachusetts.
I confessed that my Moocher Index was a crude and imprecise tool, but it was one of my most popular posts in the early days of this blog. Probably because it was a way of measuring the degree to which people were being lured to ride in the wagon of government dependency (a very disturbing trend put in visual form by these two cartoons).
So I was very interested when I found that somebody at Forbes did something vaguely similar and came up with a list of “death spiral” states.
Eleven states make our list of danger spots for investors. They can look forward to a rising tax burden, deteriorating state finances and an exodus of employers. The list includes California, New York, Illinois and Ohio, along with some smaller states like New Mexico and Hawaii. …Two factors determine whether a state makes this elite list of fiscal hellholes. The first is whether it 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. …what happens when these needy types outnumber the providers? Taxes get too high. Prosperous citizens decamp. Employers decamp. That just makes matters worse for the taxpayers left behind. Let’s say you are a software entrepreneur with 100 on your payroll. If you stay in San Francisco, your crew will support 139 takers. In Texas, they would support only 82. Austin looks very attractive. Ranked on the taker/maker ratio, our 11 death spiral states range from New Mexico, with 1.53 takers for every maker, down to Ohio, with a 1-to-1 ratio. …The second element in the death spiral list is a scorecard of state credit-worthiness done by Conning & Co., a money manager… Its formula downgrades states for large debts, an uncompetitive business climate, weak home prices and bad trends in employment. …A state qualifies for the Forbes death spiral list if its taker/maker ratio exceeds 1.0 and it resides in the bottom half of Conning’s ranking. It’s easy to see how California got on our list. It has pampered a large army of civil servants while using every imaginable trick to chase private-sector jobs away, the latest being a quixotic scheme to reduce the globe’s atmospheric carbon.
Not surprisingly, there is considerable overlap between the top states in the Moocher Index and the death-spiral states.
So be forewarned. If you live in California, Hawaii, Maine, Mississippi, or New York, it’s quite likely that you are surrounded by people who want you to work harder and pay higher taxes so they can get more handouts.
Heck, that’s true in most states, so you should worry regardless of where you live. Click here to see a very depressing chart about the nationwide increase in dependency.
So what lessons can we learn? Well, if you look at this map, you’ll notice that none of the states without an income tax are death-spiral states.
And if you look at this map, you’ll see that there’s no overlap between death-spiral states and states with the lowest tax burdens.
Hmmm…sort of makes one think that maybe higher taxes aren’t the right way to solve a fiscal mess. Maybe somebody should inform the President.
Last but not least, here’s a map showing the state-by-state generosity of welfare benefits. I don’t detect any correlation with death-spiral states – except for New York and California.
If you live in either of those two states, you may want to escape before it’s too late.
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why South Carolina? Greenville has been on business friendly and favored lists time after time.
When you mentioned SS you lost my reason for reading further.”The burden of HUD, EPA, SS, and other wealth redistributors “I paid into for over 40 years into this program,an now i am getting my money back as well as paying taxes on it.Think before you post sheeple.
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There is also another micro-economic path: You take the eternal advice of the left that “money brings little extra happiness” (and indeed, brings even less when heavily taxed) and you transition to an easier lifestyle, from maker to moocher, temporarily and partially insulated from the consequences of your mediocrity. Many, myself included, will find that an appealing transition once one of the greatest redistribution programs this side of the Atlantic kicks in next year: ObamaCare. So you simply transition from ever less maker to ever more moocher. No moving expenses involved, and the party lasts until you run out of other people’s money. Which is not very long, because there is a positive behavioral feedback into this flatter effort-reward curve decline vortex. But, as in voting, your own individual behavior has only the tiniest chance of affecting the general outcome. So if decline is going to happen anyway, you might as well be on the receiving rather than the giving end.
So the entire country is on an firm trajectory to turning yellow. It’s the death spiral of slow growth, where ever more desperate (but hopeful – or is that “HopeNChangeful”?) voter-lemmings demand ever more redistribution from a pie that represents an ever smaller percentage of world GDP (because your country is growing slower than the world average under the ever flatter effort-reward curves). Once that desperation sets in, you, the voter, no longer cares about the future. The future becomes a secondary issue. Growing at 1-2% annually in a world that is growing by 5%, you simply try to claw back through the redistributive electoral process the 3-4% of the world prosperity standing that you are losing every year. France, is the archetypical society that has reached this point. It is past the event horizon. Most of Europe is also at this point and the rest is quickly, easily, and naturally been dragged down the same vortex. The US seems to have entered that same irreversible vortex about a decade ago, when the 9/11 attacks propelled American mandatory collectivism to majoritarian status. The fact that American voters elected Obama five years ago to correct Bush’s mistakes is solid evidence that the positive feedback loop to decline has been irreversibly entered. For those who doubted it then, see how Americans voted for Obama a second time. In an ever slower growing economy, redistribution demands grow ever larger.
The only way for a country/jurisdiction to avoid a fate of decline is to grow along the same long term trendline as the world average: five percent annually. Short of that, inevitable systemic decline (which eventually engulfs all aspects of life) is the ultimate fate. That is just the obvious arithmetic of compounding growth (or lack thereof) and the fate it portends for the slow growers will come rather soon in a fast moving early twenty first century world. It was, after all, a leftist that said something along the lines of “The greatest shortcoming of the human race is our inability to understand the exponential function.”. Yes indeed, the exponential function of growth, where sub-par growth leads to inevitable decline.
The only way for the US to achieve 5% growth would be to immediately divest of all the mandatory collectivism (social and economic) that voter-lemmings chose for themselves post 9/11, return to Reganesque effort-reward incentives to exceptional work – and then some. That is simply and completely out of the question. American voter-lemmings (and developer world voter-lemmings in general) seem poised to further flatten effort-reward curves. Once the desperate voters of a slower growing America taste the temporary numbing sweetness of redistribution, they will come back for more. But we don’t really need any more to decline. Now having probably already entered a permanent era of flatter incentive 2% growth trendline, we are losing relative prosperity at a 2-3% annual rate in a world that is growing by 4-5%. Malaise, desperation and more redistribution are in the cards. Prepare yourselves for a wretched long term decline. Decline that feels rather slow from day to day but is precipitous by historical standards. The next generation of Americans will be the first to have lost so much of their relative world prosperity standing in such a short peacetime period. They are the very generation that predominantly votes for HopNChange. Apparently none of them have seen the European movie.
As the tectonic change of submerging developed world vs emerging developing world unfolds, a new world order will emerge rather quickly. The few developed countries that have instituted or maintained growth effort-reward curves — and are thus keeping up with average worldwide growth – may still be specs on the map. But they will expand, simply because the developed world that is riding the HopNChange train of one to two percent growth will de-facto fade away.
In an ominous sign, some of these developed countries that are keeping up with the high growth effort-reward curves (like Hong-Kong and Singapore) are also not complete democracies. I hope this is not where the inevitable natural selection of cultures — based on dynamism and success – leads humanity.
PS. A new hyphenated word, voter-lemming, is emerging in the submerging developed world.
NM is an outlier because every Indian is counted – they all receive some kind of benefit – an we’ve got a lot of them. They can contribute to death spiral, if they eke better benefits or stop working altogether and turn to an inner city type of existence. Or not.
The death spiral by itself is rather happening because of things not counted in the death spiral formula. For example, the Republican administration have decided to steal money received from sales tax increases in spaceport counties and redirect it to “schools”. Voters weren’t consulted, of course. They voted to fund the spaceport, and now their money is thrown into the maw of the teachers’ union Molokh. Yay, governance. Suppose they’ll be smarter next time they are asked to vote for a tax increase.
In any case, state spending is rather insignificant when compared to the Federal spending. The burden of HUD, EPA, SS, and other wealth redistributors makes NM’s generosity with the stolen money fairly unimportant. 16 Trillion debt is about 20 times bigger than NM’s debt. This little elephant in the room attenuates the differences between states.
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Not to distract from the larger point, but it does look like South Carolina and Alabama are overlaps between the “death spiral” and “low taxes” maps.