Dire States
29th March 2011
Three years after the stock market cratered in 1929, American schools suffered their own crash. School districts had managed to ride out the early years of the Great Depression; in fact, because many districts depended on property taxes, which didn’t crash as fast as income taxes, more than a few managed to increase spending.
But in the 1932–33 school year, many districts ran out of funds. With more than one in five workers unemployed, many households didn’t have the money to pay property taxes, so all of a sudden, the school boards didn’t have enough money to pay their bills. Some 2,200 schools in 11 states closed entirely—in Alabama, schools in 50 out of 67 counties shut down. Many more districts cut services or sharply reduced their hours; thousands of districts in the Midwest and South shrank the school year to fewer than 120 days.
Government activity is essentially parasitical, and you can’t get blood from a corpse. This is why it behooves you to laugh whenever a politician calls for an ‘investment’; it’s not an investment, because investments produce income; it’s just plain spending that s/he is too shy to call spending.
Politicians love to bestow goodies on their constituents, especially retirement benefits for public-sector workers—largesse that some future sucker ultimately has to pay for. Decades of this kind of behavior have left a lot of states with growing structural deficits.
My, what a surprise. Aren’t you surprised? I’m sure surprised.
Cuomo himself has described the process thusly: “The governor announces the budget; unions come together, put $10 million in a bank account, run television ads against the governor. The governor’s popularity drops; the governor’s knees weaken; the governor falls to one knee, collapses, makes a deal.” Perhaps unsurprisingly, over the past decade, New York’s spending has grown almost twice as fast as personal income.
Our American political system at its … finest?
Barro thinks the state may have finally hit its fiscal capacity, with businesses fleeing and the beginnings of a tax revolt in the New York City suburbs over property taxes and school costs. This has happened before—top personal-income-tax rates went up to 15 percent in the 1970s, and the result was an exodus of businesses, driven as much by middle managers outraged at their tax burdens, as by top executives incensed at the business taxes. But the governors and legislators who brought spending under control the last time around didn’t have the magnitude of pension and health-care burdens now facing the state.
The problem with socialism is that you eventually run out of other people’s money. The problem with soaking the rich is that they can stay dry someplace else much more easily than most.