Behind the Headlines Video
12/13/12 Death Spiral States
They've been called business unfriendly. Financial hellholes. Death spiral states. Without drastic action, they're the first states that will likely collapse.
By one measure, a death spiral state is one in which there are more takers than makers. "A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient." ["Taker" definition from Forbes magazine]. A maker is someone who works in the private sector.
Figured into the taker category is the number of Medicaid recipients. And the amount of the state's unfunded pension liabilities. [Another consideration is a state's credit worthiness according to analysis by Conning & Co.] A taker-to-maker ratio greater than 1.0 is bad news. Created by Forbes magazine, this formula yields 11 death spiral states.
[Death Spiral States
New Mexico 1.53
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
Ohio 1.00]
Then, there's the U-Haul Index. It's the wide disparity in the cost for a one-way U-Haul rental between two cities. It costs nearly twice as much for a rental from San Francisco to San Antonio [$1,693] than to go the other way [San Antonio to San Francisco $983]. It's supply and demand. People are fleeing California for business and consumer friendly Texas.
In the 1980s and 90s it was business and the middle class who fled cities - leaving a dwindling number of makers who are paying for the takers. The likely collapse of Detroit is a prime example.
Now, it's not just cities that will decay but entire states. Middle class, businesses and other job creators are fleeing to better states.
They've been called business unfriendly. Financial hellholes. Death spiral states. Without drastic action, they're the first states that will likely collapse.
By one measure, a death spiral state is one in which there are more takers than makers. "A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient." ["Taker" definition from Forbes magazine]. A maker is someone who works in the private sector.
Figured into the taker category is the number of Medicaid recipients. And the amount of the state's unfunded pension liabilities. [Another consideration is a state's credit worthiness according to analysis by Conning & Co.] A taker-to-maker ratio greater than 1.0 is bad news. Created by Forbes magazine, this formula yields 11 death spiral states.
[Death Spiral States
New Mexico 1.53
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
Ohio 1.00]
Then, there's the U-Haul Index. It's the wide disparity in the cost for a one-way U-Haul rental between two cities. It costs nearly twice as much for a rental from San Francisco to San Antonio [$1,693] than to go the other way [San Antonio to San Francisco $983]. It's supply and demand. People are fleeing California for business and consumer friendly Texas.
In the 1980s and 90s it was business and the middle class who fled cities - leaving a dwindling number of makers who are paying for the takers. The likely collapse of Detroit is a prime example.
Now, it's not just cities that will decay but entire states. Middle class, businesses and other job creators are fleeing to better states.
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