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A Beginner’s Guide to Austrian Economics

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A Beginner’s Guide to Austrian Economics
by Jason Peirce

“Everyone carries a part of society on his shoulders; no one is relieved of his share of responsibility by others. And no one can find a safe way out for himself if society is sweeping towards destruction. Therefore everyone, in his own interests, must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the result. Whether he chooses or not, every man is drawn into the great historical struggle, the decisive battle into which our epoch has plunged us.” – Ludwig von Mises

December 16, 2014—Of course, Mises above is addressing the need for “everyone” to understand basic, sound economics. This is why it’s heartening to see such renewed interest in the Austrian School since the 2008 financial crisis.

Here is a beginner’s guide in which we’ll briefly examine the basic principles and answer the basic questions about Austrian economics.

The “Austrian School” of economics grew out of the work of the late 19th and 20th century Vienna economists Carl Menger, Eugen von Bohm-Bawerk, Ludwig von Mises, and Friedrich Hayek (though of course Austrian School economists need not hail from Austria). Austrians focus strongly on the analysis of individual human action. This is known as praxeology, the study of the logical implications of the fact that individuals act with purpose, from which all economic theory can be deduced. Austrians also note the correlation between greater economic freedom and greater political and moral freedom. This in part explains why Austrian economics is the intellectual foundation for libertarianism. Austrians rightly attribute the repeated implosions of mainstream Keynesian economics to the latter’s focus on empirical observations, mathematical models, and statistical analysis.

It’s important to note that Austrians sound a minority voice in economics and are widely marginalized by mainstream Keynesian economists in academia and media. Consider why this may be. It’s certainly not due to unsound theory. Perhaps because of academic group-think, since tenure is largely denied for Austrians? Or maybe because there is a lack of financial incentive to be Austrian, because Austrians cannot be “Jonathan Gruber-ized” and bought and sold by government, bankers, and the moneyed lobbyists and powers-that-be? What do you think?

The Austrian contributions to economic thought are best-evidenced when comparing Austrian economics to mainstream Keynesian economics. Here are 3 examples of how Austrians differ from Keynesians:

Example 1: The Role of Savings, Capital, and Prices

Keynesians assert that consumer and government spending drive economic growth and that GDP determines the strength of the economy. Seeing savings as the enemy of growth, Keynesians advocate government deficit spending, monetary inflation, and artificially low interest rates to boost “aggregate demand.” Of course, inflation, spending, and debt destroy savings, capital, and prices.

“Keynes did not teach us how to perform the ‘miracle of turning a stone into bread’ but the not-at-all miraculous procedure of eating the seed corn.” – Mises

On the other hand, Austrians rightly see that savings and production drive economic growth and determine the strength of an economy. Also, Austrians recognize that prices act as signals in the economy, and that natural interest rates and prices determine the amount of savings and production in the economy.

“The essence of Keynesianism is its complete failure to conceive the role that saving and capital accumulation play in the improvement of economic conditions.” – Mises

http://www.voicesofliberty.com/article/a-beginners-guide-to-austrian-economics/

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New Jersey ranks 48th in return on taxes

Cory Booker, Robert Menendez

New Jersey ranks 48th in return on taxes

JANUARY 2, 2015, 11:19 PM    LAST UPDATED: FRIDAY, JANUARY 2, 2015, 11:25 PM
BY HERB JACKSON
RECORD COLUMNIST |
THE RECORD

New Jersey residents and businesses paid nearly $37 billion more in federal taxes than the government sent back to the state in 2013, the second-biggest deficit in the country, new data compiled by a non-profit group show.

Another way of looking at the numbers: For every $1 paid to the Internal Revenue Service, the state got back only 68 cents in federal largess, ranking the state 48th in the nation.

It’s a picture New Jersey has seen before. And it’s not going to change anytime soon, many analysts say.

The reason has much to do with the relative wealth of New Jerseyans, compared with their counterparts in other states, officials say; the federal tax system imposes higher rates on larger incomes, and the federal social-service network directs much of its money to programs for the poor, creating the gap.

“It’s true New Jersey pays more than it gets back per person, but if you look at states at the other end of the spectrum, such as Mississippi, which is one of the most poverty-stricken, it’s much better to be in New Jersey’s position,” said Lindsay Koshgarian, the research director for the National Priorities Project, which published the latest data.

Mississippi received $4.89 in federal spending for every $1 it paid in taxes, the highest rate of any state, The Record’s analysis of the group’s data found.

http://www.northjersey.com/news/new-jersey-ranks-48th-in-return-on-taxes-1.1185373

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France waves discreet goodbye to 75 percent super-tax

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France waves discreet goodbye to 75 percent super-tax

By By Hannah Murphy and Mark John | Reuters – Tue, 23 Dec, 201

PARIS (Reuters) – When President Francois Hollande unveiled a “super-tax” on the rich in 2012, some feared an exodus of business, sporting and artistic talent. One adviser warned it was a Socialist step too far that would turn France into “Cuba without sun”.

Two years on, with the tax due to expire at the end of this month, the mass emigration has not happened. But the damage to France’s appeal as a home for top earners has been great, and the pickings from the levy paltry.

“The reform clearly damaged France’s reputation and competitiveness,” said Jorg Stegemann, head of Kennedy Executive, an executive search firm based in France and Germany.

“It clearly has become harder to attract international senior managers to come to France than it was,” he added.

Hollande first floated the 75-percent super-tax on earnings over 1 million euros ($1.2 million) a year in his 2012 campaign to oust his conservative rival Nicolas Sarkozy. It fired up left-wing voters and helped him unseat the incumbent.

Yet ever since, it has been a thorn in his side, helping little in France’s effort to bring its public deficit within European Union limits and mixing the message just as Hollande sought to promote a more pro-business image. The adviser who made the “Cuba” gag was Emmanuel Macron, the ex-banker who is now his economy minister.

The Finance Ministry estimates the proceeds from the tax amounted to 260 million euros in its first year and 160 million in the second. That’s broadly in line with expectations, but tiny compared with a budget deficit which had reached 84.7 billion euros by the end of October.

 

https://ca.news.yahoo.com/france-waves-discreet-goodbye-75-percent-super-tax-162358813–business.html

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Rep Scott Garrett : Tax reform: a tall order

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Rep Scott Garrett : Tax reform: a tall order

DECEMBER 21, 2014    LAST UPDATED: SUNDAY, DECEMBER 21, 2014, 1:21 AM
BY SCOTT GARRETT
THE RECORD

The code is also unfair, as many of the loopholes target small numbers of high-income individuals, while New Jersey’s middle-class families get stuck with the tab. It should come as no surprise that New Jersey has one of the highest tax burdens in the nation when you figure in the tidal wave of local, state and federal taxes.

Scott Garrett represents the 5th District in the House of Representatives. He serves on the House Financial Services Committee and the House Budget Committee. He is chairman of the Subcommittee on Capital Markets and Government-Sponsored Enterprises for the House Financial Services Committee, where he oversees the Securities and Exchange Commission and government-sponsored enterprises Fannie Mae and Freddie Mac.

ON MAY 1, 1931, with the push of a button at the White House, President Herbert Hoover officially commenced the opening of the Empire State Building. The 103-story structure was built with a powerful combination of steel girders, rivets and American ingenuity. This engineering feat and cultural icon took more than 7 million hours to complete.

There is another labor-intensive, American-made feat that happens every April 15. Unfortunately, we don’t get the productive equivalent of 192 Empire State Buildings for the 1.35 billion man-hours American workers spend filing tax returns each year. Instead, our outdated and complicated tax code rewards us with sluggish economic growth, wasted resources and a whole lot of frustration around the kitchen table.

We must fix our broken tax code and replace the outdated system with a pro-growth tax system, built upon the tenets of simplicity, fairness and efficiency. This is a tall order, but we have a lot at stake here in New Jersey and across the nation.

Currently, the U.S. tax code is the worst of all worlds. First, the system is notoriously complex, with individuals and families spending hundreds of billions of dollars a year trying to solve a numerical riddle of rules, deductions and tax schedules.

The code is also unfair, as many of the loopholes target small numbers of high-income individuals, while New Jersey’s middle-class families get stuck with the tab. It should come as no surprise that New Jersey has one of the highest tax burdens in the nation when you figure in the tidal wave of local, state and federal taxes.

Inefficient tax structure

According to a recent Monmouth University poll, half of New Jerseyans want to eventually leave the state because of the tax burden.

Moreover, the U.S. tax structure is as inefficient as a horse-and-buggy in the age of the high-efficiency hybrid engine. Considerations such as how to legally game the tax code, rather than business fundamentals, often distort individual decisions to work, save and invest. For example, tax economists Seth Giertz and Jacob Feldman argue that the tax code encourages businesses to switch their investments from productive activities (like hiring more workers) toward unproductive ones (like lobbying for special tax preferences).

As a result, not only is our current tax system unfair, but it also wastes resources, slows economic growth and leads to fewer jobs. We need to eliminate the special exemptions, simplify the rates and create a tax code that encourages savings, investment and job creation.

I remain hopeful that President Obama is willing work with Senate and House Republicans to revamp our tax code. Encouragingly, the White House website states “the tax code has become increasingly complicated and unfair. Under today’s tax laws, those who can afford expert advice can avoid paying their fair share and interests with the most connected lobbyists can get exemptions and special treatment written into our tax code.” Mr. President, I couldn’t agree more — now, it’s time to put meaning behind your words.

It is also important to recognize the political hurdles facing tax reform. While Republicans will control both the Senate and House in the New Year, without cooperation from the president, tax reform is as good as dead on arrival.

Serious about tax reform

The president has not yet demonstrated that he is serious about bringing tax reform across the finish line. Instead, the president views the tax code as a political tool to punish industries he happens to support (green energy) and those that don’t fit the party line, such as the oil and gas industry. Rather than talk about a simplified tax code to encourage job creation, the president remains committed to the theory that increasing the overall tax burden on working families in New Jersey somehow means these families are paying their “fair share.”

Most recently, the president threatened to veto a tax deal between the Senate and the House. Here is an example of both houses of Congress working together in a bipartisan manner, and the president killed the deal. For tax reform to work, the American people need a willing partner in the White House.

The American people gave Republicans the responsibility of controlling both houses of Congress for the next two years. In return, we can repay the American people by advancing solutions that help America’s families. And like President Hoover’s dedication of the Empire State Building, hopefully President Obama can work with Republicans to hit the switch and inaugurate another feat of American achievement: a reformed tax code.

 

http://www.northjersey.com/opinion/opinion-guest-writers/tax-reform-a-tall-order-1.1173284

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State Republicans oppose increase hotel-tax bill Meadowlands

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State Republicans oppose increase hotel-tax bill Meadowlands

DECEMBER 20, 2014    LAST UPDATED: SATURDAY, DECEMBER 20, 2014, 1:21 AM
BY DUSTIN RACIOPPI
STATE HO– USE BUREAU |
THE RECORD

Senate Republicans say that when a bill to overhaul the 14-town Meadowlands district comes to a vote Monday, it won’t have their support.

But their opposition to the measure will be merely symbolic unless they can convince a handful of Democrats to align with them in voting it down.

The proposal to restructure the district’s tax-revenue sharing and meld its two authorities had moved quickly since being introduced last week by Assembly Speaker Vincent Prieto, D-Secaucus. The Assembly passed the bill Thursday night in a late-running session that included lengthy amendment talks and an emergency vote. The Senate halted the pace that night when it would not allow an emergency vote, but instead passed the amendments.

Now the Senate will return Monday for a vote.

Republicans object to the proposal to shift the revenue-sharing burden from some of the district’s well-developed municipalities to its hotels by adding a 3 percent room tax. And although they do not disagree with the idea of consolidating the Meadowlands Commission and the New Jersey Sports and Exposition Authority, as of Friday they didn’t know the details of the merger.

When the Senate votes on the bill, Republican leader Tom Kean Jr. said, he doesn’t anticipate any support from the caucus. Because of the last-minute changes made Thursday night requiring an emergency vote, the Senate would not allow a vote on the bill, because, Kean said, it “was literally changing by the minute.”

“They’re still writing it as they’re asking us to vote for it,” said state Sen. Gerald Cardinale, R-Demarest. “That is not good government.”

Since 1972, the 14-municipality Meadowlands district within Bergen and Hudson counties has operated under a complex formula in which tax revenues generated by development in individual communities is shared.

Each year, communities that have been allowed to more-liberally develop land send tax dollars from those ratables to the communities that are restricted to preserve open space.

In the past several years, though, the formula has become a sore point for local officials, who view it as inequitable and antiquated.

The legislation, sponsored by Prieto, would consolidate the two Meadowlands agencies and add the hotel tax, a move estimated to draw $7 million to $10 million a year. Last year about $7 million was distributed in the district.

Shifting the burden from the municipalities to the hotels would free up tax revenues for local budgets, which have become strained under increased costs and the need to stay within the mandated 2 percent cap on increases in most tax-supported spending. Prieto also said that any money left over would be used for infrastructure improvements, flood control and promoting tourism.

But Cardinale worries about the plan’s long-term sustainability.

“If that 3 percent hotel tax doesn’t produce enough, then what happens? Cardinale said. “If the cash flow doesn’t happen, then the taxpayers in the whole state” will have to make up the difference to fund the district’s costs to operate. For the past two years, Prieto has said, the state budget has either partially or fully funded the district because municipalities could not meet their tax-sharing obligations.

http://www.northjersey.com/news/nj-state-news/gop-opposes-meadowlands-hotel-tax-bill-1.1173006

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Pascrell, Garrett find a ‘no’ vote they agree on

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Pascrell, Garrett find a ‘no’ vote they agree on

“I am looking forward to a complete and thorough reform of our tax code in the new Congress.  America sent a very clear message in November.  We desperately need tax reform that promotes fairness for everyone, not just carve-outs for a well-connected few.  Unfortunately, though I support some of the measures included in today’s legislation, this bill is far outweighed by special interest tax giveaways, and I cannot support it.” Rep. Scott Garrett (R-NJ)

DECEMBER 7, 2014, 11:19 PM    LAST UPDATED: SUNDAY, DECEMBER 7, 2014, 11:20 PM
BY HERB JACKSON
RECORD COLUMNIST |
THE RECORD

Rep. Bill Pascrell Jr. bucked his party last week and joined only 19 other Democrats in opposing the extension of dozens of expired tax breaks, including some he had said a day earlier were important to New Jersey residents.

Rep. Scott Garrett, a Republican with a much longer history of breaking with his party, joined him in the “no” column as one of only 26 Republicans against the tax package.

It’s an understatement to say that Garrett, of Wantage, and Pascrell, of Paterson, do not usually agree. Data compiled at opencongress.org show that the veteran North Jersey representatives voted the opposite way on three out of every four votes during the past two years, and even on this bill, they voted the same way for different reasons.

The vote could also be a sign that Pascrell, who is finishing his ninth term in the House, is starting to act out against his party’s leadership.

After Republicans won their biggest House majority since World War II last month, Pascrell was harshly critical of Democratic strategy, arguing that his party’s candidates were too timid about discussing improvements in the economy.

http://www.northjersey.com/news/jackson-pascrell-garrett-find-a-no-vote-they-agree-on-1.1148270

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New Jersey loses jobs in October as it prepares for bond sale

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New Jersey loses jobs in October as it prepares for bond sale
By By Hilary Russ | Reuters – 4 hours ago

(Reuters) – New Jersey’s economy showed more cracks on Thursday as the U.S. state with the second-lowest credit rating in the country reported 4,500 jobs lost in October and an upward tick in its unemployment rate.

The latest bad news broke a streak of much-needed labor market improvement that had been slow but steady for the Garden State, and it came in advance of a planned $525 million state borrowing on Dec. 3.

The unemployment rate rose by 0.1 percentage point to 6.6 percent in October. More than half of the jobs lost were in the private sector, particularly in construction, preliminary data from the U.S. Bureau of Labor Statistics showed.

A spate of casino closures in Atlantic City, which has suffered from increased competition in nearby states, also weighed on the state in October, as they did in September, said New Jersey labor spokesman Brian Murray.

Accommodation and food service jobs declined by 2,200 jobs in October, due in part to the closure of the Trump Plaza, he said.

The state has now recovered only 48 percent of the jobs it lost during the 2007-2009 recession, far less than New York and nationwide, according to the left-leaning research group New Jersey Policy Perspective.

Wall Street credit rating agencies have downgraded the state eight times because of its poor economic recovery and large public pension shortfalls. Governor Chris Christie, a potential 2016 Republican presidential candidate, took controversial actions – not putting the money into the pension system that the state was supposed to contribute – in the middle of a budget crunch this year.

https://ca.news.yahoo.com/jersey-loses-jobs-october-prepares-bond-sale-193419248.html

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Raising N.J. gas tax can have financial and political drawbacks

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file photo by Boyd Loving

Raising N.J. gas tax can have financial and political drawbacks

NOVEMBER 17, 2014, 10:45 PM LAST UPDATED: MONDAY, NOVEMBER 17, 2014, 11:06 PM
BY CHRISTOPHER MAAG
STAFF WRITER |
THE RECORDGEORGE MCNISH/SPECIAL TO THE RECORD

Editors Note : the real questions remains ,what have they been doing with all the money the last 15 years ?

A Delta gas station on Main Avenue in Passaic advertising regular gasoline this week for $2.55 a gallon. New Jersey’s gas prices are much lower than neighboring states because of its low gas tax.

Even as gas prices nationwide continue to drop, hitting the lowest average tabs Americans have seen since 2010 — New Jersey continues to maintain its advantage. Average prices here hovered around $2.76 a gallon last week, 17 cents lower than the national average and more than 50 cents cheaper than New York’s.

The biggest reason for New Jersey’s resilient price advantage: The motor fuels tax, which at 10.5 cents a gallon, is the nation’s second lowest. The closest nearby price competitor is Delaware, where the gas tax is more than double at 23 cents. New Jersey’s other neighbors — Pennsylvania, Connecticut and New York — charge gas taxes that are four or five times higher.

But pressure on New Jersey’s Transportation Trust Fund, which gets a large portion of its money from the gas tax to fund road repairs, has been growing for years. It reached a crescendo under Governor Christie, who took office to find that virtually no capital was available to fund road projects. Instead, the bulk of the money in the trust fund goes to pay debt, not fix roads.

Christie has relied on a number of tactics to find the cash needed to keep construction vehicles working on New Jersey highways — and avoid raising the tax.

Tolls have been raised on the New Jersey Turnpike, and the money has been used to fund projects throughout the state. For instance, toll increases on the turnpike have been used to pay for road projects and to prop up NJ Transit.

And a train tunnel project under the Hudson River was canceled and part of its funding — $1.8 billion — redirected

Christie has relied on a number of tactics to find the cash needed to keep construction vehicles working on New Jersey highways — and avoid raising the tax.

from the Port Authority to rebuild the Pulaski Skyway and complete several other projects. The federal Securities and Exchange Commission and the Manhattan District Attorney’s Office began probing the deal after a report in The Record showed that Port Authority officials were concerned that providing the funding to New Jersey was outside the agency’s mandated mission. The probes are ongoing.

Those moves were one-time gambits that don’t provide a stable source of funding, and the money they generated is slated to run out by the end of 2016.

http://www.northjersey.com/news/raising-n-j-gas-tax-can-have-financial-and-political-drawbacks-1.1135869

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Ohio’s Unfunded Pension Liability More than $25K per Resident, $10K Above National Average

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wow I thought New Jersey needed Pension reform ?

Ohio’s Unfunded Pension Liability More than $25K per Resident, $10K Above National Average

Maggie Thurber / @Watchdogorg / November 15, 2014

Ohio’s public pension plans have so much debt that paying it off today would cost each resident $25,080.

According to a new report, “Promises Made, Promises Broken 2014,” by the nonprofit State Budget Solutions, the amount of unfunded pension obligations in Ohio has grown to nearly $290 billion, fifth highest in the nation.

That’s despite recent changes in the pension plans that were supposed to address the unfunded liability.

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“That’s a very scary place for Ohio. The national average is $15,000, so $25,000 is just terrible,” said Joe Luppino-Esposito, SBS editor and general counsel and the author of the report.

He said the $25,080 places Ohio third in highest per-capita debt. Alaska, in part because of its low population, was first, and Illinois was second.

Ohio has several individual plans — for teachers, police and fire, state employees, school employees and the state highway patrol. Participants and the public employer contribute to the plans just as non-public workers and employers contribute to Social Security.

The plans are categorized as defined benefits, with the amount of payment upon retirement based on the three highest years of earnings while working.

That’s part of the problem, Luppino-Esposito said.

It’s hard to know the exact amount the plans will have to pay out years in the future when current employees retire because there is no way to know for sure how much will be owed, he said. People are working longer and more likely to have higher earnings. They’re also living longer, so they’re collecting pensions for more years.

The methods states use to project how much money they need to contribute to the funds every year also contributes to the problem because estimates could be off.

Luppino-Esposito warned that the consequences of ignoring the unfunded liabilities could lead to a situation similar to Detroit’s.

“When the money starts running out and you have to pay more for pensions, you start cutting back on essential services,” he said. “The result in Detroit was bankruptcy for the city, and then pensioners had to end up taking a cut in benefits. The sooner the unfunded liabilities get addressed, the better for everyone.”

Read more at Watchdog.org

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Which Cities/States Will Be The First To Default When The Economy Rolls Over?

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Which Cities/States Will Be The First To Default When The Economy Rolls Over?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

What happens to local governments when the economy rolls over?

Though we’re constantly reassured the “recovery” that’s stumbled for five years has years of strong growth ahead, history suggests the “recovery” is due to roll over. Few recoveries last longer than 5 or 6 years, and the business cycle is graying fast: subprime auto loans are not exactly the foundation of “strong growth.”
 
So what might push the economy over the cliff? The strong U.S. dollar is crimping overseas sales and profits, the global economy is already recessionary, mortgage applications have dried up, auto sales are being driven by subprime loans, and the valuation bubbles in stocks and real estate are due for a breather, if not an outright reversal. Retail sales are flat, and with all these headwinds, growing profits by 10% to 20% a year becomes impossible for the vast majority of enterprises.
 
So what happens to local governments when the economy rolls over? Tax revenues decline.
 
The consensus is that local governments are sitting pretty: sales and property values have risen smartly, pushing tax revenues higher, and the cost of borrowing money via tax-free municipal bonds has fallen. Nice, but these are all functions of expansion and rising tax rates.
 
The uneven nature of the “recovery” has left some cities and states more vulnerable to a downturn than others.Let’s catalog the various risk factors that might become consequential as the global and U.S. economies weaken.

1. Those dependent on foreign tourism. The weak dollar made America a bargain destination for the past decade. As the dollar strengthens and other currencies lose purchasing power, America is no longer a bargain–especially as job cuts decimate the number of people who can blow a few thousand dollars on overseas vacations to the U.S.
 
2. Auto manufacturing-dependent locales. Vehicle sales have been strong, and the cheerleaders claim sales will keep rising for years to come. Really? With what money? As soon as layoffs hit the marginal workforce and the subprime auto loan bubble implodes, vehicle sales will follow suit.
 
3. Cities and states that depend heavily on capital gains taxes. Once the current housing and stock bubbles deflate–or simply stop expanding–tax revenues from the enormous capital gains reaped in the past five years will wither.
 
4. Locales dependent on high income taxes. Given that most of the job growth of the past five years has occurred in low-wage sectors, adding jobs hasn’t boosted income taxes much. High income-tax states have jacked up rates on high-income earners, but there is no law of nature that says high-income jobs will survive a global downturn.
 
Rather, enterprises desperate to tighten operating costs will want to jettison high-cost employees first.
 
5. Local governments with enormous debt burdens. With interest rates low, municipalities and states went to the bond market over the past few years for “free money.” Once tax revenues plummet, the interest on all that “free money” will take a larger percentage of tax revenues, heightening the cost of new bond debt as buyers start adding in the risk of eventual default.
 
6. Locales with high fixed costs. These include high healthcare costs for homeless, elderly, government employees, etc., interest on all those bonds, government employee pensions, etc. The fixed costs only increase every year, regardless of tax revenues. Every local government with high fixed costs is in a tightening fiscal vice once tax revenues plummet.
 
7. Local governments with generous employee benefits and pensions. Once the stock market rolls over, the big capital gains that have funded public pension plans dry up, and the annual contribution has to be paid out of declining tax revenues.
 
Should interest rates actually rise, pension fund bond portfolios would plummet in value, too.
 
8. Local governments dominated by self-serving entrenched interests. That is, all of them: sclerotic, self-serving, entrenched interests resolutely refuse to accept any cuts in their swag. As tax revenues fall off a cliff, government managers will face a dilemma: they can’t cut costs because the self-serving interests have made that politically impossible, and they can’t borrow money for operating expenses.

That leaves defaulting on debt as the only choice left. And since that’s the only choice left, that’s what they’ll do.
 
The vice will close on some cities and states sooner than others, but it will eventually squeeze every city and state with declining revenues and rising fixed costs into default.

http://www.zerohedge.com/news/2014-11-12/which-citiesstates-will-be-first-default-when-economy-rolls-over