It’s no secret, the great US locomotive is
working at full speed. After 10 years of uninterrupted growth, the
North American economy is enjoying a wonderful moment: the unemployment rate lies below 4% – its
lowest level since 2000; every month more than 100,000 new jobs are created, salaries
are growing, and in the last 3 years alone, almost 8 million jobs were created. In addition, industrial production and exports
are at historically high levels. Even, in spite of their last stumble, the
SP 500 has exploded in recent years. The locomotive is soaring ahead. But hold on for just a second, because the
US economy has another face… Of which we’ve already spoken here on VisualPolitik. Dear viewers, the American economy – especially
the government – is addicted to credit and debt. You heard that right. See, September 30th, 2018 marked the end of
the federal government’s budget year. Well, here’s a question: can you tell me
how much the federal debt increased by, this year alone? The answer is, no less than 1.3 trillion dollars. 1.3 trillion dollars! This amount surpasses the entire Mexican GDP. And, we’re only talking about the federal
government. The economy is growing, but public deficit
is out of control. By the way, just in the last year, with Donald
Trump in the White House, government spending grew by 7% And it looks like things are going to get
worse, much worse… Congress’s budget office estimates that,
if they stay on this path, in less than 10 years interest payments alone will cost the
federal government more than 900 billion dollars per year. However, the federal government isn’t the
only debt junkie. Listen up. (THE STATES: THE HIDDEN DEBT) The economy grows and incomes grow. In 2017, 39 of the 50 states that make up
the United States had surpluses. That is, they made more money than they spent. After years of adjusting, now the question
that many governors ask themselves is… What’s the best way of spending all this
money? And, on top of that, since 2010 every states’
collection has increased by 40%, so… we’re not talking about a few cents, not at all. Finally, states have resources to invest in
infrastructure, education, social services, etc. Sounds good, right? Sadly, the truth is a little different…
well… a lot different. See, in principle, every state except for
Vermont has to have a balanced budget. However despite this and all the apparent
announced surpluses, the truth is that all of the states won’t stop accumulating debt,
obligations and liabilities of all kinds. In fact, nowadays every state drags, according
to the Think Tank Truth in Accounting estimates, a heavy load of more than 1.5 trillion in
unfunded debt. The result is that the vast majority, no less
than 40 of the 50 states, don’t have the resources to face all the commitments they’ve
gotten themselves into. But… just a second. How the hell can states accumulate debt while
their budgets are balanced? Well… basically by doing all kinds of accounting
tricks. After all, politicians and elected officials
are the most interested in masking their figures and spending every penny… – Come on, haven’t you heard? There are elections to be won. To do so, they use many tricks… from inflating
income assumptions to delaying bill payments, but… the most important trick of all is
the one that has to do with pensions and benefits for public employees who retire. Allow me to explain. In order to gain votes and get along with
unions, state governments tend to promise public employees very good pensions as well
as lots of additional benefits upon their retirement. Well, given how the pension system works in
the United States, it’s assumed that each month state governments have to contribute
the amounts they committed to, to a pension fund, so that tomorrow all those public workers
can collect the pensions they were promised However, just for a second, let’s put ourselves
in the place of the politicians in charge of the state government. – What if instead of depositing all that money
into a pension fund, we invest it in all kinds of public spending programs? That way we can finance a lot of projects,
which will make us win more votes. Okay, some of you may be thinking… And what will happen when all those employees
start retiring and claim their pensions and benefits? How are they going to be paid? – It doesn’t matter. You’re a politician… that’ll be someone
else’s problem… You just need to worry about winning elections. Well, folks, according to the data it looks
like that’s the thought many state politicians had. (State and local governments made big commitments,
particularly on pensions and retiree health care, but didn’t adequately fund those liabilities,”
Mr. Bronin, a Democrat and Mayor of Hartford) In total, only regarding unfunded pensions,
the state debts already exceed 800 billion dollars. The big question is knowing how the hell they’re
going to be able to cope with this huge amount of debt. Of course, not every state is in the same
situation. Listen up. (THE BEST AND THE WORST) If we think about it for a moment, folks,
it’s easy to understand: politicians have a gigantic incentive to spend every last penny,
after all… their entire future depends on the next election cycle. That’s why it’s so important, absolutely
essential, to not only have counterweights, but also for civil society to be attentive
and very demanding. But, let’s go back to the case of the US. As we’ve seen, in addition to the official
data, that they are dragging a colossal, unfunded debt of 1.5 trillion dollars. However, not every state is in the same situation. Out of the country’s 50 states, at least
40 don’t have enough assets today to face all of their obligations. Of course some states are better off than
others. And, in any case, there are 10 states whose
politicians have been responsible enough to guarantee their state’s future and keep
their accounts in order. Well, these are the 10 states that did their
homework: – Yes, no doubt, they’ve earned at least
the right to be mentioned, don’t you think? Alaska, North Dakota, Wyoming, Utah, South
Dakota, Idaho, Tennessee, Nebraska, Oregon and Iowa. As you can see, almost all of them, with the
exception of Oregon and Iowa, are strongly Republican states. Democrats should start looking at this. The fact is that all the other states, currently
have a negative balance. Of course, to get a better idea of what we’re
talking about, let’s take a look at the following graph, which shows the top 5 and
bottom 5 states. The data is expressed in dollars per taxpayer. And yes, you read that right. While states such as North Dakota, Wyoming
and Iowa have been responsible and have accumulated enough savings to meet all their obligations
– and even have surpluses to invest and benefit each state – Illinois, Connecticut
and New Jersey are dragging a terrifying load of more than $ 50,000 per taxpayer. But of course, at this point the question
is: How on earth are all these states going to be able to cover their obligations? The answer isn’t simple… because the situation
of some states, as we saw in the case of Illinois, Connecticut and New Jersey, is so bad that
finding a solution might be really hard. Check this out, in New Jersey’s case, the
worst-off of all the states, the fiscal hole amounts to almost 200 billion dollars. That is to say, this hole, which belongs to
a state that has a little over 9 million inhabitants, is larger than the economy of Qatar and almost
as big as the economies of countries like New Zealand or Peru. Crazy! In any case, what we can say is that ultimately
there are only two possible ways to solve this: either they raise taxes or cut spending. The problem is that raising taxes… may not
even be an option insofar as it can damage the state’s economic potential and drive
away taxpayers, especially those that hold large fortunes. That’s precisely what has happened in Connecticut
where in recent years a lot of big businessmen have fled the state because of their high
taxes in comparison to other territories within the United States. And it wasn’t only Connecticut. In 2016, the last year for which we have data,
600,000 people moved from the 25 states with the highest taxes to the 25 states with the
lowest taxes. And after Donald Trump’s latest fiscal reform,
it looks like this process will speed up. But, folks, we’ll talk about all this in
a future video. So far, you can see that the debt addiction
is far from being an exclusive federal government problem. The US economy is growing strong, but this
is the other side of the coin. The truth is that for the country’s growth
to be sustainable, both the federal government and the state governments need to finally
start taking the whole deficit and public debt issue very seriously. It isn’t normal for a country with such
a high amount of growth to have so many public account imbalances… Don’t you think? What will happen when things go wrong? What’s the limit to so much debt? Because folks, let’s not forget: sooner or
later, in one way or another, public debt always has to be paid. So I really hope you enjoyed this video, please
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