A Bankruptcy Chill Hits Cuomo Adding To Albany's Below Zero Freeze With NY Medicaid Excesses Unaddressed And 12,000 Jobs Lost

You know you're directly over the enemy, when the flack gets heavy.

   Bankruptcy has sent a chill up the spine of the true believers and media hacks for Andrew Cuomo and other Governors facing fiscal disaster.   The Business Insider's hacks have reported, "The Cheerleading For State Bankruptcies And Municipal Defaults Is Downright Ghoulish," and Business Insider offers the following 12 reasons why State finances won't go broke: (Reasons blue, comments red)

1. Outstanding muni debt remains within historical parameters.  What was the historical parameters before the mortgage collapse, or NYC before fiscal collapse, or stock market historical values before a crash or major devaluation?

2. Interest payments absorb less than 5 percent of current expenditures.   Not after interest rates triple or more and more borrowing is needed for pension contributions.   See example of Greece or Ireland.  Link

 3. Municipal bond default is extremely rare -- less than one-third of 1 percent.  European Counties were defaulting rarely, but now cash infusions and/or  the EU insuring their bonds is not extremely rare.   Link

4. There wasn't a bubble in muni bonds, nor any exotic derivatives.   There is insurance (a derivative) on some bonds.   Will a massive default also result in an insurance default?  Isn't the actuarial basis of the insurance based on very limited expected default?  Yes.   And, lots of litigation claiming deliberate unnecessary default as a reason not to pay said insurance will result and/or bankruptcy filing by such insurers.

5. Pensions were fully funded until they had to weather back-to-back recessions.   A big lie, check out California or NY. Link CA-1/2 trillion dollars pension shortfall    NY Link     Central NY Muni.

6. Anyone claiming there are $3 trillion in unfunded pension liabilities is ignore investment earnings -- which are the majority of returns.   Hey, dopey, check out NY's Madoff style promise of 7.5% Safe Return.    Link.http://cuomotarp.blogspot.com/2010/11/from-ponzi-to-madoff-to-hevesi-to.html   or this link to California's 1/2 trillion dollar unfunded liabilities

7. Pension funds average over 8 percent returns through a diversified portfolio. Why would they invest only in fixed income?  Get real, see NY's return for past 5 years was 01.1%.   Link.

8.  Municipalities devote only 3.8 percent of their budget to pension funding: A modest increase could solve most problems.  Is that due to the phony assumption of a 7.5% Safe Return on pension investments or the borrowing by workers to fund their pensions, so they don't realize the true amount they are contributing to their pensions? Link.

9. Pension plans are legally protected. Health benefits generally are not. 

 

Bye, bye, granny, it's for the good of the State.

10. In fact, most states WILL have to scale back health benefits -- but won't default on pensions or bonds.  But NY and Cuomo, if judged by his record of failures to prosecute Medicaid frauds as AG,  will make sure the massive overspending by NY on Medicare remains. Link 1 Link 2 Link 3.

What about that  $28 billion overspending on NY medicaid?  Link.

11. Municipalities have the next 30 years to remedy any pension shortfalls.  No, the money is missing now and present contributions must be many multiples of prior budgeted amounts.   Link
See #5, 6, 7 and 8 above.

12. Mass default doesn't seem likely, but austerity does.   This opinion uses word "mass" so as to leave some smaller number of States such 6 out of 50 states.   Link to Finance Bazaar.

     Andrew Cuomo must be waiting for a bankruptcy bailout because he isn't  cutting Medicaid to California levels and saving at least $28 Billion a year?  Oh, I forgot Cuomo recovered 0.6% of Medicaid fraud.

     Although the latest fraud is, "New York's seemingly endless cavalcade of corruption continues, with the Young Adult Institute National Institute for People with Disabilities Network and five of its current and former officers ordered to pay $18 million in civil damages under the False Claims Act," as usual the defendants aren't going to jail.   "The defendants will pay $7.2 million to the United States and the rest to New York - though YAI does not admit that it did anything wrong."
   Is this to be Cuomo's new ethical standard: Cheat, steal and if you get caught, you'll have to pay some of it back. Will this be equally applied to the ordinary criminal, not in a suit and without a fancy campaign contributing  lawyer?

    .Cuomo to cut 12,000 jobs.  Link 1 Link 2   But why must New York fund this Medicaid corruption with $28 Billion dollars and then face bankruptcy and 12,000 lost jobs?