No Whining, No Federal Bailout; You Made Your Bed Of Debt, Lie In It, New York

From Arithmetic for the Economically Challenged Idiots 


For the USA:
1. Total public debt outstanding Dec. 20 $13,868,461,000,000
2. nation's population on April 1 was 308,745,538 
3. USA debt per person $44,805
     And just today, "The U.S. government fell deeper into the red in fiscal 2010 with net liabilities swelling more than $2 trillion as commitments on government debt and federal benefits rose, a U.S. Treasury report showed on Tuesday."

    The federal Government can't bailout New York; it's sinking itself.  You're on your own, New York. 


    New York State reports State-funded debt was $60.5 billion or $3,105 per person and in 2009, NY was the second most indebted State behind California.

    BUT, this debt doesn't include the Pension liabilities from the present phony estimated safe return on pension investments of  7.5%, when the New York fund earned annualized returns of 3.1 percent for the 10 years ended in March 2009, and 1.1 percent over five years and New York state’s $132.6 billion pension fund is the nation’s third-largest. 

   So we need to correct the pension liabilities optimistically with a 3.1% return, or a pessimistically with a 1.1% return.  Doing the arithmetic optimistically, we have 7.5/3.1 x $132.6 billion = $321 billion,  which should be in pension fund, when only $132.6 billion is, or NY has net debt burden owed the pension fund of optimistically $321 billion - $132.6 billion = $188.3 billion or another $9,664 additional debt per person, which should be added to $3,105 per person above.   Making $12,769 debt per person as a better debt estimate in New York.   But now look at the 4.52 million people on Medicaid in NY (don't pay taxes) out of a NY population of 19,541,453  which raises the debt per taxpaying person and each of their dependents to $16,600 each.

The party's over; the hand writing is on the wall and on the paper; the accounting's been done; the prophet heard; the piper must be paid.

The words, Mene, Mene, Tekel, u-Pharsin, written by a God of Justice Disrupt the Albany Victory Celebration (King Cuomo, Paterson, Silver and Sampson in their blue uniforms with their new committees behind them)

Economic Laws, Pensions And Gravity Lead Andrew Cuomo To A Hard Fall

From Arithmetic for the Economically Challenged Idiots:

First, the rose colored government accounting system: 
     A report in the August issue of Governing, called New York State, the nationwide pension leader with Pension liability: $141 billion; Percent funded: 107.38%; Employees in Pension Plans: 1,343,524.
Compared to California's  Pension liability: $454 billion; Percent funded: 86.89%; Employees in Pension Plans: 1,995,169   But, Government Accounting Rules allow state pension plans to calculate their obligations using an assumed long-term yield of 8%.

Second, the law of economic reality, which like law of gravity cannot be ignored:

Economic reality:
     1. what safe investments earn 8% return in  our present economy?
     2. Pension plans -- including California, New York and Florida -- invest some of their pension funds in BP stock,
     3. Guess what?    NY Comptroller Di Napoli will reduce his hope to earn 8% percent a year to 7.5%.  Except for  Madoff, who guarantees a 7.5 percent rate of return?  Or 7 percent?  Or 6 percent?  No junk bonds allowed.   NY's real rate of return was less than 4% for ten years.
     4.  Comptroller Thomas DiNapoli proposes for the state government and local governments a  pension “amortization” (i.e., borrowing) plan where the 7.5% rate won’t necessarily affect annual pension fund contributions, because they can borrow their higher payments from the pension fund. Only the Government could imagine being able to use your credit card to charge your credit card payment.
     5. And it gets better, "after a decade in which the New York State pension fund’s annual return on assets averaged less than half its [8%]target rate, the fund will need to jack up its taxpayer-funded contribution rates next year, Comptroller Thomas DiNapoli announced today."  That's you, the taxpayer, paying a 42% rise in your share (11.5% to 16.3%)  See * below for changing the rate from 7.5% to 2.5% that would need a 420% increase in the taxpayer share.


 Third, a Cuomo cheerleader, the NY Times, agrees and had  "How to Cheat a Retirement Fund", an "approach that assumes, as economists generally do, that even corporate accounting standards in this area are too lenient, public pension underfunding is about $3.5 trillion, or one-quarter of gross domestic product."


  Fourth, from Arithmetic for the Economically Challenged Idiots,  here's the advice a parent must give a child who believes in a 7.5% safe return on investments, in maintaining the value of his BP stock investments, and asks whether you should make your credit card payment with your credit card.    The answer: Tough love; First, No; then a good Cry; then Stop Spending.

  Fifth,  Economic real world thinking: "Private pension plans must discount their liabilities based on a market rate—typically, a corporate or U.S. government bond rate—which is often much lower than the plans’ projected returns." 
*Return US Treasury: 10-MONTH NOTE 10-15-2010 2.475%
  There appears to be a large difference between 2.475% and 7.5% and DiNapoli's assumed drop from 8% to 7.5%.


  Finally, "New York’s state budget gap for 2011-12, the first year of the next gubernatorial administration, is now projected at nearly $8.2 billion[up from $5.4 predicted earlier]" and that doesn't include the corrections reported above. 
   Sorry, Andrew and Thomas (DiNapoli), using the laws of Economic Arithmetic or the law of gravity equals a hard fall.
You're Bankrupt, your game is over.