I’ve been warning of the U.S. state and local pension debacle for some time, and especially how the government is coming after you – the taxpayer – for a bailout.
Just last week I spoke about the dire financial situation in Puerto Rico, and how years of out-of-control spending inspired the biggest governmental bankruptcy in U.S. history.
But it’s only going to get worse.
Come to find out, some U.S. state residents are taking matters into their own hands and they’re leaving in hopes of greener pastures.
I’m talking about The Great State Migration.
And I’m not one bit surprised: Citizens are fed up with how states pick their pockets through higher taxes, fees, and needless regulations. They’re hightailing it for a new state with better job opportunities, lower costs of living and lower taxes.
The latest shoe to drop is Connecticut, a state struggling with a weaker economy and soaring budget deficits. While they were busy raising taxes, top earners in the state saw the writing on the wall and relocated elsewhere.
As a result, Connecticut tax revenues from the top 100 taxpayers dropped nearly 50% in 2016 from the same period a year earlier. This equates to nearly $200 million.
You read that right: A staggering $200 million drop in tax revenues!
But it gets worse.
The lost revenue magnifies the state’s budget problems. In fact, Connecticut’s projected deficit for the new fiscal year jumped 35% to $2.3 billion.
And contending with their own budget woes, city leaders in Hartford, Connecticut, have taken a step toward bankruptcy by soliciting proposals from law firms specializing in Chapter 9 protection.
And while they could use a cash infusion from the state, I wouldn’t hold my breath!
Unfortunately, Connecticut and Hartford are just the latest examples, with more to come.
And that’s because of enormous underfunded state and local pension liabilities, estimated at $3.85 trillion this year in a report by the Hoover Institution.
That’s not a typo: That’s trillion with a “T.”
Worse yet, that figure is up $434 billion in the last year.
The bottom line: Years of overspending and accounting gimmicks are coming home to roost. And the solution is for the government to dig deeper into your pockets, while it cuts pension benefits.
But just how are governments going to maneuver their way out of this?
When governments get their backs against the wall, historically they turn first against their own citizens by raising taxes, loading up on fees, and even outright confiscations.
That’s why savvy investors are pickier than ever when it comes to where they put their money. Right now, I have my eyes set on physical gold and silver when the time’s right.