Politicians from New York want states to get a big bailout from Uncle Sam. I explained earlier this month that this would be a bad idea.
Simply stated, the Empire State is in big trouble because it has a bloated government, not because of the coronavirus.
Probably the strongest piece of evidence is that New York is ranked #50 for fiscal policy according to Freedom in the 50 States.
If you want to understand how New York’s politicians have created a fiscal disaster, let’s compare the Empire State to Florida, which is ranked #1.
I’ve already done that three times (Round #1, Round #2, and Round #3), so this will be Round #4.
The Wall Street Journal compared the two states in an editorial two days ago.
…let’s do the math to consider which state has managed its economy and finances better over the last decade. …Democrats in Albany are claiming to be victims of events that are out of their control. But they have increased spending by $43 billion since 2010—about $570,000 for each additional person. Florida’s budget has increased by $28 billion while its population has grown 2.7 million—a $10,400 increase per new resident.
New York has a top state-and-local tax rate of 12.7%, while Florida has no income tax. Yet New York has a growing budget deficit, while Mr. Scott inherited a large deficit but built a surplus and paid down state debt. The difference is spending. …Blame New York’s cocktail of generous benefits, loose eligibility standards and waste. New York spends about twice as much per Medicaid beneficiary and six times more on nursing homes as Florida though its elderly population is 20% smaller. …The rate of private job growth in Florida has been about 60% higher than in New York from January 2010 to January 2020. Finance jobs expanded by 25% in Florida compared to 9.7% in New York. …The policy question is why taxpayers in Florida and other well-managed states should pay higher taxes to rescue an Albany political class that refuses to restrain its tax-and-spend governance. Public unions soak up an ever-larger share of tax dollars, but Albany refuses to change.
If you want further details on the difference between the two states, Chris Edwards takes a close look at the burden of government spending.
New York and Florida have similar populations of 20 million and 21 million, respectively. But governments in New York spent twice as much as governments in Florida, $348 billion compared to $177 billion. On some activities, spending in the two states is broadly similar… But in other budget areas, New York’s excess spending is striking. New York spent $69 billion on K-12 schools in 2017 compared to Florida’s $28 billion.
Yet the states have about the same number of kids enrolled—2.7 million in New York and 2.8 million in Florida. New York spent $71 billion on public welfare compared to Florida’s $28 billion. Liberals say that governments provide needed resources to people truly in need. Conservatives say that generous handouts induce high demand whether people need it or not. Given that New York’s welfare costs are 2.5 times higher than Florida’s, the latter effect probably dominates. …New York governments employed 1,196,632 workers in 2017 compared to Florida’s 889,950 (measured in FTEs). …Most New York residents do not benefit from bloat in government payrolls, inefficient transit, excessive welfare, and deficit spending. To them, the high taxes are disproportionate to the government services received. That is why they are moving to better‐managed states with lower taxes.
Here’s the accompanying chart.
And he also compares the level of bureaucracy in both states.
New York’s excess includes spending more on handouts such as welfare. Another cause of New York’s high spending is employment of more government workers and paying them more than in Florida. …New York governments employ 34 percent more workers than Florida governments.
…The two states have similar K-12 school enrollments of 2.7 million in New York and 2.8 million in Florida. But New York employs 31 percent more teachers and administrators than Florida. Do the 111,000 extra staff in New York generate better school outcomes? Apparently not…study puts Florida near the top and New York in the middle on school quality. Does New York really need two times more highway workers than Florida and three times more welfare workers? …Government workers in New York make 42 percent more in wages than government workers in Florida, on average.
Here’s the accompanying chart.
The bottom line is that New York is a great place to be an over-paid bureaucrat in an over-staffed bureaucracy.
But if you’re a taxpayer, Florida is the easy winner – which may explain why so many productive people are leaving the Empire State and permanently migrating to the Sunshine State.
P.S. The same pattern exists all across the United States. Taxpayers are escaping the poorly managed states and fleeing to low-tax states. Especially ones with no income taxes.
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Image credit: Zack Seward | CC BY-ND 2.0.
