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Thursday, March 10, 2011

Facing the New “Red Menace”

“Are we good guys or bad guys?” the animated (cartoon) Little John asked Robin Hood in the 1973 Disney classic. “You know,” John continued, “Our robbing the rich to feed the poor?” “Rob?!” Robin exclaimed. Then, sounding much like today’s Democrats, he declared, “That’s a naughty word. We never rob; we just sort of borrow a bit from those who can afford it.” “Borrow?!” cried John. “Boy, are we in debt!”

I wonder how Little John would feel about $14 trillion of debt. Since the youth of America are going to pay for most of this, perhaps Disney should make a child’s film about the U.S. debt. They could call it Pinocchio: How Decades of Lies Grew the American Debt; or Alice in Entitlementland; or Fantasia: The Money Printer’s Apprentice. You get the idea.

It seems that the idea of Democrats being compared to Robin Hood is gaining in popularity.

Just two days after I transcribed the little cartoon exchange with the idea for this column, on February 28, 3M Chief Executive Officer George Buckley called President Barack Obama “anti-business,” adding, “I judge people by their feet, not their mouth.” Buckley told the Financial Times, “We know what his instincts are. They are Robin Hood-esque. He is anti-business. There is a sense among companies that this is a difficult place to do business. It's about regulation, taxation, seemingly anti-business policies in Washington…”

According to recent reports, by the end of this fiscal year, September 30, the total U.S. debt will equal nearly $15.5 trillion, and for the first time since 1947, will surpass the total U.S. GDP. All of this red ink, according to Indiana Governor and possible GOP presidential candidate Mitch Daniels, is our new “Red Menace.”

Of course this “menace” looms not only in the federal government, but in state and local governments across the country. And, of course, just as with the communist threat, liberals all over the U.S. are finding themselves on the wrong side of history.

Every year Moody’s publishes its State Debt Medians Report. According to Moody’s 2010 report, “Debt burden is one of many factors that Moody’s uses to determine state credit quality. In considering debt burden, the focus is largely on Net Tax Supported Debt,” which is defined as “debt secured by state operating resources which could otherwise be used for state operations. Any debt to which state resources are pledged for repayment is considered to be net tax-supported debt.”

Again, according to Moody’s 2010 report, “Two measures of state debt burden – debt per capita and debt as a percentage of personal income – are commonly used by analysts to compare the debt burden of one state to another.”

The states with the most debt per capita: 1.) Connecticut 2.) Massachusetts 3.) Hawaii 4.) New Jersey 5.) New York 6.) Delaware 7.) California 8.) Washington 9.) Rhode Island 10.) Oregon.

The states with the largest debt as a percentage of personal income: 1.) Hawaii 2.) Massachusetts 3.) Connecticut 4.) New Jersey 5.) New York 6.) Delaware 7.) California 8.) Kentucky 9.) Washington 10.) Rhode Island

Notice the “blueness?”

As most everyone now knows, especially given the recent events in Wisconsin, one of the greatest contributors to local and state debt is pension liabilities. However, in Moody’s numbers above, pension liabilities were not included. Moody’s has now changed that.

Earlier this year, Moody’s Investors Service released a report on state debt that included a broader approach to measuring a state’s financial health. As the Financial Times put it, “In a bid to give a broader picture of state finances, Moody’s combined their net tax supported debt and unfunded pension liabilities to assess how leveraged states are.” In other words, Moody’s is now calculating a state’s debt burden by including the unfunded pension obligations owed to state employees.

When state pension liabilities are included, the top ten states in total debt are: 1.) Connecticut 2.) Hawaii 3.) Massachusetts 4.) New Jersey 5.) Illinois 6.) Alaska 7.) Rhode Island 8.) Kentucky 9.) Mississippi 10.) West Virginia.

Again, the blue states lead.

As I noted a couple of years ago, U.S. states have frequently been called “laboratories of democracy.” If you want to see how something will work in the federal government, look to the states.

Given the picture painted above, it is quite clear where liberals have taken the state governments of which they have been in control. For the most part, it is also quite clear on which side liberals stand with our new “Red Menace.” Sadly, it is not with the “good guys.”

Copyright 2011, Trevor Grant Thomas
At the Intersection of Politics, Science, Faith, and Reason.
Trevor and his wife Michelle are the authors of: Debt Free Living in a Debt Filled World
tthomas@trevorgrantthomas.com