Meltdown

Remember this?  Interesting that a Vermonter's fingerprints were found on the first cracks in the now-crumbling financial edifice.  Mr. Cioffi, however, was not alone in thinking that, somehow, the rules had changed. 

How bad is it?  Well, Martin Feldstein, who has some serious creds, is not reassuring:

The potential collapse of house prices, accompanied by widespread mortgage defaults, is a major threat to the American economy.

And what about Vermont?  Are we insulated or innoculated or something?  Scrap Wood has been carrying the water for all of us on this and the short answer is:

Not really

Comments

[Jon Harrison]

Scrap Wood's "ruminations" are pointing to the distress to come: 1) VSAC is running more than a minimal risk of seeing a negative spread -- in fact, the danger is real and growing; 2) You bet the student loan default rate is going to climb, as families' net worth shrinks as the result of declining home values, increasing inflation, and job losses.

The American economy is out of balance and heading for a fall. The problems can be corrected, but the cost will be high, and Vermont will not escape unscathed. Far from it.

[Tom Licata]

MY TURN: The coming economic 'train wreck'

By Tom Licata

November 5, 2007, Burl. Free Press

Morgan Daybell missed the point in his Oct. 21 My Turn column "Douglas wrong on tax claim" in regards to the governor's concern over Vermont's economic health and its domestic tranquility. Vermont Tax Revolt is a recently formed grassroots organization composed of nonpartisan citizens who are concerned not only with Vermont's weighty tax burdens, but with what we see as ominous signs of worse things to come.

Let's look at some of the more troubling danger signals that not only concern Gov. Douglas but should give pause to all Vermonters.

Vermont is in a demographic free-fall: Vermont's share of people aged 25 to 29 is the lowest in the nation while its share of people aged 50 to 54 is the highest in the country; Vermont has the lowest birthrate in the nation; Vermont's young people leave our state at four times the national average; and lastly, because of an anomaly of birth cycles, in approximately 2012, our school population will actually begin to increase just as our aging population and their income tax dollars begin to retire, causing what the Ethan Allen Institute's "Off The Rails" report terms our coming "train wreck."

Between 2000 and 2006, Vermont lost 11,000 quality private sector jobs and found 20,000 new jobs; 65 percent of which came from either government (4,000) or from the education and health services field (9,000) -- and these mostly in the field of "social assistance." This is an unsustainable trend. Our taxpaying businesses shrink, leaving our remaining private sector businesses and home owners to support a growing government and non-profit sector.

In addition to these two major demographic and economic challenges, the Vermont Tax Revolt organization has identified at least $3.5 billion of unfunded liabilities and expenses facing Vermont taxpayers, all of which are identified on its Web site.

On June 26 of this year, I wrote another My Turn column titled "Culture does matter." As of this writing, I find this to be even truer today than when I wrote those words back then.

October witnessed the first of almost 80 million baby boomers who will file for retirement in the coming years. In addition to the projected $50 trillion deficit facing Medicare and Social Security, these retirees will be cashing in their IRAs and 401(k)s. This demographic tsunami will result in an enormous amount of claims on the goods and services of this nation. If output demand doesn't at least keep pace with this demand, shortages and inflation will occur.

Imports may seem like a viable option, but if we're not producing the wealth to pay for them, we'll just be adding to our deficit spending. Drilling down to Vermont's economic and demographic crisis, Sen. Peter Shumlin is on record as saying that "Vermonters do not have the additional earning capacity to raise (even) $250 to $350 million." In order for Vermont to keep pace with the claims on its economy, entitlements and transportation infrastructure needs, it must abandon its preoccupation with its culture of distribution and redistribution of wealth and embrace a culture of producing real wealth, not just financial claims on it.

Over time, tax revenues are determined by economic and productivity growth. Mr. Daybell opines that "Vermont is actually a pretty good place to live." With our young sons and daughters fleeing Vermont at four times the national average, and with quality private sector job growth almost nonexistent along with the general lack of affordability for the average, working middle-class family and Vermont taxpayers facing at least $3.5 billion of unfunded liabilities and expenses, the facts just don't validate Mr. Daybell's rosy view.

"The multitudes remained plunged in ignorance of the simplest economic facts, and their leaders, seeking their votes, did not dare to undeceive them." Those words are by Winston Churchill, and executed deftly by Mr. Daybell.

Tom Licata of Burlington leads Vermont Tax Revolt found at www.VermontTaxRevolt.org.