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www.vteh.org 112/09 1
Who Are VermontersWho Are VermontersFor Economic Health?For Economic Health?
VEH is a grassroots,citizen-ledorganization,founded in 2007.
OurMission is simple:
To Promote Economic Health
And Fiscal Responsibilityin Vermont
Sign our Petition: www.vteh.org
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www.vteh.org 2
Political Deficit Inertia
In the summer of 2009, Washington Post columnist FredHiatt asked President Obama how to overcome thepolitical inertia of deficit control.
President Obama suggested that events might jump-startthe politics, when lenders start to fret about thecreditworthiness even of the United States:
"I actually think that, sadly, decisions are going to be
forced upon us," he said. "I mean, I think that if we don'tshow that we're serious in some fashion, then I thinkyou're going to see a reluctance on the part of peoplewho've been snapping up Treasurys to keep doing so. . .
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www.vteh.org 3
An Overview: Why ThisRecession Is Different
Balance-sheetrecession: Deleveragingofhistoriclevels of public (government) and privatedebt
Long-term structural U.S. fiscaldeficits (entitlements)
Municipal & State (FY11/12 of $255B indeficits) finances
Housing (1 in 4 underwater) & Commercialrealestate
Uncertainty: Taxes, banking, health-care & energyregs.
Monetary crisis and competitive currencydevaluations
Global competition forcapital, trade, productivity & mfg.
Geo-politicalrisk; socialunrest; & long-term unemployed
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Employment
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www.vteh.org 5
1981 vs. 2007 Recessions: U.S.Monthly Employment Declines
Source: NBC Meetthe Press, 12/13/09
- Months into Recession -
It took 28 months for the 1981
recession to regain all itsrecession job losses
It took 27 months beforethe 2007 recession saw its first
positive monthly job gain
2007 Recession
(10.8% unemployed)
(10.2% unemployed)
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A (Frightening)Employment Picture
No U.S. private sector job growth this past decade
Todays roughly 130 million employment level equalsthat of1999; while working-age population has risen
some 29M
About 125,000 jobs per month are required just toaccommodate new entrants into the labor force.
There are about 5.5 applicants for every 1 jobavailable
Between 2001-2007, 40% of jobs created were tied tothe housing sector. Most arent coming back.
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JobGrowththis pastdecade:Private-Sector: 0%
FederalGovernment: 18%
www.vteh.org
24% Increase
9% Increase
U.S. Private-sector job growth 2000 - 2009 : 0% Increase
Total Federal Employees
Civilian Agencies (Ag., Justice, Treasury, Edu. etc)
Defense
2000 20102005
OMB; Bureau of LaborS
tatistics
(Govt: Full-time equivalent employees;
Excludes Postal Service & uniformed military)
(Millions)
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Job gains/losses sinceRecession (12/07-03/10)
119,000 Public sector job gains
732,600 Health care job gains (of15.6M or 4.7%)
26,000 State Govt job gains (of 5.1M or .5%)
63,000 Local job losses (of14.5M or .43%) 156,000 Federal job losses (of 2.8M or 5.6%)
8.32 million Private sector job losses
2.1 million Mfg. job losses (of13.7M or15.3%)
1.9 million Construction job losses (of 7.5M or 25%)
628,000 Finance job losses (of 8.2M or 7.7%)
519,900 Temporary job losses (of 2.6M or 20%)
494,000 Tourism job losses (of13.5M or3.7%) Source: U.S. Dept. of Labor, WSJ, 4/3/10
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Innovation, Productivity& its Job Market Impacts
U.S Manufacturing Employment
(as a % of U.S. work force)
U.S. Manufacturing Output
(as a % of GDP)
Source: Bureauof Economic Analysis;BureauofLaborStatistics.
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www.vteh.org 1012/08 10
Source: Vt DeptofLabor
(Inthousands)
(Between 2000 2007, Vermont governmentpayroll & employee benefit costs grew 70%)
20002000--2007: Nil Vermont2007: Nil Vermont
Private Sector Job GrowthPrivate Sector Job Growth
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Vermonts Private vs.Public Sector Dilemma
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Demographics
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13
10,000 Boomers perdayretire!
Boomers:nearly30% of population
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
1 5913
17
21
25
29
33
37
41
45
49
53
57
61
65
69
73
77
81
85
89
93
97
101
Age
Est
ate
(s
s)
Children (0-17 years)
YoungerAdults (18-41years)
BabyBoomers (42-60 years)
OlderAdults (61+years)
Source: U.S. Ce sus Bureau, Popu at on Est atesas ofJu y 1,
2006 .vte .org
(Boomers)
(Boomersparents)
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Governmentwill account formorethanhalfof all U.S.
Health-Care spending in 2011
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% Private spending
% Public (Medicare, Medicaid, Veterans, States, etc)
Source: Centers for Medicare & Medicaid
(7.2% GDP) (17.3% GDP)
(Social Security & Medicare now paying out more in benefits than tax collections)
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15
Top FiveStates by Percent
BabyBoomerPopulation: 2006
Rank State
Percentof
BabyBoomers
1 Vermont 30.1
2 Maine 29.8
3 New Hampshire 29.7
4 Montana 28.75 Connecticut 28.1
Source: U.S. Census Bureau, Population Estimates as ofJuly1, 2006
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VT Retirees Double In 25Years While The Work
Force Shrinks
Over 65,(Retirees)
Age 6-18,(school age)
Total Population
Age 20-65,
(working age)
Source: Center for Research on Vermont, Art Woolf. (Indexed to 2000 = 100)
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Deficits and Debts:
U.S. and Vermont
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Its the Spending, America!Growth inSpending & Income
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18
Total Federal Spending
Median household Income
(In inflation-adjusted 2009 dollars)
1970 1980 1990 2000 2008
In 1970 total federal
spending was $883 billionand median household
Income was $39,403
2008: $3.02 trillion; +242%
$50,893; 29%
Sources: U.S. Census Bureau; OMB; Heritage Foundation
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Debt Growth Exceeds GDP;Living Beyond our Means
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(In inflation-adjusted 2009 dollars)
In 1990 total federal
debt was $5.3 trillion
and GDP was $9.5 trillion
2010 Federal Debt: $13.5 trillion; +155%
2010 GDP: $14.6 trillion; +54%
Sources: Bureau of LaborStatistics; U.S. Census Bureau
1990 2010
Est.
1995 2000 2005
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Triffins DilemmaChinas Foreign ExchangeReservesApprox. 75% Dollar-Denominated
($ Trillions) $2.4 Trillion
Source: Peoples Bankof
China, WSJ12/5/09
$400
Billion
"One of the challenges that we've got to addressinternationally is currency rates and how they match up tomake sure that our ... goods are not artificially inflated inprice and their goods are artificially deflated in price.
That puts us at a huge competitive disadvantage.
- President Obama, February 3, 2010
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The Presidents 2011Budget:U.S.Budget Deficits:
A NationalSecurity Threat?
www.vteh.org 21
1990 2010 2018
-$1.6T
Source: 2010 White House Office of Management & Budget; Peterson-Pew Commission;
(years 2016 2018)
(In Billions)
Despite $2 Trillion in added tax
increases, the Presidents budget
still calls for $5 Trillion in added debt
over the next 5 years (2010-2015)
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Federal Spending &Revenue as a % of GDP
(% of GDP)
WW II
Spending
Revenue
- Projected -
2010 Public; Total Debt to GDP = 64%; 92%
2020 = 90%; 120% (Historic Avg. +/- 40%)
Source:Officeof Mgt & Budget, May 2009; Peterson-Pew Commission, 2009
- Deficit -
($10 Trillion over10 yrs)
2010Historic avg. +/- 20%
Historic avg. +/- 18%
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Off Balance-SheetU.S. Indebtedness
$13 trillion
*Medicare becomes insolvent in approx. 6 years; Jan. 2010, S.S. now cash negative
Source:Bloomberg, 9/25/09, PeterG. Peterson Foundation
($Trillions)
$12 trillion $10 trillion
Medicare, Medicaid, & Social Security
(Excludes State, Local Govt & Fannie Mae,
Freddie Mac Liabilities)
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Enormous Overhangs & Risks
$1.25 trillion in monetized Fannie Mae/Freddie Mac
home mortgage debt by the Federal Reserve Bank
(printing of money to purchase debt)
Realized
Fan/Fred
Losses:
Proj. Fan/Fred
Losses:
$400B
$146B
Proj.FDIC
Losses:$100B
($Trillions)
Monetized
Treasury debt:
$300B
Source: WSJ12/24/09
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Composition ofFederal Spending
Defense46%
All Else31%
SS
13%6%
4%
1968 2008
All Else
29%
Defense
21%
Med.
21
%
SS
21%
8%
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Mandatory vs.Discretionary Spending
1965 2008
Mandatory
34%
Discretionary
66%
Mandatory
62%
Discretionary
38%
Mandatory spending is authorized by law rather than annual appropriations.
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Foreign Holdings ofU.S. Debt to the Public
50%
20091990
19%
81%
50%
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U.S. Interest Rate Risk
($Billions)
(5) U.S. debt payments due within a year;
currently financed at a rate of1% or less
$40B $80B $221B
(1) Increase in borrowing costs with removal of Fed. purchases
of mortgages; equal to one-half percentage point
(2) Combined budgets of the Dept. of Education & Energy
(3) Est. addl cost of 2009 debt service with 2008 int. rates
(4) Est. debt service cost in 2019; WSJ12/16
(1) (2)
(3)
(4)
(5)
$774B $1.9T
Source: NYT, E.L Andrews 11/23/09
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Commercial Real EstateNext shoe to drop
100s of billions in losses
$534 billionofthe $800billion in commercialreal-estateloans maturingbetweennow & 2014 are
underwater. $1.4 trillion in (weaker)
corporatebonds & loansmaturebetweennow &2015.
RichardLefrakestimateswereonly inthe2nd
inningof a commercialreal-estate storm.
0
00
00
00
00
1000
1200
1400
1600
h
r2014
Th
r2015
Mat rinoans
"Underater"oans
($Billions)
*Capital markets
& interest rates
ill be press red
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The State of VermontsThe State of VermontsIndebtednessIndebtedness
$1.6B(teacher&stateemployees)
$466M
$848M
$400M
$300M
$70M ($40M to stimulus)
(Netof
Stimulus $)
(ChamplainBridge, VT State Hosp. & otherroad/bridge costs not included)
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Its the Spending, Vermont!Growth inSpending & Income
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31
Total Vermont Spending
Median household Income
(In inflation-adjusted 2007 dollars)
In 1990 total Vermontspending was $1.77 billion
and median household
income was $47,212
2007: $4.1 billion; +131%
2007: $51,809; +9.7%
Sources: www.vttransparency.org; Bureau of LaborStatistics; U.S. Census Bureau
1990 1997 2002 2007
1997:
Act 60
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VermontGeneral Fund($848M Deficit: FY11-FY14)
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Source: VT Legislative Joint Fiscal Office, Feb. 2010
GF AvailableGF Uses @3.5% off FY10
(ARRA funds used to support GF Base:
FY09=$76M; FY10=$192M; FY11=$113; FY12=$0)
(-$154M)
(-$254)
(-$223)
(-$217)
(Millions)
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VermontGeneral Fund($313M Deficit: FY12-FY14)
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Source: VT Legislative Joint Fiscal Office, 2010
GF AvailableGF Uses @3.5% off FY10
(Doesnt include VSH, Fed HC impact or Tobacco impact which increase
Deficits by up to $22M; assumes 3.5% budget growth rate & current 5 year
Rev. forecast;
FY12 Gap solutions
That are ongoingWill reduce out-year
Deficits)(-$122M)
(-$100M)
(-$91M)
(Millions)
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Vermont Education FundRevenue Sources
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Homestead
Property Tax:
26%
General Fund
Transfer:
22%
Sales&Use
Tax: 9%
Misc:
5%
Source: JFO 1/8/10 (FY08 data); Crisis on the Horizon Report Feb. 2010
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Vermont Property TaxIncomeSensitivity Payments
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$109M
$111M $118M $120M
$142
$168M
$183M
(Millions)
(Est.) (Est.)
Sources: Kavet & Rockler, Nov. 09 Eco. Rev. & Rev. Forecast Update; Crisis on the Horizon Report
+ $26M
+ $15M
+ $22M
(FY12 will show a contraction in the statewide
grand list for the 1st time since Act 60s passage)
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Vt. Education Fund Balance
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(Est.)
(Est.)
-$59.3M
JFO Edu. Fund Outlook, 1/8/10; Crisis on the Horizon Report, 2010
$41.5M
(Millions)
$25.9M
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www.vteh.org 3712/09 37
Student EnrollmentStudent EnrollmentDownDown -- EmploymentEmployment
andandCosts UpCosts Up
Source:
Summaryofthe AnnualStatisticalReportofSchools(SASR) FY1997 - 2008
Student s = -9.1%; Teacher and Staff Growth = +20.8%
106,341
94,11615,783
18,876
94,000
96,000
98,000
100,000
102,000
104,000
106,000
108,000
15,000
16,000
17,000
18,000
19,000
20,000
Students
Teachers
And Staff
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Vermonts Dangerous RelianceVermonts Dangerous RelianceOn An Ailing FederalGovernmentOn An Ailing FederalGovernment
01/10 38
Source: VT CAFR-2009
$ inBillions34%
33%
32%
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www.VermontersForEconomicHealth.org 39
Vermonts Progressive(and highly risky)
Income Tax Structure
26% of Taxes Paid,
2,113 Tax Filers;0.69% of Filers
38% Paid,6,970 Filers;
2.29%49%15,200;
4.99%
98%185,534;61%
60%27,632;9.08%
75% Paid
58,415;19.20%
91% Paid121,827;40.04%
100%304,254;
100%
Source: Vt. Comprehensive Annual Financial Report, 2007
Top 1% pay about 1/3 of taxes
Start here,move clockwise
Top 5% pays about 50%
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Losses in income andtax-revenues are accounted fromVermonts top 1% ofearners
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(A) $598M decline in total Adjusted Gross
income by all Vermonters
(B) $36M decline in total net income taxes
paid by all Vermonters
(Millions)
2007-2008 2007-2008
(A)
(B)
(C)
(D)
(C) $614M decline in total Adjusted Gross
Income by Vermonters earning $200K+
(about 1% of all taxpayers)
(D) $37M decline in total net income taxes
paid by Vermonters earning $200K+
VT Dept. of Taxes; VT Economy Newsletter
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Current Use Program:(88% reduced assessments)
Opportunity Costs Explode
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(Millions)
(B) $37.4M in foregone education property taxes
(C) $49M in total Vermont opportunity costs
Opportunity Costs
2008
Source: VT Dept. of Taxes (PVR)
(A)
(B)
(C)
(D) (E)
(D) 2.2M acres of enrolled land in Current Use Program
(E) 6.6M acres of total land in Vermont;
1/3 of all Vermont land is enrolled in Current Use, as it
grew 3.3% in 2009 and continues to grow. To what end?
At what cost? In lieu of what job creation?
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A World View
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An Explosion ofWorld Debt vs. GDP
Financial Deepening
($Trillions)
$12 $10
$195
$55
Financial Assets
Include:
119%% of GDP 356%
Source: HarvardBusiness Review, Sept. 2008
1980
2007
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Sovereign Debt Levels ofAdvanced Countries
1
3
1
1 3 1
Source: International Monetary Fund, WSJ12/10/09[Projected]
(% of GDP)
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Life Cycle of a SuperpowerCompetition:Share ofWorld GDP
33%
China 65%
Other
1820
2020 - 2025
18%
U.S.
64%
Other
1950
27%
U.S.68%
Other
2009
24%
U.S.68%
Other
U.S. = 2% China = 5%
China = 8%8%
5%
18%
China
Sources: IMF; Maddison; US Census Bureau; Financial Times 10/11/09
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The multitudes remained plunged inignorance of the simplest economic facts,and their leaders, seeking their votes, did not
dare to undeceive them.- Winston Churchill, 1940
Fora copyofthis presentation:[email protected]
SignourPetition atwww.vteh.org
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