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	<title>Comments on: Is the State in Crisis?</title>
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	<link>http://www.gothamgazette.com/blogs/wonkster/2008/08/04/is-thestate-in-crisis/</link>
	<description>A blog about the views and spews of editorialists, bloggers and other unsavory opinionated New Yorkers.</description>
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		<title>By: Larry Littlefield</title>
		<link>http://www.gothamgazette.com/blogs/wonkster/2008/08/04/is-thestate-in-crisis/comment-page-1/#comment-82641</link>
		<dc:creator>Larry Littlefield</dc:creator>
		<pubDate>Thu, 07 Aug 2008 13:47:31 +0000</pubDate>
		<guid isPermaLink="false">http://www.gothamgazette.com/blogs/wonkster/?p=1968#comment-82641</guid>
		<description>Read again what I wrote two days ago, and read this article:

http://www.bloomberg.com/apps/news?pid=20601109&amp;sid=aAjM9j4K4v4U&amp;refer=home

&quot;The Oakland, California, agency that runs toll bridges across the San Francisco Bay is proving that the era of cheap money for municipal borrowers is over. This week the Bay Area Toll Authority sold more than $700 million of bonds at rates as high as 5.34 percent to refinance debt that cost 4 percent last year. That leaves less money to finance projects, such as bridge improvements. &#039;The cost of money just went way up,&#039; said Brian Mayhew, the agency&#039;s chief financial officer. &#039;You may have projects on the cusp that are going to be difficult to do.&#039;&quot;

Again, the MTA and other NY state and local borrowers have floating rate debt.  So when the rates reset, we&#039;re dead.  And forget borrowing even more money that won&#039;t be paid back.  There are no lenders, because there are no savers.

Those bastards in Albany don&#039;t care because they don&#039;t have to.</description>
		<content:encoded><![CDATA[<p>Read again what I wrote two days ago, and read this article:</p>
<p><a href="http://www.bloomberg.com/apps/news?pid=20601109&amp;sid=aAjM9j4K4v4U&amp;refer=home" rel="nofollow">http://www.bloomberg.com/apps/news?pid=20601109&amp;sid=aAjM9j4K4v4U&amp;refer=home</a></p>
<p>&#8220;The Oakland, California, agency that runs toll bridges across the San Francisco Bay is proving that the era of cheap money for municipal borrowers is over. This week the Bay Area Toll Authority sold more than $700 million of bonds at rates as high as 5.34 percent to refinance debt that cost 4 percent last year. That leaves less money to finance projects, such as bridge improvements. &#8216;The cost of money just went way up,&#8217; said Brian Mayhew, the agency&#8217;s chief financial officer. &#8216;You may have projects on the cusp that are going to be difficult to do.&#8217;&#8221;</p>
<p>Again, the MTA and other NY state and local borrowers have floating rate debt.  So when the rates reset, we&#8217;re dead.  And forget borrowing even more money that won&#8217;t be paid back.  There are no lenders, because there are no savers.</p>
<p>Those bastards in Albany don&#8217;t care because they don&#8217;t have to.</p>
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		<title>By: Larry Littlefield</title>
		<link>http://www.gothamgazette.com/blogs/wonkster/2008/08/04/is-thestate-in-crisis/comment-page-1/#comment-82624</link>
		<dc:creator>Larry Littlefield</dc:creator>
		<pubDate>Tue, 05 Aug 2008 14:02:13 +0000</pubDate>
		<guid isPermaLink="false">http://www.gothamgazette.com/blogs/wonkster/?p=1968#comment-82624</guid>
		<description>NYC&#039;s economy is much healthier than the 1970s, or even the early 1990s, relative to the rest of the country.

But public debt and pension obligations are much greater, and the rest of the country is in much worse off.  And our state government is a disaster.

I expect much of the economic harm of the next few years will be transmitted to New Yorkers via government service and benefit cuts and tax increases, not job loss.  That is where the threat will come from.  Worst case, the consequences could be 1970s-like.

Let me give you just one example.  What would happen if the interest payments on all of New York&#039;s state and local debts that weren&#039;t fixed rate (and they&#039;ve gone with lots of floating rate, especially at the MTA) were to increase by 300 basis points?  Those budget experts quoted by the Times would probably say I am a crank for asking the question.

But in 1990 or so, I put my savings in a two-year Treasury note at 9.5%.  That&#039;s right, 9.5%.  Not so long ago, eh, and with a lower federal deficit and stronger dollar than we are going to have -- not to mention no municipal defaults in recent memory.

So why did the city and state go with floating rate debt back when fixed rates were at all-time lows.  To save a few nickels they could hand out then, and worry about the risks later.  Every decision has been like that, for nearly 20 years.</description>
		<content:encoded><![CDATA[<p>NYC&#8217;s economy is much healthier than the 1970s, or even the early 1990s, relative to the rest of the country.</p>
<p>But public debt and pension obligations are much greater, and the rest of the country is in much worse off.  And our state government is a disaster.</p>
<p>I expect much of the economic harm of the next few years will be transmitted to New Yorkers via government service and benefit cuts and tax increases, not job loss.  That is where the threat will come from.  Worst case, the consequences could be 1970s-like.</p>
<p>Let me give you just one example.  What would happen if the interest payments on all of New York&#8217;s state and local debts that weren&#8217;t fixed rate (and they&#8217;ve gone with lots of floating rate, especially at the MTA) were to increase by 300 basis points?  Those budget experts quoted by the Times would probably say I am a crank for asking the question.</p>
<p>But in 1990 or so, I put my savings in a two-year Treasury note at 9.5%.  That&#8217;s right, 9.5%.  Not so long ago, eh, and with a lower federal deficit and stronger dollar than we are going to have &#8212; not to mention no municipal defaults in recent memory.</p>
<p>So why did the city and state go with floating rate debt back when fixed rates were at all-time lows.  To save a few nickels they could hand out then, and worry about the risks later.  Every decision has been like that, for nearly 20 years.</p>
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