BLUMER: Forbes calls Ohio a ‘death spiral state’

By   /   November 29, 2012  /   4 Comments

By Tom Blumer | Special to Ohio Watchdog

DEATH SPIRAL: For every Ohioan who contributes money to the government, there is one person taking money from the government.

William Baldwin warned readers of Forbes earlier this week that Ohio is a “death spiral state” which is “at high risk of a fiscal tailspin.”

Baldwin used two factors to identify what he describes as the nation’s “fiscal hellholes”:

“The first is whether it has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector.

“… The second element …  is a scorecard of state credit-worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios.”

The Buckeye State’s “taker-maker” ratio is 1.00, meaning the state  has just as many takers as makers, according to Baldwin.

Other states with worse ratios, indicating that they have more takers than makers, include Hawaii (1.02), Illinois (1.03), Kentucky (1.05), South Carolina (1.06), New York(1.07), Maine (1.07), Alabama (1.10), California (1.39), Mississippi (1.49), and New Mexico(1.53).

Ohioans should take little comfort in having the least objectionable situation of the 11 states Baldwin identified. The state is paying the price for years of entitlement expansion under its previous governor. Current Gov. John Kasich, despite all he has accomplished in the past two years, has failed to stem the tide of dependency.

Food stamp program participation in the Buckeye State is out of control. In August, despite a seasonally adjusted unemployment rate of 7.2 percent, 1.68 million people, more than 14 percent of the state’s population, were on the food stamp rolls — an astonishing one-month increase of more than 110,000. In October 2008, the last time the state’s unemployment rate was about that low, it had more than 25 percent fewer participants.

What happened?

For starters, state government, with federal blessing, loosened the program’s eligibility requirements to the point where, as shown in early 2009, a couple with $80,000 in the bank and a paid-off house in an upscale suburb was able to qualify. College students, even those with wealthy parents, can receive benefits if they claim that they are receiving no or little support from home. Beyond that, I suspect that many who have found work that would disqualify them from receiving benefits or cause them to be greatly reduced have been slow to report their improved situation — if they have reported it at all.

In September 2008, Ohio had almost 179,000 people receiving benefits under the Temporary Assistance for Needy Families (TANF), also known as “traditional welfare.  At the end of 2011, apparently the latest data available, it was more than 193,000, a significant decline from a peak of more than  240,000 the previous year. That’s fine, but Ohio’s 1.61 percent of the population on welfare was still 60 percent higher the non-California national average of barely more than 1 percent.

As to credit quality, the Conning scorecard to which Baldwin referred ranks Ohio 47th out of all 50 states. In Conning’s view, only New York, New Jersey and Connecticut are worse off. The scorecard uses a variety of factors in its evaluation, many of which relate to a state’s economic vibrancy, an area where Ohio badly trails its peers.

Baldwin’s bottom line: Unless things change, his “death spiral states” are ones which “can look forward to a rising tax burden, deteriorating state finances and an exodus of employers.”

What should Kasich and Ohio’s state leaders do?

Besides limiting programs for the needy to the truly needy, prosecuting those who are gaming the system, and maintaining what has for the most part been a fiscally conservative posture, they need to recognize that a longer-term solution is right beneath their feet in the form of retrievable oil and gas resources. Rather than heavily tax the companies in these industries, as Kasich has proposed, Ohio should be encouraging them to explore and drill. Rapid economic growth is what has the greatest potential for solving the “taker-maker” problem, and these industries have the greatest potential for such growth.

 

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  • http://www.facebook.com/russell.eckley.5 Russell Eckley

    Once government gets the access it wants to the internet, It can monitor internet sales and make it impossible for people to lie about the value of internet purchases on form IT-1040. That means 5.5 cents on every dollar spent ordering from out of state. 100$ profitable considering that the roads already have their funding.

  • ron

    I would guise we will have to stop paying tax’s ,seems the only way we can get things done.

  • http://www.facebook.com/rick.sheldon.96 Rick Sheldon

    Obama has already decreased food stamps to all Ohioans by $50.00 a month which will save 1.6 billion dollars I wrote President and John Boehner and said we want to do our part and hope you cut it another $50.00….Hopefully all these deadbeats will move out of Ohio to Illinois or New York…I still can’t stop laughing..The deadbeats got Obama elected and he stabs them in the back taking away food money…Now all these drudges on society that got him elected are now a thorn in his side costing govt> Big $$$ to support there lazy mooching asses..In other words they are now “EXPEDABLE” Glad I don’t live in Cleveland or Atlanta..I forsee an epidmic plague in near future…4 Million Foodstamp/Obama Phone recipents that would save govt about a Trillion year…And I’m not Racist there will be just as many white trash Included in that number…

  • http://www.facebook.com/profile.php?id=100001636800284 Dennis Vest

    Just wait until Obamacare kicks in completely. Bad will go to worse in a hurry…