Why America Is Running Out Of Money
Video Transcript
Subscribe To Big Money [Music] hello Dave here how are you good how are you better than I deserve who’s calling this here is America tell me your financial situation I think we can all agree on uh that we’re broke yeah what I feel like if the US called into the Dave Ramsey Show Dave would have a heart attack and then immediately prescribe his special recipe of Rass and beans and beans and R because you know it’s bad when it’s not just ordinary Americans that are having trouble paying down their bills but it’s also Now American cities as well once study says that 53 of the largest cities in the United States haven’t generated enough Revenue to cover their bills we know that when people are in financial trouble whether they’re in debt or they’re going broke the traditional advice is to follow the seven Baby Steps step one save $11,000 step two pay off your debt step three save 3 to 6 months of expenses towards your emergency fund step four invest 15% of your household earnings towards retirement step five save for your kids college fund step six pay off your home early and step seven build wealth and give those are the steps for a person but what are the steps for entire cities across the us that are going broke because according to truth and accounting. org at least 53 cities across the US don’t even have enough money to cover their bills now when a city doesn’t have enough money to pay its bills that’s a really big problem and it affects everyone we’ve got to be careful because you don’t want to get into too much debt Rising debt may lead to dirtier streets fewer public services and tough decisions from public officials that need to make ends meet the cities that are in trouble they have a cash flow problem US cities don’t have a cash flow problem they have a spending problem because out of the 75 cities that they looked at they had a combined $37 billion worth of assets to pay their bills but their debt including retirement benefit promises totaled 595 billion or almost double that now when a city can’t afford to pay its benefits it has to get that money somewhere and that problem gets passed on to you the taxpayer in the form of higher taxes and reduce spending elsewhere which is also why public services are not as good as what we remember them to be why roads are getting worse and why streets are getting dirtier so in today’s video I want to show you the full problem how we got here and how cities actually hide this fact by Under reporting the real numbers how this all affects us and ultimately what we can do about it so let’s get into it hi my name is Andre J hope you’re doing well come for the finance and stay for the baby steps American city addition now there’s two different types of distinctions broke and not broke now if a city owes more money than it has they take that negative number and divide it by all the people living in that City and the result is a number called the taxpayer burden number now on the opposite side of that Spectrum if a city has more money left over after the bills are are paid they take that positive number divide it by the amount of people living in the city and the result is the taxpayer Surplus number in total across the 75 major cities that they looked at across the entire us 53 of them were given a taxpayer burden status in other words baroke they owed $288 billion and it gets worse they assigned each City a grade from a through F A meant there was a surplus of $10,000 or more per person all the way to F where the burden was 20,000 or more and what they found was pretty bad if 75 of those cities were us students all sitting in the same classroom they found that five of those students would get a failing grade they’d be failing class completely 22 of them would have a d 26 of them would have a C 21 would have a b and only one of them would have an A the top five best cities were Washington DC Irvine Plano Lincoln and Oklahoma City but the top five worst cities were New York Chicago Honolulu Philly and Portland so if we’re going to figure this one out we have to look at how cities spend and make their money when it comes to spending money it’s obviously very expensive for cities to do their City things now in that CNBC video they Ed New York City as their best example of how expensive it can get and by best example I mean the city that ranked absolutely the worst on their list and that’s because New York happens to rank as one of the most expensive cities in the US to operate because it has over 1,700 Parks 217 libraries 11 public hospitals 472 subway stations over 177,50 185 affordable housing units and over 8 million people shouting hey I’m walking here now that’s a lot of money that the city has to pay people to run and operate those Services as well as the energy costs and all the other things associated with it which is also why cities have to make money and besides raising taxes one of the ways they make money is by creating what are called municipal bonds New York City sells municipal bonds to fund many of these projects the city’s bonds are like your morgage you know for long-term expenditures something that you’re going to use over generally 10 20 30 years municipal bonds are types of Investments That cities and states issue or create that we as investors can buy into now the idea is that by buying these municipal bonds we are giving our money to the city and with that money the city can choose to do whatever it needs to do to operate itself and in return within a certain amount of time called the maturity date the city gives our money back plus interest that’s paid to us semiannually or twice a year now as an investor you also have a choice for how long you park your money with the city for you can go the short-term route which is a bond that lasts anywhere between 1 to 3 years long or you can go the long-term Bond route which is 10 years or longer in general the longer you park your money with the city the higher your interest rate should be and the more money you should make and also in general the interest that you collect from holding on to those municipal bonds will also be free from federal taxes and that is one of the biggest ways that cities and states make money but then we can use those bonds to build schools and invest in our water and sewer infrastructure and subsidize affordable housing but then we’ve got to be careful because you don’t want to get into too much debt and this is where the problem starts we can’t fix this problem because we’re not having the conversation because so much of this information gets obscured in how it gets reported through accounting it’s like one of those magic tricks that uses misdirection you think the money is in one hand but it’s actually completely somewhere else and that is not on accident it was designed this way very much on purpose New York City officials for example report that the city owes $96 billion but truth in accounting found that the city’s debt is almost double that at 177.1 billion so how is it possible that the city is reporting roughly half of what it actually might owe and New York City by the way is not the only city that’s doing it this way and that limits our conversation because we don’t have access to the real information the truth behind how and why this happens if you’re a nerd is actually really interesting so here’s why if you’re ever driving and you notice the horrible quality of of the road you’re on why streets are getting dirtier why public services are not as good as what you remember them to be and why taxes keep on going higher one of the biggest reasons for all of this is something called a pension fund Pension funds are just pools of money that both companies and workers put money into which is then invested into the stock market with the hope of paying money out to people in retirement and Pension funds are extremely important to the US according to public plans.org Pension funds hold 5.3 trillion in assets which pay for millions of retirees at the rate of $334 billion a year now some private companies still offer pension plans and if you work for the government chances are you have access to one but even if you don’t underfunded pension plans still affect everyone’s quality of life according to Stanford University Pension funds across the US are underfunded by about $1.6 trillion so to put that in perspective if people with a pension plan were owed $1 those pension plans would only be able to pay roughly 80 cents of the money owed and more than half of the states in the US are below 80% funding on their pension plans and less than 10 states are 100% funded or more and underfunded pension plans in some cases can bankrupt an entire city which is exactly what happened to Detroit in 2013 if public officials invest funds in stock markets and the BET goes the wrong way it can make or break a city for example retiree payment obligations are part of what sent Detroit into bankruptcy in 2013 in the Fallout Detroit temporarily revised its pension program to limit payouts to former employees so as part of the bankruptcy settlement Detroit agreed to pay its retirees less than they were owed which was already little to begin with that’s a problem if a city can’t figure out how to manage and spend its money especially when it’s combined with their Reliance on the stock market to make up for the difference when it doesn’t like it didn’t in 202 to that can create huge problems and it’s cities like Chicago Philly Houston Portland and Miami that owe money that are most in trouble and that’s why the mayor of New York City introduced something called the peeg or the program to eliminate the Gap and spend less money what the mayor announced was a series of three 5% cuts that add up a little shy of 15% a lot of those cuts that are being felt very you know palpably by New Yorkers and the side effects of all of this is something we all feel in different ways like public libraries being closed for longer classrooms getting crowded quality of Education going down roads becoming more unsafe and cities becoming dirtier and on and on this goes all the while people are expected to pay more and more in taxes to make up for the spending Gap and it’s getting worse more and more cities across the US are reporting stagnant Revenue growth like la which mostly relies on property taxes to fund its programs and Portland just flat out says it’s run out of resources leaders see a fiscal cliff ahead as there are no funds left to address existing Financial issues the demand for resources continues to surpass availability within the city so you can imagine then how much worse this problem gets when a city gets hit with an unexpected spending bill that relates to things outside of anyone’s control like climate change storms hurricanes and other kinds of natural disasters because those cities don’t have the money to fix them M themselveses and it’s not even a conversation that we’re having because this information is cleverly disguised through accounting trickery because the elected officials say year after year that the budget’s balanced when they’re using budgeting and accounting gimmicks to truly not balance the budget and that’s because pension fund losses is not money that’s yet paid out as an expense so it doesn’t get reported it’s an unrealized loss and that’s why things seem better than they actually are on paper that’s also why politicians keep on spending money because that’s what makes people happy that’s what gets them reelected but what it doesn’t do is fix the problem so how do we actually fix the problem and this is where it gets really tricky because the way that cities are handling these problems is by borrowing more money New York City for example is trying to increase its debt ceiling by $12 billion so it can borrow even more but here’s the problem with borrowing money if cities want to borrow money from the federal government they can do that but first they have to make sure that they have a good credit rating because believe it or not cities also have a credit score which affects the interest rate on borrowed money and that can either make or break the city the best credit rating ranges from AAA to Triple B which is considered investment grade and cities that default on their bonds and payments have a junk bond status from Double B to default which is sometimes what cities have to do they have to borrow money but they have to do it at a reasonable interest rate the voters think oh they must be living within their means and they’re not but if you can go ahead and use budgeting gimmicks and not have to raise taxes but still provide a large amount of services and benefits that’s obviously beneficial to elected officials so what I learned from making this video is that a lot of American cities are in financial trouble and they’re in trouble because they can’t fund their retirees and pension plans so to make up for it they stop paying their obligations which can lower their credit rating and also lowers the quality of life for every one including people without a pension plan politicians on the other hand don’t want to raise taxes and spend less money because they’re afraid they won’t get reelected so instead they choose to use accounting trickery to make it seem like everything is better than it actually is while they borrow and spend more money and none of this will ever improve as long as the public doesn’t know exactly what’s going on now I’m sure that I made this problem seem a lot less complicated than what it actually is but it doesn’t seem that complicated to me just spend less money money than the city makes if I was mayor of a city I would never borrow money unless we had a AAA credit rating and even if I did I wouldn’t borrow money at these insanely High interest rates because it’s just not worth it but if I had to because sometimes that’s what you have to do I wouldn’t borrow money just to pay my credit cards that’s like taking out a credit card to pay down your credit card instead I would borrow money and reinvest it back into the city in a way that grew our revenues that way I could build up my credit rating of that’s what I had to do and save more money and that doesn’t seem like rocket science to me living here in the South Las Vegas Valley area couple weeks ago two of my tires exploded because I ran over a pothole our roads here are atrocious and several dozen cars had the same thing happened to them over the course of a few weeks because the city just didn’t fix it so I know that we all experiened this in different ways but I’d love to get your thoughts about how you experienced this and what you think we can do to fix this but as always I hope you have a wonderful rest of your day smash the like button subscribe if you haven’t already don’t forget to grab your free stocks links are down below and then go track them automatically with a spreadsheet link Down Below in my patreon thank you so much for watching this video I’d love to see you back here on Monday and Friday sometimes a Wednesday see you soon bye-byeUS Financial News
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Comments (35)
Thanks for sharing
I love the coin magic trick
We Arabs love a generous person even if he is poor like New York 😀
This person should show his channel to all politicians, engineers, and administrators who own the management of cities or even villages!
This is what happens when they’d rather spend money on covering gender transition surgeries and other bullshit things related that don’t matter to us regular everyday working Americans.
LOL the intro! xD
no wonder chicago has such a high crime rate
The problem is too many people sucking up resources and not contributing.
Lazy millenials demanding high salaries yet refusing to do a good day's work is the problem.
Just think about this: If you were able to pay $1 BILLION dollars, that's $1 THOUSAND MILLION DOLLARS, every day, seven days a week, 365 days a year for 100 YEARS, you still wouldn't pay off what the UNITED STATES OWES. Does that put it in perspective for you AT ALL?
My county just raised property taxes 60 percent.
Cutting taxes is a good thing because the government just spends it on garbage.
I don't know why this is considered a spending problem. I think it's a taxation problem. People from the suburbs benefit from the cities but leave the citydwellers with the bill. For instance, my city has lots of beautiful public parks and public beaches; while the burbs just has cookie cutter boring houses and the random office park. People from the suburbs come to our parks and beach, litter, and sometimes create a disturbance. These bad things are done by everyone, but the catch is that the suburbanites don't pay our sanitation workers, don't pay our police. If anything, some of the higher-ups in sanitation and the police often live in the suburbs, so the city doesn't get their property tax dollars or local income tax dollars.
Doesn’t matter I’m still voting demxorat. Americans need to pay their fair share so we can send it to Ukraine and other countries!!! Defund the police!! Hahahahahah
If I were to wager a guess I would say it's probably because we have a foreign country controlling the actions of our own government and forcing that government to give away on twelve billions of dollars to sedge foreign country
The system has been insolvent for a long time now.
All America is broke… Just YOU
35 Trillion State Debt. 17 Trillion Consumer Debt. 52 Trillion dollar Debt. Whose gonna pay.
Americans who watched movies like "Wall Street" with the character name Gecko who stated the famous line "greed is good" "greed works" lived by that mantra in the 80s are paying for keeping up with others who also believed it. Greed is not good. It states in the Bible, "Love of money" leads to fall.
it's kinda crazy how nobody's talking about the forbidden ebook called 25 Money Secrets From Donald Trump
Nothing makes a city fill in potholes quicker than phallic drawings around it xD
Thank u for pointing out Pensions plans were Horribly & poorly thought out and bankrupting us all
Only broke Americans are broke.
Myself and all my friends and colleges are doing GREAT!…huge raises the last few years 'cuz Covid' and most of us got large salary bumps jumping jobs. Not to mention HUGE GAINS in our equity portfolios, housing and other assets due to all that free FED money! Bottom line, Covid was the best thing financially that has happened to us in our lifetime.
The U.S. national debt is over 28 TRILLION dollars, and you say we are running out of money?
You're really good! Thank you!
Taxation without representation! Even after cities froze workers pension plans which allowed to to have a spend frenzy…they spent themselves into a mess and no one benefits. Not the workers…not the future generations…just the corporations doing the work.
Print more. That's you have to do.Just don't run out of paper and ink and we'll be fine
They should learn the art of begging from Shahbaz Sharif and company.
As long america keep helping israel they getting broke each years
Cuz America is helping Ukraine with war against Russia.
There is a lot of money out there the only thing is that it does not belong to very many people. The reason why Cities are broke is because they are taxing the people who don't have any of the money.
I know this is going to be a bit hard to process… But the main reason America is having money problems is the lack of tax collection from the very rich AND the unsustainability of suburbs… They are not sustainable, people living in denser areas are subsidizing people that live in suburbs…
DEMONRAT CITIES
My advice to any American with some decent savings and good money knowledge is to get ready and start looking outside the box. Moving outside the US it could be inevitable the question is to where? Many countries out there will take you and have better governments, more freedom, very affordable, and overall healthier life style. America will not survive 35 trillion dollars debt.
It is easier to adopt better life styles than harsher ones😢