Escape From New York

by Kerry Lutz
Financial Survival Network

Screen Shot 2017-04-10 at 11.29.45 AMA recent article in the New York Post showed that people are fleeing the New York State at an alarming rate. “More than 1 million people moved out of the New York area to other parts of the country since 2010, a rate of 4.4 percent — the highest negative net migration rate among the nation’s large population centers, US Census records show.” I am proud to be one of those people. I moved down to Florida in 2012 and haven’t looked back. Leaving New York was one of the happiest moments of my life. The Post continues, “Americans have been increasingly relocating from the eastern US and the Rust Belt to cities in Florida, Texas and the Northwest.”

But this only tells half the story. New York State’s top personal income tax rate is a whopping 8.82%. If you’re unfortunate enough to live in New York City, you could be forking over another 4% of your income, just for the privilege. And what do you get in return, rotten roads – among the country’s worst, one of the most generous welfare systems of almost any state, a medicaid system that’s out of control and systemic corruption to the core.

Florida is by no means a panacea. While it has among the best weather and highways in the nation, its schools are abysmal, corruption is rampant and governmental incompetence is staggering. The difference is that New York has a $153 billion annual budget versus Florida’s $83.5 billion. As humor writer Dave Barry says, “We’re only paying half for the same incompetence and corruption.” What a bargain.

Thanks to half a century’s unbridled socialism, New York is on the brink of insolvency. It’s pension funds are seriously underfunded. It’s union pandering ways means that everything costs twice as much than elsewhere in the nation. It’s pandering politicians are never at a loss to create new money draining programs that will help further sink the state’s finances. It’s in complete denial over this sorry state of affairs. Governor Andrew Cuomo is trying to outdo his father Mario’s socialist legacy. He’s going to out Bernie, Bernie Sanders.

On top of  all this, NY has just passed a law providing for “free” college tuition for all New Yorkers enrolling in state, city universities and colleges, for those families making less than $125,000 per year. They just have to agree to live and work in the state upon graduation. The scholarships don’t include room, board or books. Tuition in SUNY runs $6470 per annum. The state is guessing that this new program won’t cost more than $153 million a year.

It all sounds great. Why should anyone pay for college, after all it’s a human right, like high speed internet, smartphones and cable tv. But the state is grossly underestimating the true cost of this program. Those collecting welfare in other states have probably considered a moving to New York, lured by it’s more generous benefits. Free college is yet another incentive to cross state lines. While there is some promised aid to private colleges, the State is providing a nearly irresistible incentive for students to attend there. The nearly $26,000 savings on a 4 year degree will dramatically increase the demand for the better state schools.

So the cost is going to be way beyond current estimates. In addition, it’s sending future college students a bad message about higher education. It’s incentivizing people to attend college who will receive the least benefit. The lower the barrier to entry, the more entrants there will be. The higher the subsidy, the great the likelihood of shortages. This is exactly what’s going to happen to New York’s State University. Demand will increase greatly, but the capacity of it’s schools won’t.  Therefore, the students with better grades will wind up with higher acceptance rates and those with lower grades will be rejected. The net result will be less minorities and poor attending college. It will turn into another entitlement for the middle class. In future years, expect the outlays to increase geometrically, while those who could benefit most from a college degree will be frozen out.

When you’re dealing with Socialism failure is always will be the guaranteed result.

~Kerry Lutz.

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