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Smith's Research & Gradings
August 3, 2020

Smith's Research & Gradings

New York Is No "Donor State"

New York Is No "Donor State"

In  truth,  high-tax  blue  states  are  net  "receivers"  of federal funds, New York foremost among them, according to Matthew Schoenfeld, a Chicago-based municipal bond portfolio manager.

He gored one of the sacred cows of  New Yorkers (and many municipal analysts). What's more, Mr. Schoenfeld did it publicly — in the Wall Street Journal's Opinion Page on July 22, 2020. Governor Andrew  Cuomo,  (D.NY)  has  repeatedly flouted a list of "donor states" topped by New York, which "gives" $29 bln. a year more than it "got" from 2015 through 2018. The source of the Governor's claim is the Rockefeller Institute's "Giving or Getting" which was published in 2017.

Mr. Schoenfeld wrote, "It isn't so simple. A food stamp isn't the same as a serviceman's paycheck. The former can be characterized as a federal subsidy — a gift in Mr. Cuomo's parlance — while the latter cannot. The Rockefeller report treats both as gifts, distorting who gets what.

"Texas is home to nearly 219,000 military personnel, New York 60,000. It's no surprise federal defense-related ex- penditures in Texas dwarfed those in New York. From this the Rockefeller report implies Texas got $51 bln. more than New York — for the privilege of defending the whole country." That doesn't square. If the DOD's spending is used to allocate the "value of the defense provided by the federal government by population" in 2018, New York got $2 bln. more than it gave.

What's  more  Mr.  Schoenfeld's  analysis  shows  how blue  states  disproportionately  reap  the  benefits  of  federal subsidization  for  municipal  debt issuance.   Based  on  the Congressional Budget Office 2018 estimate, New York State got more than $9 bln. than it received (bringing the total got to $11 bln.) Back out the $2 bln. in social security payments that  New York  State  avoids  because  its  retirees  move  to warmer climates, and the "get" grows to $13 bln.

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Beirut’s Agony: Ports, Food, and China

On August 4th the port of Beirut was the scene of a horrific explosion, which killed more than 150 people, injured 6,000 and left some 300,000 homeless. The damages are estimated to be in excess of $15 billion. The city’s hospitals, already struggling due to the COVID-19 pandemic, were damaged by the blast and swamped with injured. On top of already raging economic and political crises, the explosion now raises the question of food security. Prior to the explosion, 80 percent of Lebanon’s imports passed through Beirut’s port. Without a functioning port in Beirut, the country now relies on a handful of secondary ports, chief among them being Tripoli in the north, to import food and to export its products.

Jobs Number May Indicate Covid Economy is Over

Wow! The U.S. economy added 467,000 jobs last month, keeping the unemployment rate in the 4.0% area. Also impressive is that there were large upward revisions from previous months. We say 'wow' because there was such negative sentiment prior to the release of the jobs number.

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