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How Much State Debt Rests on Your Shoulders?

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The following “snowball” shows state debt per person in each state:
How Much State Debt Rests on Your Shoulders?

How Much State Debt Rests on Your Shoulders?

We’ve previously shown the federal government debt incurred per person in each country, but today’s infographic drills down to the state level.

How much state debt is there per person, and why is there such a wide discrepancy between states like Massachusetts ($11,000 per person) and Nebraska ($1,000 per person)?

The Snowball of State Debt

Today’s infographic from HowMuch.net, a cost information site, organizes states by debt per capita using a snowball-like effect.

The five states at the center of the snowball with the highest debt per capita are Massachusetts ($11,000), Connecticut ($9,200), Rhode Island ($8,900), Alaska ($8,200), and New Jersey ($7,400).

On the other end of the spectrum are the five states with the lowest state debt per capita: Tennessee ($900), Nebraska ($1,000), Nevada ($1,200), Georgia ($1,300), and Arkansas ($1,500).

While it is reasonable to expect big differences in debt per capita between countries, seeing an interstate difference of up to 10x per person seems a bit perplexing at face value. Let’s see if we can dig a little deeper on what accounts for these differences.

The Curious Case of Massachusetts

Currently, Massachusetts holds the title of the highest state debt per capita, as well as ranking #2 in terms of state debt as a percentage of GDP (14.0%). It’s also worth noting that debt analysts at S&P have recently lowered the outlook on state bonds from stable to negative.

Meanwhile, The Mercatus Center ranked Massachusetts in 49th place in their 2016 State Fiscal Rankings. (The only state to fare worse was Connecticut.)

Mercatus snapshot for Massachusetts

Like other old and urban states, Massachusetts requires significant investments to repair aging roads, schools, and other infrastructure. For many fiscal analysts, however, it is the gap in unfunded liabilities that is the long-term concern.

Forbes notes that unfunded liabilities from public pensions are probably the biggest fiscal problem facing state governments today, and Massachusetts is no exception. Unfunded liabilities in the state are pegged at $94.45 billion with other postemployment benefits (OPEB) at $15.38 billion, and eventually these are issues that will have to be dealt with.

Healthier Budgets

What does a healthier state budget look like? The best examples can be found in the Midwest.

Here’s Nebraska, which has about $1,000 of debt per person:

Mercatus snapshot for Nebraska

Nebraska exhibits strong fiscal health across all categories. On a cash basis, Nebraska has between 3.81 and 5.02 times the cash needed to cover short-term liabilities. Revenues exceed expenses by 7 percent, producing a surplus of $294 per capita.

– Mercatus Center at George Mason University

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The Biggest Business Risks Around the World

We live in an increasingly volatile world, where change is the only constant. Which are the top ten business risks to watch out for?

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The Biggest Business Risks Around the World

We live in an increasingly volatile world, where change is the only constant.

Businesses, too, face rapidly changing environments and associated risks that they need to adapt to—or risk falling behind. These can range from supply chain issues due to shipping blockages, to disruptions from natural catastrophes.

As countries and companies continue to grapple with the effects of the pandemic, nearly 3,000 risk management experts were surveyed for the Allianz Risk Barometer, uncovering the top 10 business risks that leaders must watch out for in 2021.

The Top 10 Business Risks: The Pandemic Trio Emerges

Business Interruption tops the charts consistently as the biggest business risk. This risk has slotted into the #1 spot seven times in the last decade of the survey, showing it has been on the minds of business leaders well before the pandemic began.

However, that is not to say that the pandemic hasn’t made awareness of this risk more acute. In fact, 94% of surveyed companies reported a COVID-19 related supply chain disruption in 2020.

Rank (2021)% ResponsesRisk NameBusiness Risk ExamplesChange from 2020
#141%Business InterruptionSupply chain disruptions
#240%Pandemic OutbreakHealth and workforce issues, restrictions on movement
#340%Cyber IncidentsCybercrime, IT failure/outage, data breaches, fines and penalties
#419%Market DevelopmentsVolatility, intensified competition/new entrants, M&A, market stagnation, market fluctuation
#519%Legislation/ Regulation ChangesTrade wars and tariffs, economic sanctions, protectionism, Brexit, Euro-zone disintegration
#617%Natural CatastrophesStorm, flood, earthquake, wildfire
#716%Fire, Explosion-
#813%Macroeconomic DevelopmentsMonetary policies, austerity programs, commodity price increase, deflation, inflation
#913%Climate Change-
#1011%Political Risks And ViolencePolitical instability, war, terrorism, civil commotion, riots and looting

Note: Figures do not add to 100% as respondents could select up to three risks per industry.

Pandemic Outbreak, naturally, has climbed 15 spots to become the second-most significant business risk. Even with vaccine roll-outs, the uncontrollable spread of the virus and new variants remain a concern.

The third most prominent business risk, Cyber Incidents, are also on the rise. Global cybercrime already causes a $1 trillion drag on the economy—a 50% jump from just two years ago. In addition, the pandemic-induced rush towards digitalization leaves businesses increasingly susceptible to cyber incidents.

Other Socio-Economic Business Risks

The top three risks mentioned above are considered the “pandemic trio”, owing to their inextricable and intertwined effects on the business world. However, these next few notable business risks are also not far behind.

Globally, GDP is expected to recover by +4.4% in 2021, compared to the -4.5% contraction from 2020. These Market Developments may also see a short-term 2 percentage point increase in GDP growth estimates in the event of rapid and successful vaccination campaigns.

In the long term, however, the world will need to contend with a record of $277 trillion worth of debt, which may potentially affect these economic growth projections. Rising insolvency rates also remain a key post-COVID concern.

Persisting traditional risks such as Fires and Explosions are especially damaging for manufacturing and industry. For example, the August 2020 Beirut explosion caused $15 billion in damages.

What’s more, Political Risks And Violence have escalated in number, scale, and duration worldwide in the form of civil unrest and protests. Such disruption is often underestimated, but insured losses can add up into the billions.

No Such Thing as a Risk-Free Life

The risks that businesses face depend on a multitude of factors, from political (in)stability and growing regulations to climate change and macroeconomic shifts.

Will a post-pandemic world accentuate these global business risks even further, or will something entirely new rear its head?

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RCEP Explained: The World’s Biggest Trading Bloc Will Soon be in Asia-Pacific

The Regional Comprehensive Economic Partnership (RCEP) covers 30% of global GDP and population. Here’s everything you need to know about it.

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RCEP Explained: The World’s Biggest Trading Bloc

Trade and commerce are the lifeblood of the global economy. Naturally, agreements among nations in a certain geographical area help facilitate relationships in ways that are ideally beneficial for everyone involved.

In late 2020, the Regional Comprehensive Economic Partnership (RCEP) was signed, officially creating the biggest trade bloc in history. Here, we break down everything you need to know about it, from who’s involved to its implications.

Who’s in the RCEP, and Why Was it Created?

The RCEP is a free trade agreement between 15 nations in the Asia-Pacific region, and has been formalized after 28 rounds of discussion over eight years.

Member nations who are a part of the RCEP will benefit from lowered or completely eliminated tariffs on imported goods and services within the region in the next 20 years. Here are the countries which have signed on to be member nations:

CountryPopulation (M)Nominal GDP ($B)
🇦🇺 Australia25.7$1,359
🇧🇳 Brunei0.5$12
🇰🇭 Cambodia15.7$26
🇨🇳 China1404$14,723
🇮🇩 Indonesia270.2$1,060
🇯🇵 Japan125.8$5,049
🇰🇷 South Korea51.8$1,631
🇱🇦 Laos7.3$19
🇲🇾 Malaysia32.9$338
🇲🇲 Myanmar53.2$81
🇳🇿 New Zealand5.1$209
🇵🇭 Philippines108.8$362
🇸🇬 Singapore5.8$340
🇹🇭 Thailand69.8$502
🇻🇳 Vietnam97.4$341
RCEP Total2,274.2M$26,052B

Source: IMF

But there is still some work to do to bring the trade agreement into full effect.

Signing the agreement, the step taken in late 2020, is simply an initial show of support for the trade agreement, but now it needs to be ratified. That means these nations still have to give their consent to be legally bound to the terms within the RCEP. Once the RCEP is ratified by three-fifths of its signatories—a minimum of six ASEAN nations and three non-ASEAN nations—it will go ahead within 60 days.

So far, it’s been ratified by China, Japan, Thailand, and Singapore as of April 30, 2021. At its current pace, the RCEP is set to come into effect in early 2022 as all member nations have agreed to complete the ratification process within the year.

Interestingly, in the midst of negotiations in 2019, India pulled out of the agreement. This came after potential concerns about the trade bloc’s impacts on its industrial and agricultural sectors that affect the “lives and livelihoods of all Indians”. India retains the option to rejoin the RCEP in the future, if things change.

The Biggest Trading Blocs, Compared

When we say the Regional Comprehensive Economic Partnership is the biggest trade bloc in history, this statement is not hyperbole.

The RCEP will not only surpass existing Asia-Pacific trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in size and scope, but also other key regional partnerships in advanced economies.

This includes the European Union and the U.S.-Mexico-Canada Agreement (USMCA, formerly known as NAFTA). How does the trio stack up?

 Nominal GDP, 2020Population, 2020
EU$15.2 trillion445 million
USMCA$23.7 trillion496 million
RCEP$26.1 trillion2.27 billion
World$84.5 trillion7.64 billion

With the combined might of its 15 signatories, the RCEP accounts for approximately 30% of global GDP and population. Interestingly, the total population covered within the RCEP is near or over five times that of the other trade blocs.

Another regional agreement not covered here is the African Continental Free Trade Area (AfCFTA), which is now the largest in terms of participating countries (55 in total), but in the other metrics, the RCEP still emerges superior.

Implications of the Regional Comprehensive Economic Partnership

The potential effects of the RCEP are widespread. Among others, the agreement will establish rules for the region around:

  • Investment
  • Competition
  • E-commerce
  • Intellectual property
  • Telecommunications

However, there are some key exclusions that have raised critics’ eyebrows. These are:

  • Labor union provisions
  • Environmental protection
  • Government subsidies

The RCEP could also help China gain even more ground in its economic race against the U.S. towards becoming a global superpower.

Last, but most importantly, Brookings estimates that the potential gains from the RCEP are in the high billions: $209 billion could be added annually to world incomes, and $500 billion may be added to world trade by 2030.

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