The editors of the Chicago Tribune point out a critical shortage:
Chicago teachers want better pay and working conditions. Mayor Lori Lightfoot has made a generous contract offer, yet the Chicago Teachers Union is threatening to strike. That’s but one sequence of current events in this city’s, this state’s, long-running series of public finance crises. What’s the fuller picture? Well, go back decades to when politicians in Chicago and Springfield began skimping on payments to government retirement systems.
Illinois suffers many of these fiscal catastrophes — in its school districts, cities, townships, counties and of course state government. Yet there’s only one set of taxpayers to address the layers of distress — the people who live here now.
Yes, there’s a critical shortage of Illinois and Chicago taxpayers. There is no shortage of ideas for spending more money, for the wants of public employees, or for Springfield’s demands that present taxpayers make up for the fecklessness of past lawmakers.
The rich are being driven from Illinois and Chicago by high taxes and the prospect of even higher taxes in the “Pritzker tax”, the poor by high crime and school closings in their neighborhoods, and the middle class by the highest property taxes in the nation.
Former Chicago Mayor Rahm Emanuel had an effective by cynical strategy: drive the poor from the city while attracting the rich by adding amenities for them. Besides its cynicism it only suffered from one flaw: why come to Chicago when you could go to San Francisco, San Jose, Raleigh, or Miami instead?
The editors conclude with their alternative proposal:
The best way to rescue Illinois governments from themselves is to curb public pension benefits earned in the future. That also requires amending the Illinois Constitution. Giving voters a voice on that amendment — not just on the Pritzker Tax — will help state and local governments survive. So will affordable labor contracts. Mayor Lightfoot’s negotiations with Chicago teachers are part of the mix.
Because there’s only one set of taxpayers in Illinois.
Goes without saying, unsustainable. Public sector union members surely do not outnumber voting age taxpayers. Or is your government dependent class plus public sector a majority? In that case, as they say, this will not end well. Federal bailouts are really a long shot. Even a President Warren or Sanders would be blocked by the Senate.
As a pensioner myself, I wonder what’s right. Is the current baby boomer retirement bulge a temporary budgetary problem? can we fund these things federally and grow out of it?
I don’t think anyone knows, in a previous post I poked fun at the Chinese for peering 80 years ahead into their energy future.
If we fund pensions, we fund them, if we don’t we don’t. Either path has costs and benefits. Politically, it’s a very hard sell. My guess is that Chicago is going the way of Detroit. You may stay, but ……..
It would be amusing if Warren wins the Presidency + Democrats take the Senate next year and instead of legislating the Green deal, M4A, free University, open borders…. Illinois triggers a solvency crisis and the Warren / Democrats spend the whole term trying to bailout the states — Illinois won’t be the only state that will require a bailout when the time comes.
Perhaps not that amusing.
Curious:
You’re comment assumes a pension bailout would trigger an insolvency crisis. Is that true? I do not know. What was it? 1985? Savings and loan bailout, Then, I thought that would trigger explosive inflation . Please explain why this time is different .
“As a pensioner myself, I wonder what’s right.”
Go back and prosecute the pols who didn’t fund their promises. Won’t happen.
” Is the current baby boomer retirement bulge a temporary budgetary problem?”
For the states, no. They can’t print money. The unfunded pension obligations are calculated based upon (over) estimated investment returns and a deemed population size of payers with deemed tax rates. Its actually worse than it appears.
In corporate finance this is usually resolved by shared sacrifice: claimants accept less, payers pay more, usually with some form of economic concession, and the payments are stretched out in time.
However, as the Chicago Teachers indicate the claimants have no intention to be flexible. Payers are voting with their feet. And you cant pay dead people, just their estate.
This is how death spirals occur.
“Can we fund these things federally and grow out of it?”
Printing money of this magnitude is a theoretical exercise. Politically, don’t expect FL, TX or SC etc to be eager to bail out IL, NJ, CT, NY, MA or CA. And what makes you think taxing will not go to the general fund?
TAXES!?
No, never. Won’t fly. 30 year bonds, federally subsidized. Inflationary? Maybe. I don’t know. But in a democracy, you have to count the votes. Voters say: Help me, so, are bailouts do able?
Actually it is the reverse, an insolvency crisis will trigger a pension bailout. It depends on the mood of the market, but a bond market panic like Greece and the Eurozone bailouts is a possibility.
I think a Federal bailout makes eventual sense, because of quirks many of these people that are in state pension plans also are not part of social security, and I have no passion to push people into penury (for decisions they had little responsibility for).
But how you get from state(s) cannot pay to federal bailout; that is the tricky part. Like Germany, the residents of the states that have to pay to the insolvent states will be indignant. And the irresponsibility of the politicians in the insolvent states will drive that outrage.
If a Federal bailout of the indebted states were popular; Warren would have proposed it.
Curious: That’s only because Warren hasn’t thought of it. She already has 546 proposals ready to go when she becomes dictator. This will be number 1007.