Spending

Illinois Democrats Abandoning Attempt To Make Temporary Income Tax Hike Permanent?

“In his election-year budget speech Wednesday, Gov. Pat Quinn called on lawmakers to make permanent the 67 percent temporary income tax increase they approved in 2011…

Quinn’s budget speech was the first time he directly addressed what should be done about the pending expiration of much of the temporary tax increase. When lawmakers approved raising the state’s personal income tax rate from 3 percent to 5 percent, they stipulated that the rate should drop to 3.75 percent on Jan. 1, 2015…”

-The State Journal-Register (Springfield), March 26, 2014

There’s news coming out of Springfield that the Democrats are preparing an Illinois state budget that accounts for the expiration of the temporary income tax hike they approved in 2011. Doug Finke reported on The State Journal-Register website last night:

House Democrats are preparing a new state budget that allows most of the temporary income tax increase to expire on schedule at the end of the year.

“Today we’re going to have our (budget negotiators) working toward a middle-of-the-road budget that would be consistent with the revenue estimates which have been adopted by the House,” House Speaker Michael Madigan, D-Chicago, said Monday. “The income tax increase would not be extended.”

From an Associated Press piece earlier today:

House Speaker Michael Madigan emerged from a Memorial Day caucus meeting and told reporters he was dropping the idea of making the 5 percent income tax permanent — and crafting a budget blueprint that holds the line on spending but is not the “doomsday” plan the House overwhelmingly rejected Friday.

“We’re going to call upon the agencies and those that receive appropriations from the Legislature to live within their means,” said Madigan, a Chicago Democrat. “We understand the way this is… Let’s take a good hard look at it and get the job done.”

So does this mean Illinois Democrats have abandoned their push to make the temporary income tax hike permanent? I doubt it. This is “Madiganistan,” after all. And what Mike wants, Mike gets.

I wouldn’t be surprised to see some sort of maneuvering being carried out to eventually land these funds. Perhaps another “temporary” increase in such taxes sometime after the November 2014 election, with buzz words such as “fiscal emergency” and “for the children” being used to justify the measure?

Stay tuned…

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Finke, Doug. “House Democrats work on budget without tax increase.” The State Journal-Register. 26 May 2014. (http://www.sj-r.com/article/20140526/NEWS/140529531/). 27 May 2014.

“Illinois Democrats give up on tax-hike extension.” Associated Press. 27 May 2014. (http://www.chicagobusiness.com/article/20140527/NEWS02/140529846/illinois-democrats-give-up-on-tax-hike-extension#). 27 May 2014.

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CBO: Updated 2014-2024 Budget Projections Show Substantially Rising Budget Shorfalls, Federal Debt

That idea that the U.S. could someday resemble a “banana republic” might not be too far off the mark. From the non-partisan Congressional Budget Office website today:

As it usually does each spring, CBO has updated the baseline budget projections that it released earlier in the year…

Between 2015 and 2024, annual budget shortfalls are projected to rise substantially—from a low of $469 billion in 2015 to about $1 trillion from 2022 through 2024—mainly because of the aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt. CBO expects that cumulative deficits during that decade will equal $7.6 trillion if current laws remain unchanged. As a share of GDP, deficits are projected to rise from 2.6 percent in 2015 to about 4 percent near the end of the 10-year period. By comparison, the deficit averaged 3.1 percent of GDP over the past 40 years and 2.3 percent in the 40 years before fiscal year 2008, when the most recent recession began. From 2015 through 2024, both revenues and outlays are projected to be greater than their 40-year averages as a percentage of GDP (see the figure below)…

In CBO’s baseline projections, federal debt held by the public reaches 78 percent of GDP by 2024, up from 72 percent at the end of 2013 and twice the 39 percent average of the past four decades (see the figure below). As recently as the end of 2007, federal debt equaled just 35 percent of GDP

Such high and rising debt would have serious negative consequences. Federal spending on interest payments would increase considerably when interest rates rose to more typical levels. Moreover, because federal borrowing would eventually raise the cost of investment by businesses and other entities, the capital stock would be smaller, and productivity and wages lower, than if federal borrowing was more limited. In addition, high debt means that lawmakers would have less flexibility than they otherwise would to use tax and spending policies to respond to unexpected challenges. Finally, high debt increases the risk of a fiscal crisis in which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates…

(Editor’s note: Bold added for emphasis)

You can read the entire assessment and view the complete document on the CBO website here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Chicago Wakes To Proposed Property Tax Hike On April Fool’s Day

Many Chicagoans probably wish what’s being widely-reported in the local news this morning about a proposed property tax hike is just a silly April Fool’s joke.

It’s not.

Fran Spielman wrote on the Chicago Sun-Times website last night:

Chicago property owners will face $250 million in property tax increases over five years while city employees make increased pension contributions that will cost them at least $300 more a year, under landmark reforms unveiled Monday…

The new revenue the mayor had promised only after pension reform will come in the form of $50 million property tax increases for five straight years, beginning next year and continuing through 2019.

Top mayoral aides estimate that would cost the owner of a home valued at $250,000 with an annual property tax bill of $4,000 roughly $58 more or $290 over the five-year period. That’s on top of expected increases for the Chicago Board of Education and Chicago Park District…

(Editor’s note: Bold added for emphasis)

A couple of thoughts here:

First off, is anyone really surprised this is happening?

Regular readers of this blog shouldn’t be.

Higher fees, fines, and taxes. Less government services.

I’ve been squawking this for quite some time now.


“Black Dynamite- Who saw that coming?”
YouTube Video

Second, a $250,000 home? When discussing a Chicago Board of Education property tax hike last August, I blogged:

$230,000? You’d be hard-pressed to find a home for that little money in my former stomping grounds on the Northwest Side.

The same holds true for a $250,000 one (especially if it’s a property big enough for a family and doesn’t require a ton of work).

Which means many of my old neighbors will be coughing up significantly more than just $58 annually/$290 over five years as a result of this proposed hike.

And they already pay a big chunk of change to the City’s coffers.

Third, Spielman added last night:

The bottom line, according to Emanuel, is a plan that spreads the burden between employees, retirees and homeowners without raising property taxes so high that it triggers a mass exodus to the suburbs…

“Mass” being the key word here, because an exodus has already started. Former Chicago residents who have awakened to the “writing on the wall” are moving to the suburbs (yours truly included), leaving Cook County, and departing the state.

The push to make “temporary” personal and corporate income tax hikes permanent and the pursuit of class warfare in the form of a proposed millionaire tax hike by the ruling political party in the city, county, and state certainly don’t help the situation either.

Fourth, I can’t stand when tax hikes are proposed despite the lack of significant belt-tightening. Think the City of Chicago is as lean-and-mean as it possibly can be with its operations and set-up?

As long as 50 aldermanic wards exist, I’d argue no.

Fifth, as it stands right now, there’s still a state-required $600 million contribution due next year from the City to stabilize police and fire pension funds that this proposed property tax hike doesn’t address and has to be dealt with. Hal Dardick an Bill Ruthhart reported on the Chicago Tribune website this morning:

But the proposal the mayor and his top aides outlined late Monday would not address huge pension shortfalls for Chicago police, firefighters and teachers. Nor would it deal with the city’s most immediate, pressing financial problem: a state requirement to pay a whopping $600 million more toward police and fire pensions next year, a provision that could lead to a combination of tax increases, service cuts and borrowing

(Editor’s note: Bold added for emphasis)

You read right. Possibly more “tax increases, service cuts and borrowing” coming down the line shortly for Chicago residents.

Stay tuned…

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Spielman, Fran. “Pension deal pinches city workers and taxpayers.” Chicago Sun-Times. 31 Mar. 2014. (http://politics.suntimes.com/article/chicago/exclusive-pension-deal-pinches-city-workers-and-taxpayers/mon-03312014-821pm). 1 Apr. 2014.

Dardick, Hal and Ruthhart, Bill. “Emanuel’s pension fix: Shrink benefits, raise taxes.” Chicago Tribune. 1 Apr. 2014. (http://www.chicagotribune.com/news/local/ct-rahm-emanuel-pension-property-tax-increase-met–20140401,0,1662095,full.story). 1 Apr. 2014.

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Seen On The Streets, Part 10

While I’ve been doing quite a bit of driving around the Northwest Side of Chicago and surrounding suburbs lately, I’ve noticed the price at the pump has been rising.

I filled up the Flintstone Mobile for $3.99 a gallon of regular gas last weekend, and noticed that was typically the same price at the various stations I drove by yesterday while in the west suburbs.

From the Journal & Topics Newspapers (northwest suburbs) website yesterday:

Gas prices in the Chicago-area are quickly approaching $4 per gallon.

The average price of a gallon of regular gas peaked at $3.98 last week and had only fallen to $3.95 as of Friday.

Gas prices in the Chicago-area are expected to continue their rise, peaking in late April or early May between $4.10 and $4.25 a gallon in Chicago…

(Editor’s note: Bold- yes, bold now- added for emphasis)

If the cost at the pump does indeed go higher, I predict irritated drivers will start showing up on the local news again like they did in the summer of 2008.

Question is, will they also start cutting back on spending in other areas like they did that year?

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

“Gas Prices Spiking Again.” Journal & Topics Newspapers. 26 Mar. 2014. (http://www.journal-topics.com/business/article_3c8eed54-b526-11e3-b729-001a4bcf6878.html). 27 Mar. 2014.

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Wisconsin Cuts Taxes While Illinois Looks To Make 2011 ‘Temporary’ Tax Hikes Permanent

Throughout the years, I’ve known/met a number of Illinois residents who can’t stand Wisconsin. Mostly from the Chicago area, they equate Wisconsin and its residents as being unsophisticated clowns.

I wonder if they haven’t noticed by now that the only circus around is in the “Land of Lincoln.”

While Illinois falls deeper into an economic abyss (public pension fix my butt), Wisconsin seems to have gotten their finances under control and look to be on the path to prosperity.

So much so they’re cutting taxes. Again.

Patrick Marley and Jason Stein reported on the Milwaukee Journal Sentinel website Monday afternoon:

Lowering taxes for the third time in less than a year, Gov. Scott Walker signed his $541 million tax cut bill in a ceremony Monday at a farm in Cecil as he travels through central and northern Wisconsin touting it.

Speaking at Horsens Homestead Farms, about 35 miles northwest of Green Bay, Walker called it a great day for Wisconsin taxpayers and a sign of the state’s shifting financial fortunes in recent years.

“Now, instead of billion dollar budget deficits, we have a surplus — and today that money is on its way to the workers, parents, seniors, property owners, veterans, job creators and others. You deserve to keep as much of your hard-earned money as possible — because after all, it is your money,” Walker said.

With growing tax collections now expected to give the state a $1 billion budget surplus in June 2015, Walker’s tax proposal will cut property and income taxes for families and businesses, and zero out all income taxes for manufacturers in the state.

Though the state’s tax revenue is increasing, GOP lawmakers and Walker are trimming state spending slightly for the next three years rather than increasing it

(Editor’s note: Italics added for emphasis)

Meanwhile, across the Cheddar Curtain in Illinois there’s this on the website of The State Journal-Register (Springfield). Doug Finke reported Friday:

Hundreds of employees would be laid off, state facilities would be closed and thousands of prison inmates released without supervision, state agency directors told senators Friday during a hearing to gauge the effect of possibly severe spending cuts next year.

During a more than three-hour joint hearing of the two Senate Appropriations committees, agency after agency warned of drastic consequences should they be forced to cut their current budgets by 20 percent.

“There would be extreme consequences for the economy across Illinois,” warned Ben Winick of Gov. Pat Quinn’s budget office. “Over a dozen state facilities would have to close. Thousands of state employees would have to be laid off.”

The hearing occurred just days before Quinn is scheduled to finally deliver his budget outline for the fiscal year that starts July 1…

Translated? Illinois residents, this is what will happen if you don’t support making the Democrat-led temporary 67 percent personal income tax hike and 46 percent corporate income tax hike implemented in January 2011 permanent next year.

I hear Governor Quinn will be delivering his budget plan tomorrow.

Instead of ridiculing Wisconsin, us FIBs (F***ing Illinois Bastards as we’re known by up there) might want to start emulating our neighbors to the north in certain respects before we completely destroy Illinois.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Marley, Patrick and Stein, Jacob. “Scott Walker signs tax cut legislation.” Milwaukee Journal Sentinel. 24 Mar. 2014. (http://www.jsonline.com/news/statepolitics/scott-walker-set-to-sign-tax-cut-legislation-b99231851z1-251936261.html). 24 Mar. 2014.

Finke, Doug. “State agencies outline cuts if forced to make 20% reductions.” The State Journal-Register. 21 Mar. 2014. (http://www.sj-r.com/article/20140321/NEWS/140329821). 24 Mar. 2014.

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Illinois Millionaire Tax Hike Could Pass As Part Of Class Warfare Push By Democrats

While I’ve been putting a lot of time lately into my offshore Web projects, Illinois Democrats have been grabbing the local headlines as they replicate President Obama’s class warfare strategy to win votes in November. Monique Garcia, Ray Long, and Maura Zurick reported on the Chicago Tribune website last Friday:

Illinois Democrats went all-in Thursday with their election-year class warfare theme as Speaker Michael Madigan pitched the idea of asking voters to raise taxes on millionaires, Senate President John Cullerton advanced a minimum-wage increase and Gov. Pat Quinn compared wealthy opponent Bruce Rauner to TV villain Mr. Burns…

The newest front in the campaign battle came as Madigan held a rare news conference to announce he wants lawmakers to put a question on the Nov. 4 ballot asking voters whether the state should raise the income tax by 3 percentage points on those who make more than $1 million a year.

The powerful Democratic speaker said the tax hike on millionaires is a way to generate more than $1 billion for elementary and high schools. Madigan based his calculations on what he said are roughly 13,675 millionaires that lived in Illinois in 2011, brushing aside a question about whether such a tax hike might drive them out of the state.

“Well, if they’re in Illinois today, they’re probably so much in love with Illinois that they’re not going to leave,” Madigan said

(Editor’s note: Italics added for emphasis)

I’m not as optimistic as the 71-year-old Speaker of the House is about Illinois millionaires sticking around if they’re targeted with a tax hike.

After all, money typically gravitates to where it’s being treated the best.

And recent demographic data suggests Chicagoland and Illinois residents may not be “so much in love” with the area as Mr. Madigan claims.

That includes the rich as well.

“Cook County’s population grew by 17,000 people in 2012, about .3 percent- but much of that gain came from immigrants, according to Census Bureau estimates released Thursday.

The figures showed that about 32,000 more domestic residents moved out of Cook County than moved in. But a net increase of 17,000 immigrants, along with a high ratio of births over deaths, contributed to an overall gain for the county…”

-Chicago Sun-Times website, March 13, 2013

Moving Out
The top outbound states for 2013 were:

1. New Jersey
2. Illinois
3. New York
4. West Virginia
5. Connecticut
6. Utah
7. Kentucky
8. Massachusetts
9. New Mexico”

-United Van Lines press release, January 2, 2014

“As the Great Recession churned job prospects for many, Cook County lost about 13,000 residents with six-figure household incomes to other places, despite the widely hyped revival of downtown housing and jobs…”

-Crain’s Chicago Business website, February 14, 2014

“Roughly 13,675 millionaires that lived in Illinois in 2011”

Should Illinois Democrats jack up their income taxes, I suspect the number of Illinois millionaires right before the tax hike is implemented will plummet. Revenue will follow. Out-of-state vacation homes in Indiana and Wisconsin will be declared as primary residences.

“A way to generate more than $1 billion for elementary and high schools”

I highly doubt that.

So does the proposed millionaire tax hike have a chance of becoming reality?

Consider what Greg Hinz blogged on the Crain’s Chicago Business website Friday:

Springfield Democrats have such big legislative majorities that they won’t need any Republican votes to pass the measure if they hang together. And Springfield insiders are saying that odds are much better that Democrats will unify behind the speaker’s proposal- which, after all, would affect only millionaires like Bruce Rauner- than behind another plan being pushed by Senate Democrats to implement a graduated income tax, which would affect far more voters.

Stay tuned. If you can stomach it.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Garcia, Monique, Long, Ray, and Zurich, Maura. “Illinois Democrats go all-in on class warfare theme.” Chicago Tribune. 21 Mar. 2014. (http://articles.chicagotribune.com/2014-03-21/news/chi-speaker-madigan-proposes-asking-voters-to-raise-taxes-on-wealthy-20140320_1_tax-hike-bruce-rauner-income). 24 Mar. 2014.

Hinz, Greg. “GOP leaders blast Madigan’s millionaires tax, but idea likely has legs.” Greg Hinz On Politics.” Crain’s Chicago Business. 21 Mar. 2014. (http://www.chicagobusiness.com/article/20140321/BLOGS02/140329950/gop-leaders-blast-madigans-millionaires-tax-but-idea-likely-has-legs). 24 Mar. 2014.

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BIS: Global Debt Markets Grow To Estimated $100 Trillion In 2013, Up From $70 Trillion In 2007

Last night, I read about global debt markets hitting the $100 trillion-mark.

One word came to my mind at that moment:

Unsustainable.

Branimir Gruić and Andreas Schrimpf wrote “Cross-border investments in global debt markets since the crisis” in the latest BIS Quarterly Review- a report from the Bank of International Settlements (the central bank of central banks). From the publication released Sunday:

Global debt markets have grown to an estimated $100 trillion (in amounts outstanding) in mid-2013 (Graph C, left-hand panel), up from $70 trillion in mid-2007. Growth has been uneven across the main market segments. Active issuance by governments and non-financial corporations has lifted the share of domestically issued bonds, whereas more restrained activity by financial institutions has held back international issuance (Graph C, left-hand panel).

Not surprisingly, given the significant expansion in government spending in recent years, governments (including central, state and local governments) have been the largest debt issuers (Graph C, left-hand panel). They mostly issue debt in domestic markets, where amounts outstanding reached $43 trillion in June 2013, about 80% higher than in mid-2007 (as indicated by the yellow area in Graph C, left-hand panel)…

(Editor’s note: Italics added for emphasis)

“Not surprisingly, given the significant expansion in government spending in recent years, governments (including central, state and local governments) have been the largest debt issuers”

Gruić and Schrimpf are correct- I’m not surprised.

And regular Survival And Prosperity readers shouldn’t be either, as warnings about reduced government services and new/higher taxes and fees (to deal with all this new debt) have been issued time and time again.

You can read the entire BIS report here (page 22 of the .pdf file/page 18 of the publication contains Gruić and Schrimpf’s findings).

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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The Civic Federation Proposes Plan For Achieving Long-Term Fiscal Sustainability In Illinois

The last time I blogged about The Civic Federation, an independent, non-partisan government research organization that provides analysis and recommendations on government finance issues for the Chicago region and State of Illinois, was right before the holidays.

The Civic Federation is in the headlines again these days for proposing a five-year plan to balance the Illinois state budget, eliminate its huge bill backlog, and reduce income tax rates. From a March 3 press release:

In a report released today, the Civic Federation’s Institute for Illinois’ Fiscal Sustainability proposes a comprehensive plan for achieving long-term fiscal sustainability for the State of Illinois. The five-year plan would fully pay down the State’s $5.4 billion backlog of unpaid bills while gradually reducing income tax rates by 20%, broadening the tax base and building a reserve fund as protection against future economic downturns…

$5.4 billion? That’s a lot of bills.

One part of this financial rescue plan will likely raise the eyebrows of certain Illinois residents. From the press release:

3. Broaden Income Tax Base to Include Federally Taxable Amounts of Retirement Income: Out of the 41 states that impose an income tax, Illinois is one of only three that exempt all pension income and one of 27 that exclude all federally taxable Social Security income. The State should broaden its income tax base to create greater equity among taxpayers and facilitate the gradual rollback of the income tax rates. The broader base will also ensure greater long-term sustainability of the State’s resources by accessing a growing portion of the Illinois economy…

You can read the entire press release here, as well as find a link to The Civic Federation’s 50-page report State of Illinois FY2015 Budget Roadmap: State of Illinois Budget Overview, Projections and Recommendations for the Governor and the Illinois General Assembly.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Repeal Of Illinois ‘Temporary’ Income Tax Hikes Questioned

Short of some other revenue-generating scheme replacing it, the “temporary” 67 percent personal income tax hike and 46 perent corporate tax hike pushed through by Illinois Democrats and signed off by Governor Pat Quinn (D-Chicago) in January 2011 are starting to look permanent.

Big shock there.

Back at the beginning of 2011, the State of Illinois was on the hook for an estimated $8 billion in unpaid bills. “Temporary” increases in personal and corporate income taxes were passed- as I understood it- to help pay down the massive amount owed.

But as I blogged less than two weeks ago on November 25:

This morning, I read that the backlog is now approaching $9 billion.

Big fail there.

No wonder there’s increased chatter then about Illinois Democrats- who’ve controlled state government since 2003- making those “temporary” tax hikes permanent. Ray Long reported on the Chicago Tribune website Saturday:

The harshest Republican critics of a new law to wipe out the state’s $100 billion government worker pension debt argued that the plan should have saved more money or Illinois’ temporary income-tax increase that’s set to expire will never go away.

A look at the state’s finances, however, shows it’s a good bet the tax hike will stick around whether or not lawmakers approved last week’s major overhaul of the retirement systems. If lawmakers allow the tax increase to expire as scheduled at the end of 2014, the state will lose about $5 billion a year. That’s one-seventh of the state’s $35 billion operating budget.

(Editor’s note: Italics added for emphasis)

This wouldn’t be the first time supposedly temporary taxes would be made permanent by Illinois lawmakers. As I noted back on January 13, 2011:

The last time income tax rates in the “Land of Lincoln” went up in 1989, politicians also claimed it was as a temporary increase to combat a financial “rough patch.” But the rates never came down and by 1993 were designated permanent. Until now, that is.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Long, Ray. “State income tax hike doesn’t look so temporary now.” Chicago Tribune. 7 Dec. 2013. (http://www.chicagotribune.com/news/local/ct-illinois-pensions-met-1208-20131207,0,7554970.story). 8 Dec. 2013.

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Retired CPD Sergeant And TouchVision Crime Reporter Calls Out Chicago Mayor Rahm Emanuel And Pals

Any Chicago-area readers of this blog ever watch TouchVision, the new 24-hour video news and information channel that’s only recently come to the city? In these parts it’s located over on subchannel 48.2. Not sure if it’s on cable or satellite TV just yet.

Anyway, I was watching TouchVision’s Crime Report last night with my girlfriend, when retired Chicago Police Department sergeant and crime reporter Pete Koconis came on. Koconis talked about a recent murder as part of an ongoing feud between two different factions of the Gangster Disciples street gang in Chicago when he launched into this stinging criticism of Mayor Rahm Emanuel and his cronies down at City Hall:

Forget the guy who gets on that television set [and says] “homicides are down.” Sure they are. Is it because of him? No. It’s because of the men and women in blue who risks their lives on your streets daily, and the emergency room doctors who somehow save lives…

Oh, there’s more. Koconis added later on:

Stop spending money on making your city look good. Spend the money on making the city work. Where you can be safe anywhere, and at any time.

Amen.

I don’t know if it’s realistic to think “you can be safe anywhere, and at any time” entirely in the “concrete jungle” that is Chicago.

Still, there’s no use of gussying up the joint when the city is crime-infested as a result of short-changing public safety.

Along those same lines, the attitude taken by City Hall these days seems to be “if you build it, they will come.”

No. Not if Chicago cements its growing reputation as being a dangerous place to live/visit they won’t.

Safety first. Otherwise City Hall is just putting lipstick on a pig.

As Democrats like to say a lot these days, “It’s only common sense.”

You can watch this latest Crime Report on TouchVision’s website here. Plug “gangs” into the site’s query tool (click on magnifying glass along right-hand side) and look for “GANG TURF WAR 12/6/2013″ among results.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Quote For The Week

“Well, the whole thing is quite simple. We have one party that promisess endless freebies from education, healthcare, to food stamps, and even contraceptives. Then we have another party that promises austerity, cutting social security benefits, spending…etc. Guess who the voters go for? It doesn’t matter what you believe in, because the force of enticing you with ‘free stuff’ is just too overwhelming.

Even places like AZ and TX, traditionally conservative are all trending towards liberals. That’s the direction period.

I’v already tried to fight the devils for years, but honestly I’m exhausted. Now my vote goes to anyone that promises to give me more free stuff.

Screw the Constitutions, self reliance…”

-Comment left on Reuters article that appeared on the Yahoo! News website early this morning

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Chicago’s Debt Crisis Finally Gets Major Exposure

Early Sunday morning, I mozied on down to the end of my driveway to pick up my Chicago Tribune. After eating a little breakfast, I busted out the paper and saw the following headline in big, bold letters on the front page:

City’s debt splurge: ‘It’s like a cancer’

Well, it’s about time Chicago’s debt crisis gets major exposure in a mainstream media outlet.

Of course, Survival And Prosperity readers have known about this growing debacle for some time now (a big hat tip goes out to Fran Spielman over at the Chicago Sun-Times). Back in July 2012 I noted Chicago’s long-term debt was over $27 billion. This July, I blogged that this figure was now up to nearly $29 billion, or $10,780 for every city resident ($780 more per Chicagoan in just one year). So the debt splurge wasn’t just a feature of the Daley regime.

Regarding that Tribune piece, Patricia Callahan, Heather Gillers, and Jason Grotto reported:

A reckless pattern of borrowing by city leaders has undermined Chicago’s future by ignoring the most basic tenets of municipal finance and piling billions of dollars of debt onto the shoulders of future generations, a Tribune investigation has found.

Chicago officials abused a powerful financial tool intended to build for the future — issuance of bonds backed by property taxes — as they spent nearly $10 billion in 13 years with few restrictions and virtually no oversight.

The Tribune’s unprecedented examination of city finances reveals that Chicago built mountains of long-term debt from thousands of problematic short-term purchases including software that was soon obsolete, spare parts for vehicles and items you might find on a weekend shopping list: trash bins, flowers, even bags for dog waste…

When the Tribune analyzed $9.8 billion in proceeds from general obligation bonds issued from 2000 to 2012, it found that nearly half of the money went to paper over growing budget problems.

(Editor’s note: Italics added for emphasis)

Any doubts I still may have had about Chicago being in serious financial trouble were dispelled when I read that last bit about half the bond money going to “paper over growing budget problems.”

As to the culprits in this financial caper? Callahan, Gillers, and Grotto added:

Most of Chicago’s debt woes can be traced to the long reign of former Mayor Richard M. Daley, but the borrowing he relied on so heavily has continued under Rahm Emanuel as his administration gropes for ways to deal with the financial problems it inherited…

There is no limit on the city’s general obligation debt, and the sole check and balance is the City Council, a body that rarely pushes back on major mayoral decisions. Since 2007, aldermen have authorized $7.6 billion in general obligation bond issuances without a single dissenting vote. And each year they get millions in bond proceeds to dole out for projects in their wards.

While it would be easy to blame Richie Daley, Rahm Emanuel, and the alderpeople for this big mess, at the end of the day, many Chicagoans need only look into the mirror to see who’s really to blame for letting the city’s finances get this far out of hand.

As to what “Windy City” residents might want to do now seeing that “a reckless pattern of borrowing by city leaders has undermined Chicago’s future”? Perhaps start looking at ways to mitigate the current and coming damage- something I’ll be talking more about in the months to come.

A good place to begin would be read the article to get a sense of how bad the problem really is, which can be found on the Chicago Tribune website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Illinois Comptroller Judy Baar Topinka’s New Warehouse Tool Sheds Light On Local Government Fiscal Health

It’s been some time since I talked about Illinois State Comptroller Judy Baar Topinka on this blog. The last time I mentioned her name was back on April 3, 2012, when I blogged about a new Internet tool- The Ledger- that Illinoisans now had available to keep a closer eye on state finances.

Joining the comprehensive online financial database this week is The Warehouse, which lets state residents scrutinize local government finances.

From the Comptroller’s website Monday:

CHICAGO – Illinois Comptroller Judy Baar Topinka on Monday launched The Warehouse, a comprehensive online database that puts Local Government financial information and tens of thousands of records at a single location for taxpayer review.

Each year, the Comptroller’s Office collects financial reports from 5,200 counties, municipalities and special taxing districts across the state. In creating The Warehouse, Topinka has made those records and other pertinent local financial information collected by her office immediately available to residents…

Warehouse visitors are able to search records by report type, unit of government or community name. Once a local government is selected, users will be taken to a landing page where they can view a snapshot of local finances, Annual Financial Reports and Audits. The site also offers a “compare data” feature allowing visitors to see how one government stacks up against another.

I took this new database for a spin last night. You can search by “Report Type” or “Unit Type” along the left sidebar, or enter keywords in a query area at the top of the right sidebar.

All seemed to be working well, until I punched in “Cook County” in the search query. This is the message I got:

Sorry, there is no current documentation required for Cook County. No data is available.

Hmmm. I noticed DuPage and Lake Counties come up fine, so I’m not sure what the deal is here.

I can see The Warehouse being a good tool for researchers and those wanting to check on the fiscal health of the towns and other jurisdictions they reside in, I can also envision prospective homebuyers and renters using it as well should they choose to look into the financial situation of the place they’re considering moving to.

The Warehouse has it’s own web page, which can be accessed here.

And you read the rest of that release from the Comptroller’s site here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Tuesday, October 29th, 2013 Fiscal Policy, Government, Main Street, Spending No Comments

Thoughts On Chicago Mayor Rahm Emanuel’s Proposed 2014 Budget

Yesterday, Chicago Mayor Rahm Emanuel unveiled his proposed 2014 budget. From a press release posted on the City of Chicago website:

Mayor Rahm Emanuel today presented the proposed 2014 budget to the City Council, an $8.7 billion budget that, for the third consecutive year, balances the City’s finances without introducing new property, sales or gasoline taxes.

In 2011, the City faced a projected deficit of $790 million for 2014. In the last two budgets, that structural deficit has been cut by more than half, to $339 million…

The City began the 2014 budget process with a projected deficit of $338.7 million. The gap was closed through spending reforms and cuts, and improved revenue growth, including: $40 million through reduced technology, equipment and telecom costs; $26 million in healthcare savings; $101 million in additional revenue growth and children’s safety zones; $35 million from sweeping aging revenue accounts and grant funds; $34 million in targeted revenue enhancements; $18.7 million through proper allocation of costs to enterprise and grant funds; and $53.4 million from 2013 surplus captured through spending controls.

Last year around this time I offered up my thoughts about the proposed City budget for 2013. Using that as a backdrop:

• Mayor Emanuel proposed an $8.3 billion budget last year. For 2014, it’s risen to $8.7 billion.
• A big deal was made over no “new taxes, fines or fees” in the 2013 budget. The same can’t be said for 2014, where no “new property, sales or gasoline taxes” is the best Emanuel can do. $34.2 million in tax, fee, and fine increases are included in the proposed budget according to the Chicago Tribune’s Hal Dardick.
• To help plug a projected $369 million deficit last year, the City “identified” $45 million in additional revenue. I noted that was just projected tax revenue on real property transfer, hotel, sales, and electricity taxes until the end of September 2013 (I wonder how much of that projected revenue was actually realized?). For 2014, “the gap was closed” with $101 million in (projected) additional revenue. Time will tell if this is really accomplished.

Even if the projected deficit of $338.7 million can be eradicated, Chicago is still in big financial trouble. I blogged backed on August 7:

The “Windy City” faces a number of financial hurdles in the coming years…

• Growing projected deficits of $994.7 million in 2015 and $1.15 billion in 2016, according to the city’s annual financial analysis released last Wednesday (blogged about here)
• A total long-term debt of nearly $29 billion, or $10,780 for every one of the city’s nearly 2.69 million residents (blogged about here)
• A pension crisis with the Chicago Public Schools, which Davey and Williams Walsh note draws from the same tax base and where an extra $338 million must be found in 2014.

You can read the entire City of Chicago press release about Mayor Emanuel’s proposed budget for 2014 on the city’s website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Dardick, Hal. “Emanuel uses ‘boatload of ways’ to balance budget.” Chicago Tribune. 22 Oct. 2013. (http://www.chicagotribune.com/news/local/ct-met-rahm-emanuel-budget-1023-20131023,0,744928.story). 24 Oct. 2013.

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Peter Schiff: U.S. Will Become Either Greece Or Weimar Germany

“It’s hard to imagine what the country will look like when the dollar crashes. But one thing is certain; it will bear little resemblance to the America we know today.”

-Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital, in an interview posted on The Daily Caller website, October 17, 2013

Yesterday we heard from two “crash prophets”- Dr. Marc Faber and Jim Rogers on finance and investing. Today, I want to bring up a third “prophet”- Euro Pacific Capital’s Peter Schiff- and talk about an interview he just did with Faith Braverman over at The Daily Caller website. Posted last Thursday, Braverman asked Schiff- who correctly predicted the U.S. housing crash and “Panic of ’08”- about what Americans should be on the lookout for as the real U.S. financial crash draws closer. Schiff advised:

You gotta follow the foreign exchange market, the value of the dollar vs. foreign currencies. The Federal Reserve keeps buying bonds to keep interest rates from rising. We have no choice but to default if creditors want their money back. If interest rates go up, we can’t afford that. That is why the Fed feels that it has to keep interest rates down at all costs. So the Federal Reserve prints more money to buy up bonds. That puts pressure on the dollar. Foreign central banks than buy those dollars to prevent their currencies form rising, which imposes costs on their own population, as they are forced to absorb our inflation.

There will be big spikes in commodity prices, like energy and food. Ultimately, we will be forced to make even bigger cuts than the ones we would have made now had the debt ceiling not been raised. Then we’ll be Greece, essentially. If we refuse, and keep spending, and the Fed prints even more money to buy the bonds no one else will buy, we’ll destroy the dollar and then we’ll be Weimar Germany. When the dollar collapses, what does that mean? Hyperinflation means you will have nothing. Your life savings will be worth nothing. We’re celebrating solving the debt ceiling, but we’ve only kicked the can down the road and removed the barrier between us and fiscal responsibility.

Later on in the exchange, the former U.S. Senate candidate suggested Americans should “get gold, silver, foreign assets, and buy up things that will have value after the dollar crashes.”

Braverman did a nice job on this interview, which can be read in its entirety on The Daily Caller website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Christopher E. Hill, Editor
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