The following bit about Illinois’ total unfunded liabilities from a January 28 Investor’s Business Daily editorial was so depressing to read that I originally planned to blog about it much earlier this morning- but needed to step away. From the IBD website:
A recent release by the Illinois Policy Institute shows this [$96.8 billion unfunded debt to five state pension systems] is only the tip of the iceberg and when you add in other liabilities such as $54 billion in unfunded liabilities for retiree health insurance and $15 billion in pension bonds that Gov. Pat Quinn and his immediate predecessor, former Gov. Rod Blagojevich, issued to avoid pension reform, Illinois’ total unfunded liabilities amount to $275 billion, or $58,000 in debt for each and every household in the state.
(Editor’s note: Italics added for emphasis)
So what’s it going to be, Illinois? Since a booming economy seems unlikely to return anytime soon, will the Democrat-dominated Illinois General Assembly finally enact significant spending cuts? Raise fees and taxes through the roof? Throw public sector retirees “under the bus?”
They’re going to have to do something real quick.
Or watch the whole thing unravel.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
“Obama’s Illinois Downgrade Makes It America’s Greece.” Investor’s Business Daily. 28 Jan. 2013. (http://news.investors.com/ibd-editorials/012813-642237-credit-downgrade-illinois-standard-poors-worst.htm). 31 Jan. 2013.
Last time I mentioned Dr. Nouriel Roubini, a former Treasury official in the Clinton administration who correctly-called the 2008 global financial crisis, he was warning about a slowing U.S. economy. Well, the professor of economics at New York University and chairman of Roubini Global Economics appeared on Bloomberg Television’s Surveillance earlier today and discussed the looming “fiscal cliff,” the combination of tax hikes and spending cuts the U.S. faces on January 1 under current federal law. “Dr. Doom,” as the media sometimes refers to him as, warned viewers:
I think there’s a highly-likely chance we’re going to go over the cliff. If we do so, the market reaction is going to force the two sides to reach an agreement. But even if we reach an agreement, like I said- you’re going to have 1 to 2 percent drag on growth in an economy that’s barely growing.
“Roubini Says Fed Inflation Targeting Out the Window”
Bloomberg TV Video
We have an emergency, a fiscal emergency. Our state was careening toward bankruptcy, fiscal insolvency. Even in the last couple of months, the situation got seriously more dire. So the governor has to act at the moment. And that’s what I did.
-Illinois Governor Pat Quinn, January 12, 2011, in defense of signing off on a 67 percent personal income tax hike on Illinois residents (Chicago Tribune, January 12, 2011)
The fiscal emergency in Illinois remains.
So much so that the billions of dollars worth of unpaid bills Illinois state government is responsible for could soon exceed the $8 billion estimated back in January 2011, when massive personal and corporate income tax hikes went into effect in the “Land of Lincoln.” Monique Garcia wrote on the Chicago Tribune website yesterday:
Sixteen months ago, Democrats pushed through the largest income tax increase in Illinois history, an unpopular decision that was billed as a crucial step to put state government on the road to financial recovery.
Yet last week lawmakers made deep cuts in health care for the poor, and this week they face tough votes to raise the cigarette tax, strip away public worker pension benefits and slice spending on social services. Despite all that, the giant pile of unpaid bills that has loomed over state government for years is expected to keep growing…
Even if Medicaid cuts and pension reforms are put in place, the state’s unpaid bills are expected to total $8.5 billion come June 30. The new state budget isn’t expected to shave much off that tab. The pile of bills was an estimated $8 billion when the income tax hike was approved.
(Editor’s note: Italics added for emphasis)
Illinois taxpayers might be wondering how something like this could happen. Garcia explained:
Pension payments continue to increase dramatically each year. The same is true for health care costs as more people seek coverage during a down economy. And that stack of bills keeps rolling over from one year to the next partly because lawmakers declined to go along with Gov. Pat Quinn’s request to use some of the income tax windfall to borrow to pay it off.
The rising costs have created what Quinn calls a “squeeze” on the rest of the state budget.
It’s not only Illinois’ stack of unpaid bills that is growing. Garcia pointed out:
Meanwhile, the retirement system’s $83 billion unfunded liability continues to grow because of early retirement incentives, pension sweeteners and skipped payments orchestrated by Democrats and Republican.
(Editor’s note: Italics added for emphasis)
Thank you for bringing this to your readers’ attention, Chicago Tribune.
$8.5 billion. $83 billion. Like the former U.S. Senator from Illinois Everett Dirksen supposedly said:
A billion here, a billion there, and pretty soon you’re talking about real money.
Real money. Real fiscal crisis.
Garcia, Monique. “Record tax hike isn’t fixing Illinois’ problems.” Chicago Tribune. 28 May 2012. (http://articles.chicagotribune.com/2012-05-28/news/ct-met-illinois-budget-20120528_1_pension-payments-income-tax-tax-hike). 29 May. 2012.
The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance the government’s reckless fiscal policies.
-Then-U.S. Senator Barack Obama, speaking on the Senate floor in 2006
I’m all for shooting for the stars. But this is just ridiculous. From the Associated Press today:
The United States just passed a dubious milestone: Government debt surged to an all-time high, passing $14 trillion – $45,300 for every person in the country.
That means Congress soon will have to lift the legal debt ceiling to give the almost maxed-out government an even higher credit limit or dramatically cut spending to stay under the current cap…
Remarkably, about half of today’s national debt was run up in the past six years. It soared from $7.6 trillion in January 2005 as President George W. Bush began his second term to $10.6 trillion the day President Obama was inaugurated and to $14.02 trillion now.
With a $1.7 trillion deficit in fiscal 2010 alone, and the government on track to spend $1.3 trillion more than it takes in this year, annual budget deficits are adding about $4 billion a day to the national debt. Put another way, the government is borrowing 41 cents for every dollar it spends.
In a letter to congressional leaders, U.S. Treasury Secretary Timothy Geithner said the $14.29 trillion debt limit could be reached as soon as March 31 and “most likely” by May 16. A showdown looks to be brewing over the issue, as Republicans in Congress informed President Obama and Democrats last week they won’t agree to raise the debt ceiling unless specific spending cuts are made.
“U.S. debt tops $14 trillion, nears ceiling.” Associated Press. 17 Jan. 2011. (http://www.washingtonpost.com/wp-dyn/content/article/2011/01/16/AR2011011604005.html). 17 Jan. 2011.
Christopher E. Hill, Editor
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