Beating Up on Illinois Dems' Brazen Bailout Request: YOU GET BANKRUPTCY
Perhaps politicians need training in how to beg for bucks
I started this post early this morning. That’ll teach me to take several hours to write stuff [and do my job, take care of my kids, and celebrate my birthday]. The older stuff is still relevant…. just not as an eye-grabber as the following story:
McConnell says he favors allowing states to declare bankruptcy:
Senate Majority Leader Mitch McConnell said Wednesday he favors allowing states struggling with high public employee pension costs amid the burdens of the pandemic response to declare bankruptcy rather than giving them a federal bailout.
“I would certainly be in favor of allowing states to use the bankruptcy route,” he said Wednesday in a response to a question on the syndicated Hugh Hewitt radio show. “It’s saved some cities, and there’s no good reason for it not to be available.”
Actually, I can think of lots of reasons it’s not available to states, while it is to cities. There are various federalism issues, just to start with.
But, there’s nothing stopping Chicago and New York City from declaring Chapter 9 bankruptcy to discharge debts when they can’t fulfill them. Well, there is [Chicago, at least, requires the explicit permission of the General Assembly & governor iirc], but let’s see what the mayor of NYC had to say:
De Blasio slams McConnell over state bankruptcy comments:
“When Mitch McConnell says we should let states go bankrupt, let’s be honest about what he’s saying: He wants police officers to lose their jobs. He wants firefighters to go broke,” de Blasio wrote on Twitter. “He wants hospitals to close and sick people thrown out on the street.”
Mmmmm. Well, de Blasio is dealing with a bunch of untoward comments re: his snitch line, so maybe he’s a bit on edge, or at least wants to change the story from what a useless idiot he’s been in doing anything productive re: the coronavirus crisis in the city he’s supposed to be leading. He probably has no clue what actually happened in Detroit back in 2013.
In any case, the potential of states having recourse to a federal bankruptcy will provoke much more comment, and I want to address that in a separate post later. For now, I’m going back to beating up on Illinois.
More Reactions to Illinois Piggishness
I know Elizabeth Bauer did her own reaction round-up piece, but I do have a few sources from after she posted that, and I went digging, looking for somebody to defend the disgusting bailout request.
The nutshell take from everybody: no, the pensions [and the years of unpaid vendor bills] have nothing to do with COVID; they’re you’re own damn fault, Illinois Democrats. Live with it.
McConnell, with his talk of bankruptcy processes for states, is indicating the following for Illinois: YOU GET NOTHING
The most recent coronavirus bailout bill passed by the Senate is focused on small businesses, hospitals, and more testing. No additional state/local government bailouts on the table right yet. But that’s obviously a hot topic.
So before I get to the responses I’ve found, I want to remind you that state and local governments across the U.S. are looking at vastly lower revenue in 2020, and some of them are seeing increased costs due to coronavirus response and unemployment/Medicaid impacts.
Angering One’s Fellow Governmental Entities
A bunch of them have been lobbying Congress for dough. I will talk about state/local govt bailouts [without the Illinois distraction] another time. But I do want to speculate on what the politicians from non-Illinois localities think about Illinois Dems’ move.
I am sure a bunch of them are supremely angered that their own requests for bailouts may be endangered by Illinois getting really hoggish. It’s not that Illinois got there before them, but that the case Illinois laid out for the various dollar amounts they want in a bailout were very poorly supported. Some of the state and local governments probably were making some specific requests tied to decreased revenue and increased costs, and Illinois just threw in 40+ years’ worth of fiscal profligacy to be covered.
Not cool, Illinois Dems, not cool.
Illinois Republicans Respond
I will mainly be using the shorthand of “Illinois” when it really was a specific group of Illinois Democratic legislators who sent the letter to the Illinois Congressional delegation, which does include 5 Republican Congressmen.
The Republicans wrote a letter back to the Illinois Dems in the General Assembly. The letter sits at that link at Wirepoints, if you want to read the full response.
I want to excerpt some of that text.
It is imperative that Illinois’ State and local leadership step up and address the preexisting financial mismanagement that makes our State and localities particularly vulnerable to the fiscal impacts of this pandemic. We will work with you to provide more federal resources, but we need the State to address the longstanding issues exacerbated by this crisis:
Illinois must reform its pension system to reduce long-term liabilities and make the system more equitable to the people of Illinois before federal money is used to support the pension system.
Illinois must reduce State and local spending and make the government more flexible and responsive to the people.
Illinois must reduce spending mandates on local governments in order to provide the same flexibility the State is seeking for the use of federal dollars.
Illinois must withdraw the Graduated Income Tax increase to protect Illinois jobs that are already at risk from the pandemic and to stem the exodus of people and opportunity from our great State.
So let me get down to practical politics.
These five Congressmen are out of the 18 seats Illinois currently holds in the House of Representatives. The House is currently led by Democratic Speaker of the House, Nancy Pelosi, who is from San Francisco. These five guys do not really have any power in the House. For the Senate, there are two Democratic senators, of which maybe Dick Durbin may have some bargaining power, related to his longevity in the Senate. [Duckworth, senator since 2017, not so much.]
All of the items mentioned in the Republicans’ letter are, of course, state-level items that the General Assembly is responsible for. Even if they made those moves, some of which would take years to effect [pension reform requires the state constitution be amended], that wouldn’t make much of a practical politics difference in Congress.
This is just political theater.
Similar to McConnell’s floating the idea of state bankruptcy. Except McConnell can get something started to make bankruptcy happen. After all, he was involved in Puerto Rico’s pseudo-bankruptcy, which limps along.
Forgive Your Debts? How About Lay Off on Others?
That said, the one line I emphasized from the Republican letter… reminds me of a parable from the Gospels. The Parable of the Unforgiving Debtor, from Matthew 18:
23 Therefore is the kingdom of heaven likened to a king, who would take an account of his servants.
24 And when he had begun to take the account, one was brought to him, that owed him ten thousand talents.
25 And as he had not wherewith to pay it, his lord commanded that he should be sold, and his wife and children and all that he had, and payment to be made.
26 But that servant falling down, besought him, saying: Have patience with me, and I will pay thee all.
27 And the lord of that servant being moved with pity, let him go and forgave him the debt.
28 But when that servant was gone out, he found one of his fellow servants that owed him an hundred pence: and laying hold of him, throttled him, saying: Pay what thou owest.
29 And his fellow servant falling down, besought him, saying: Have patience with me, and I will pay thee all.
30 And he would not: but went and cast him into prison, till he paid the debt.
31 Now his fellow servants seeing what was done, were very much grieved, and they came and told their lord all that was done.
32 Then his lord called him; and said to him: Thou wicked servant, I forgave thee all the debt, because thou besoughtest me:
33 Shouldst not thou then have had compassion also on thy fellow servant, even as I had compassion on thee?
34 And his lord being angry, delivered him to the torturers until he paid all the debt.
Now, this parable had to do with forgiving those who sin against you, if you hope for God to forgive your own sins. But it is interesting how many parables in the Gospels do boil down to fundamental principles of human behavior and society. There is an expectation that largesse be spread around – the one forgiven should also show forgiveness down the chain. Not get even worse.
But here’s the point: you want the federal government to bail you out? How about laying off on those downstate municipalities who are strained due to your tax-[and-bond]-and-spend ways?
Heck, how about laying off on the taxpayers a bit, you rapacious hogs?
A Defense? A Defense? Anybody?
This part was tough. I went digging at the usual places with respect to Illinois politics, trying to see if any of the usual suspects would defend the bailout request.
Harmon, the named person on the letter, has not taken back the request. So, at least, he seems to be sticking by it. Okay.
So I went to Rich Miller’s CapitolFax, who is usually a dependable supporter of Democratic strategy in Illinois.
* But why Harmon thought to ask for this [$10+ billion for pensions] is just beyond me…..
For those who might say “It never hurts to ask,” yes, it can hurt to ask.
Remember how Republican US Sen. Tom Cotton used just that sort of argument to try and kill federal aid to state and local governments last month?….
There is a certain strain of wonky politicians who try to “start conversations” without first pausing to ask themselves if publicly sharing those ideas could hurt their own causes.
Illinois created this problem. It’s Illinois’ responsibility to solve it, not the federal government’s. This letter could even hurt all other states’ attempts to convince Congress and the president to back an aid package.
As I said above. The other states and cities must be absolutely livid at the Illinois Democrats.
Gov. Pritzker didn’t have anything positive to say:
Asked about this on Saturday, Gov. J.B. Pritzker astutely distanced himself from Harmon’s requests, saying he “was not aware of the content of the letter” before it was sent.
“It’s different than what I have been talking to the federal representatives about,” Pritzker said. “I really believe the states need to have some unencumbered dollars that come in that will help us with the coming year’s budget — every state has this problem.”
I will note that executives, like Pritzker and Cuomo, who have actual responsibilities in making sure certain things get done tend to be far less nuts about these sorts of shenanigans than legislators, who have the protection of the crowd of being one among many.
Hell, this isn’t really a defense, but it’s the closest to something nice to say about the proposal:
I don’t agree with what Andrew says, mainly due to realism that Illinois would renege on the deal, and there would be little leverage on the federal side once the money was gone.
As Olivia Mitchell points out, they would not be able to pay back those loans:
Yes, it’s not merely the future liabilities that are dragging Illinois down; the old pension liabilities which are already accrued are too much for Illinois to ever afford.
So it will default on some promise, sooner or later.
COVID-19 just made that breaking of promises sooner.
Pigs Get Fat; Hogs Get Slaughtered
It’s an old saying, once used by Mavericks owner Mark Cuban: “Pigs get fat, hogs get slaughtered. When you try to take it too far, people turn the other way. I’m just telling you, when you’ve got a good thing and you get greedy, it always, always, always, always, always turns on you.”
He was talking about the NFL, not Illinois public finance, but he may as well have.
The McConnell remark was almost definitely in response to Illinois in particular, because they’re the ones mentioning covering old pension costs. Not New York City. Not Michigan. Just Illinois. [that we know of]
Chicago Sun-Times: Senate President Don Harmon’s foolish pitch to Washington can only hurt Illinois
For weeks now, this editorial page has beat the drum for at least one more big federal stimulus package to help all states — red ones and blue ones — recover from the coronavirus pandemic.
….
Our role [as a newspaper editorial board] has been to encourage Democrats and Republicans to work together to do what’s best, understanding that the politics are delicate and difficult.Apparently, the president of the Illinois Senate, Don Harmon — who has been in that job all of three months — doesn’t quite get that. Last week, he made a politically deaf, even foolish, pitch to Washington that can only hurt our state’s chances of securing additional COVID-19 relief funds.
….
At best, Harmon’s pension ask is politically clueless.At worst, it will serve to explode efforts at bipartisanship in Washington as our nation struggles to recover from the pandemic. You can almost see congressional Republicans waving Harmon’s letter in the air and saying: “See, we told you. Blue states like Illinois are just being greedy. They want us to bail them out of problems of their own making, created over decades. Why should we help them?”
For this section, I will let Elizabeth Bauer have the last word:
Trying to make sense of the request
Is this simply a matter of a tone-deaf legislator?
What’s the specific purpose of $10 billion?
Does any of this make any sense?
To the best of my knowledge, Harmon has not explained himself and Gov. JB Pritzker, again according to Capitol Fax, denies having directly asked for pension money.
….
What’s the purpose of the money?As it happens, Harmon’s $10 billion ask is nearly identical to the state’s statutory contribution to its pension funds in 2021, $9.7 billion. (The 2021 fiscal year runs from July 1, 2020 to June 30, 2021.) Is Harmon entertaining the possibility that the state will make its contributions only to the extent that the federal government funds this? Or did he somehow imagine that specifying pension funds as a use for bailout funds would garner support by assuring skeptics that it would be put to good use?
That’s the last word from Bauer, but here’s a cartoon from Eric Allie:
You’ll Get Nothing, and You’ll Like It
I have an amusing [to me] story from my childhood. My sisters and I would always go shopping the day after Christmas with our mother, hands full of our Christmas money. I remember one year, my middle sister coming up to me and our youngest sister asking for $20.
Here was the reasoning:
“I need $20 to have an even $200”.
This was not a compelling argument to us. We knew she would not pay us back anytime soon. We found out later she had tried that line on mom, too. That was also a no-go.
My sister was a teenager at the time, so one doesn’t expect that they understand what makes for a persuasive argument to be given money.
Now, in her case, it didn’t hurt to ask us for the money. We didn’t do anything worse than laugh at her.
In this case, Harmon got a shot across the bow: “How would you like a taste of the bankruptcy process? You may end up with a result you might not like….”
In future posts, I will look at other states and municipalities, and what they’re up to in public finance due to the coronavirus consequences.
But for now, Illinois is a clear loser because a new legislative leader decided to do something truly stupid.
Maybe there needs to be training sessions for politicians: “How to Ask for a Bailout in a Crisis”.
First, do not request large amounts of money for purposes having nothing to do with the crisis.
It’s a bad look.
Various groups, from Harvard University to Shake Shack are being shamed into returning stimulus funds, and you think you can just slip an extra $10 billion for pensions over the transom?
I do wonder what y’all smoked before composing the letter.
So congrats, Democratic assemblymen of Illinois, you managed to get the Senate Majority Leader to talk about bankruptcy for states.
I hope you have learned something useful from this exercise.