I thought the situation would reach a breaking point, i.e. bankruptcy, by now. However, the amounts are now much, much larger. I don't see Trump/Vance giving a bailout. Thanks for writing. It is impossible for real estate taxes to increase enough to pay for the pensions. The exodus of the middle class would be a storm. But Pritzker continues to pay for and protect the illegal criminals essential for his political base.
I've been watching this stuff for almost 20 years now.
I know it takes a long time for the money to run out (think about what it took for Detroit to hit the wall: large population loss + actual fraud + 13th checks + ... and they didn't even have a bad underfunding problem compared to Chicago! -- they had some bad debt separate from pensions... and Michigan itself was okay.)
Chicago and Illinois are both headed towards real fiscal pain. Illinois is one of the few states that has shown a decrease in population between Censuses... and I will have to come back to this. WHO is going to run into pain? Illinois, obviously... but what other states/cities?
Contra @BrennanWoodruff, this can very easily be broken into two sides; those who live in Chicago/Illinois, and those who don't. It has been very obvious for a very long time that Chicago was heading toward a financial crisis; honestly, it has taken longer than I thought to play out. (The same exact thing can be said about the US fiscal situation)
I remember arguing about this with friends in college and grad school in the early 90's. It was apparent to me then that it would not be safe to get jobs and so earn a lot of income and have property in Detroit or Chicago. I also thought then that California and NJ were risky, though not as immediate.
Reading Mary Pat over many years expanded my list of trouble spots, but Chicago has always been right at the top. I don't see any way the US gov't can fix this, though they have shown great skill at pushing off the reckoning (imo making the final resolution worse). I do fear they will try and that might be the trigger to a global crisis.
Illinois seems uniquely bad given the protections they've written into their constitution. RI seems to me to be a state with real risk, as do Kentucky and Connecticut. NYC is so incredibly large and wealthy it seems impregnable, but any real disruption in finance would have massive impacts there. The DC region (mine) seems safe but is incredibly dependent on massive federal spending at a time of unsustainable annual deficits.
MP, how bad do you think things will get? You've always seemed much more sanguine about these problems than I am.
I haven't touched on what's been going on in Rhode Island (and especially Providence) in a long time. I should "circle back", but they had made changes post-financial crisis, and most of those seem to have stuck -- as you note, the 1970 Illinois Constitution has caused real problems. Until that's gotten taken care of, who knows....
Look, Chicago is extremely noticeable given its size and its flagrant bad behavior.
This is how bad it can get for Chicago
- Chicago drives away its high-income folks and industries, not only with its high-taxing ways, but also by going all-in with ACAB talk, no cash bail, and "retributive" justice [aka, if you're in the groups we like, we don't care how bad the crime is, we won't prosecute]
- tax revenue craters
- bonds are defaulted on, because they can't keep juggling the cash flows
- there's no bankruptcy process, because the Illinois legislature is delusional and won't allow it (and they don't feel like covering Chicago bonds, either, because it's not like Illinois can really afford to with the Illnois tax base also getting eroded)
- Chicago is locked out of bond markets, given their situation
- pension funds have to start liquidating their assets to cover their benefit flows... and it takes a few years to do that, but not too many, because their funded ratios are so low.... oh, and once those assets are gone, they can't support benefits pay-as-you-go
- yes, they'll go crying to the feds, but nobody will feel particularly sympathetic. They caused their own problem. There is no bailout.
I mean, it can get worse than what I wrote above. But that's a potential worst-case scenario. [that does not involve asteroids]
And I really need to look into these Illinois Policy budget numbers for LA vs Chicago vs NYC
because the orders of magnitude are way different
I have a feeling NYC's budget numbers are all-in (like, the schools, transit, etc. are all in there) and Chicago and LA are excluding that stuff, and dump them in county or some other "account"
I thought the situation would reach a breaking point, i.e. bankruptcy, by now. However, the amounts are now much, much larger. I don't see Trump/Vance giving a bailout. Thanks for writing. It is impossible for real estate taxes to increase enough to pay for the pensions. The exodus of the middle class would be a storm. But Pritzker continues to pay for and protect the illegal criminals essential for his political base.
I've been watching this stuff for almost 20 years now.
I know it takes a long time for the money to run out (think about what it took for Detroit to hit the wall: large population loss + actual fraud + 13th checks + ... and they didn't even have a bad underfunding problem compared to Chicago! -- they had some bad debt separate from pensions... and Michigan itself was okay.)
Chicago and Illinois are both headed towards real fiscal pain. Illinois is one of the few states that has shown a decrease in population between Censuses... and I will have to come back to this. WHO is going to run into pain? Illinois, obviously... but what other states/cities?
Contra @BrennanWoodruff, this can very easily be broken into two sides; those who live in Chicago/Illinois, and those who don't. It has been very obvious for a very long time that Chicago was heading toward a financial crisis; honestly, it has taken longer than I thought to play out. (The same exact thing can be said about the US fiscal situation)
I remember arguing about this with friends in college and grad school in the early 90's. It was apparent to me then that it would not be safe to get jobs and so earn a lot of income and have property in Detroit or Chicago. I also thought then that California and NJ were risky, though not as immediate.
Reading Mary Pat over many years expanded my list of trouble spots, but Chicago has always been right at the top. I don't see any way the US gov't can fix this, though they have shown great skill at pushing off the reckoning (imo making the final resolution worse). I do fear they will try and that might be the trigger to a global crisis.
Illinois seems uniquely bad given the protections they've written into their constitution. RI seems to me to be a state with real risk, as do Kentucky and Connecticut. NYC is so incredibly large and wealthy it seems impregnable, but any real disruption in finance would have massive impacts there. The DC region (mine) seems safe but is incredibly dependent on massive federal spending at a time of unsustainable annual deficits.
MP, how bad do you think things will get? You've always seemed much more sanguine about these problems than I am.
I haven't touched on what's been going on in Rhode Island (and especially Providence) in a long time. I should "circle back", but they had made changes post-financial crisis, and most of those seem to have stuck -- as you note, the 1970 Illinois Constitution has caused real problems. Until that's gotten taken care of, who knows....
Look, Chicago is extremely noticeable given its size and its flagrant bad behavior.
This is how bad it can get for Chicago
- Chicago drives away its high-income folks and industries, not only with its high-taxing ways, but also by going all-in with ACAB talk, no cash bail, and "retributive" justice [aka, if you're in the groups we like, we don't care how bad the crime is, we won't prosecute]
- tax revenue craters
- bonds are defaulted on, because they can't keep juggling the cash flows
- there's no bankruptcy process, because the Illinois legislature is delusional and won't allow it (and they don't feel like covering Chicago bonds, either, because it's not like Illinois can really afford to with the Illnois tax base also getting eroded)
- Chicago is locked out of bond markets, given their situation
- pension funds have to start liquidating their assets to cover their benefit flows... and it takes a few years to do that, but not too many, because their funded ratios are so low.... oh, and once those assets are gone, they can't support benefits pay-as-you-go
- yes, they'll go crying to the feds, but nobody will feel particularly sympathetic. They caused their own problem. There is no bailout.
I mean, it can get worse than what I wrote above. But that's a potential worst-case scenario. [that does not involve asteroids]
And I really need to look into these Illinois Policy budget numbers for LA vs Chicago vs NYC
because the orders of magnitude are way different
I have a feeling NYC's budget numbers are all-in (like, the schools, transit, etc. are all in there) and Chicago and LA are excluding that stuff, and dump them in county or some other "account"