Disaster: Each Chicago resident 'owes' $140,000 under current govt employee pension scheme
This report comes from the widely read Mitch Shedlock (Mish). We don’t agree with him always but he is a very good source on this sort of thing.
We’ve long written about the economic woes of The Windy City. They are as deep and as wide as Lake Michigan. Deeper and wider probably.
Flying into O’Hare in the early morning last week I marveled at the skyscrapers as we curved around downtown before landing. I looked at the urban grid below me, streetlights still on from the night before and commuters locked in battle. From 7,000 feet Chicago almost looked manageable.
But from a distance is often the best way to see many cities. That is certainly true in some respects for Chicago, which for me has all the traffic of DC, the eroding infrastructure of Trenton, the climate of southern Siberia, and the corruption of, well, Chicago. (It also has some of the finest architecture, food, music, and art in the world.)
There are lots of roads and parks named after union guys in Chicago. The mob and urban politics hang like the cold morning haze over the place. The Illinois government employee pension crisis, and it is a crisis, is born of this culture. For decades reality was pushed off. For decades state and local government workers were promised far too much in their pensions. For decades Chicago and Illinois residents have watched their taxes increase and their state and municipal debt obligations pile up. Now, reality is hitting. Might as well deal with it now, with all the ensuing pain, than during the next economic downturn. But prudence is a rare commodity in all politics.
Mish has a solution to Illinois’s pension troubles however.
I have a far simpler approach that is 100% certain to work, and work faster.
1. Illinois can allow municipal bankruptcies
2. The Federal government can pass national legislation allowing municipal and even state bankruptcies
Q. How does that fix the problem?
A. As we have seen in Detroit, Michigan; Central Falls, Rhode Island; and numerous cities in California, pension promises are not sacrosanct in bankruptcy.
As it stands, states can allow or prohibit municipal bankruptcies, but if allowed, Federal laws take precedence over state rules. In bankruptcy, pension obligations can be reduced.