OK, there are lots of reasons to get Obama out of office. The problem is, that for most of them, I have no reasonable hope that Romney will be any better. Corporatism? CEO as Venture-Capitalist-in-Chief? Indefinite detentions? Lack of Transparency? The Drug War? Obamacare, which was modeled on Romneycare? What are the odds that any of these improve under Romney, and at least under Obama they are not being done by someone who wraps himself in the mantle of small government and free markets, helping to corrupt the public understanding of those terms.
But here is one issue Obama is almost certainly going to be worse: Bail outs of states. States will start seeking Federal bailouts, probably initially in the form of Federal guarantees of their pension obligations, in the next 4 years. I had thought that Obama would be particularly susceptible if California is the first to come begging. But imagine how fast he will whip out our money if it is Illinois at the trough first?
Now that Chicago's children have returned to not learning in school, we can all move on to the next crisis in Illinois public finance: unfunded public pensions. Readers who live in the other 49 states will be pleased to learn that Governor Pat Quinn's 2012 budget proposal already floated the idea of a federal guarantee of its pension debt. Think Germany and eurobonds for Greece, Italy and Spain.
Thank you for sharing, Governor.
Sooner or later, we knew it would come to this since the Democrats who are running Illinois into the ground can't bring themselves to oppose union demands. Illinois now has some $8 billion in current debts outstanding and taxpayers are on the hook for more than $200 billion in unfunded retirement costs for government workers. By some estimates, the system could be the first in the nation to go broke, as early as 2018....
For years, states have engaged in elaborate accounting tricks to improve appearances, including using an unrealistically high 8% "discount" rate to account for future liabilities. To make that fairy tale come true, state pension funds would have to average returns of 8% a year, which even the toothless Government Accounting Standards Board and Moody's have said are unrealistic....
Look no further than the recent Chicago teachers strike. The city is already facing upwards of a $1 billion deficit next year with hundreds of millions of dollars in annual pension costs for retired teachers coming due. But despite the fiscal imperatives, the negotiation didn't even discuss pensions. The final deal gave unions a more than 17% raise over four years, while they keep benefits and pensions that workers in the wealth-creating private economy can only imagine.
As a political matter, public unions are pursuing a version of the GM strategy: Never make a concession at the state level, figuring that if things get really bad the federal government will have no political choice but to bail out the pensions if not the entire state. Mr. Quinn made that official by pointing out in his budget proposal that "significant long-term improvements" in the state pension debt will come from "seeking a federal guarantee of the debt."
I had not paid much attention to the Chicago teacher's strike, except to note that the City basically caved to the unions. The average teacher salary in Chicago, even without benefits, will soon rise to nearly $100,000 a year for just 9 months work. But I am amazed at the statement that no one even bothered to challenge the union on pensions despite the fact that the system is essentially bankrupt. Illinois really seems to be banking on their favorite son bailing them out with our money.