After Detroit ... Next Comes Chicago and All of Illinois? ... Then Who and What? ... That is the Question

Detroit is bust.

What about Chicago? And Illinois as a whole?

After all, pension obligations are pension obligations. And cities are cities. And irresponsible Santa Claus type governments in many locations across America acting in concert with public sector union officials are producing the same results as they have in Detroit. Take the city of Chicago and the state of Illinois as a whole, for example.

Moody's Cuts Chicago Credit Rating, Citing Pension Problems has the details:

"While everyone was focusing Detroit’s bankruptcy filing late Thursday, Motown wasn’t the only Midwestern city facing muni-market woes, as Moody’s cut Chicago’s general obligation bond rating by three notches to A3 from Aa3. From Moody’s:

The downgrade of the GO rating reflects Chicago’s very large and growing pension liabilities and accelerating budget pressures associated with those liabilities. The city’s budgetary flexibility is already burdened by high fixed costs, including unrelenting public safety demands and significant debt service payments. The current administration has made efforts to reduce costs and achieve operational efficiencies, but the magnitude of the city’s pension obligations has precluded any meaningful financial improvements.

These credit challenges are balanced against key credit strengths that support the A3 rating, particularly Chicago’s long-standing role as the center of one of the most diverse economies in the nation and its broad legal authority to generate revenues from a large property tax base and a larger sales tax base.

The negative outlook is based on the dramatic spike in annual pension payments scheduled to take effect in the 2015 budget year (payable in 2016) under state law, which will place material strain on the city’s operating budget. The outlook incorporates the likelihood of continued growth in unfunded liabilities in the city’s four pension plans given currently suppressed contributions from the city.

What Chicago is facing at the city level is magnified at the state level too, as Illinois is plagued by its own unfunded pension liability. More from Moody’s:

The outlook also reflects the State of Illinois’ (A3/negative) constitutional protection of pension benefits. Given this framework, in order for the city to realize any significant alleviation in pension costs, the Illinois General Assembly would need to enact pension reform legislation that ultimately withstands inevitable litigation."

Summing Up

Governments gone wild eventually become governments gone broke. And "eventually" is here right now for Detroit. But it's not just government gone wild in Detroit. Chicago and the state of Illinois are close on Detroit's heels.

And what's happened with out-of-control and underfunded public sector pensions and health care benefits in Detroit and Chicago is also happening in lots of places across America.

To further complicate matters, it appears that a clear and unambiguous state of denial is prevalent among both government and public sector union leadership.

Perhaps they think We the People are dumb enough to believe the story they're telling. And if We the People are in fact buying their story that they didn't create the mess, then we're all in deep doo-doo.

The shameful state of affairs is clearly the result of granting public sector pensions and retiree health care benefits that weren't and aren't affordable. It's a simple case of government and union leadership screwing the taxpayers, but what else is new?

So although most taxpayers never saw the debacle coming, it's arrived.

To repeat, what government and public sector union officials have done is shameful, as they in effect have said by their actions over the years, "The taxpayers be damned."

But now the noose is tightening around the necks of all concerned and there's no place left to hide.

And We the People as citizens and taxpayers are beginning to realize that what the politicians and union leaders have done is not only shameful but it's frightening, too.

And We the People are also coming to the realization that as a result, future generations of Americans are being screwed.

Here's the good news. Things are finally coming to a head, and that's a good thing.

Because if something can't go on forever, it won't.

Sunshine is a great disinfectant.

That's my take.

Thanks. Bob.