Illinois is Collapsing: It's Coming Everywhere
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2017-06-10 07:00 by Karl Denninger
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Illinois is Collapsing: It's Coming Everywhere
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The blame game is in full force, including in Crain's.

Like in a good Agatha Christie mystery, there's a whole train-full (or, in this instance, Capitol-full) of suspects in the case of Who Killed Illinois? Just like on the Orient Express, they're all guilty to one degree or another.

....

Here's who's at the top of my list: Gov. Bruce Rauner and House Speaker Michael Madigan, in that order. Other folks had their hands on the knife, but these two are the ones who really drove it in.

Uh huh.

Sure.

Maybe you can blame Madigan.  He's been there long enough.  But Rauner?  C'mon folks.

It was obvious that Illinois was going to fail as a state before I left in 2000.  That was 17 years ago by my count.

Why?

Impossible promises made to public unions, for one.  And that's not a small one either.  Suburban school districts that were driving property taxes through the roof (they're doubled since I left, incidentally, by my count) and then the general pension promises on top of that.

For those who continue to say "but it's a contractual obligation" or even "it's protected by the State Constitution" I reply thus: A contract to do an impossible thing is not a contract at all.

You cannot enforce a "contract" you make with me where I am to jump over the Empire State Building unassisted.  Why?  Because the act contemplated is impossible.

Similarly, a promise to pay an exponentially increasing amount where the exponent is larger than the tax base growth rate is also impossible.  That's math, and it makes any such promise void.

The longer the people of Illinois fail to demand that all of the medical providers in the state who are and do conspire to drive up and fix prices, refuse to quote a price before a procedure is done and engage in other similar acts, all of which I remind you appear to be illegal on their face under 15 USC, face indictment and prosecution the further down the hole the state will go.

The longer the people of Illinois refuse to demand that all public pension promises that were made with knowledge that the "growth rates" promised and assumed exceeded the historical or any rationally-arguable future growth in the tax base be declared void due to fraud at the time of the agreement the further down the hole the state will go.

You can try to enforce payment of said pensions but you can't make blood run out of a stone.  If there is no money, there is no money.  If you don't pay the teachers, police and firefighters who are on the job now because you take all the cash and give it to the pensioners the current employees will not show up as nobody in their right mind works without being paid.

15 minutes later the entire Chicagoland area is overrun with gangs and burned to ash.

Go ahead folks, keep pretending.  It won't work because it can't, but denial of mathematics is something that politicians are exceedingly good at.  I left the state in no small part because I saw it coming, it was mathematically inevitable and utterly nobody would do anything but scream "but you made a contract" when I brought up the fact that at the time the promise was made the people negotiating it on both sides of the table knew full well that it was mathematically impossible for what they "negotiated" to happen.

Watch and learn, because this same dynamic is coming to the rest of the nation -- and in Washington DC, driven by Medicare and Medicaid where exactly the same dynamic, driven by the same medical scam, has been unfolding for the last 30 years.

smiley

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Avpelleg1
Posts: 2
Incept: 2013-10-23

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What really sucks is that downstate economically nuked to pay for Chicago. My parents own a nice house near St Louis that I will one day have to sell. The only way I'll ever get any money out of it is arson.
Oldno7
Posts: 2567
Incept: 2008-11-14

RECALL STATE USA
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Yep the math always wins in the end. Think I'll head to my favorite eating place in northern IL and get me some Copper River Salmon before all hell breaks loose. This is what happens when the people paying the bills have no say in approving these contracts.

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IT'S THE SPENDING STUPID The US must become less a government of men, and more a government of LAW.When people lose everything and have nothing left to lose they lose it -Gerald Celente
Flappingeagle
Posts: 2598
Incept: 2011-04-14

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When the **** hits the fan on government promises I think there are three ways that the states will approach breaking their promises. Most likely they will use a blend of the three to bolster their position.

#1
Quote:
For those who continue to say "but it's a contractual obligation" or even "it's protected by the State Constitution" I reply thus:A contract to do an impossible thing is not a contract at all.


#2
We can't function as a government if we divert too much money to pensions.

#3
Constitutional immunity to being sued. The state will simply pass pension reform laws and in there will be a clause that says no one is allowed to grant any plaintiff permission to sue the state. The basic "The state is sovereign and you can't sue us."

Like you say above, its coming. The only people who don't "see it" are those who are purposely ignoring it.

Flap

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Here are my predictions for everyone to see:
S&P 500 at 320, DOW at 2200, Gold $300/oz, and Corn $2/bu.
No sign that housing, equities, or farmland are in a bubble- Yellen 11/14/13
Trying to leave the Rat Race to the rats...
Zappafan
Posts: 2924
Incept: 2007-11-30

Atlanta
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I read this and it made my blood boil:

https://www.vox.com/policy-and-politics/....

Apparently the plan is to herd everybody into Medicaid, bankrupting the Federal government. Then strip assets from folks 401k's/estates when they die.

Remember it is not just the poor who "die broke" taking the bait of "free Medicaid!"

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Ich bin der Tankendau!
Tickerguy
Posts: 148942
Incept: 2007-06-26
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Oh that'll be fun

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Winding it down.
Knightowl77
Posts: 1
Incept: 2017-06-10

Colorado
Banned
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I agree that the pension system is unsustainable...but cutting the pensions to current retirees is not going please current employees much...

By that I mean, when I was a peace officer we went to negotiations every 2 or 3 years. Almost every time they offered an increased pension benefit (a future payout versus a current one) for a reduced pay raise now. We accepted the lower current salary (and this was compounded over several contracts) for the pension we have now.
So if you cut pensions why would any current employees feel bound by all those past, but now invalidated contracts? Why wouldn't all current employees either immediately demand drastically higher current salaries or quit to find something more lucrative since it is obvious their retirement will Not come from their current pay & benefits package????
Also another question based on the above...I am a retiree from another blue state. I have a current mortgage, and with Obamacare premiums I am not putting anything away these days.
So when my state defaults and cuts my pension in half or worse, I won't be able to pay my mortgage....Why in the world, am I obligated to pay what I promised, if the State of California can default and not pay me what it promised?
If a state with 30 million plus people can just thumb its nose at its obligations, then why can't I since I relied on those obligations?
I think this ends very badly.
Tickerguy
Posts: 148942
Incept: 2007-06-26
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So you participated in a knowing scam and now want to be bailed out?

**** that.

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Winding it down.
Orionrising
Posts: 23
Incept: 2017-01-26

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I wonder how many of the old folks at the slots are subject to medicade lookback period and are handing the winning slips to their kids....

Yes sir grandma lost her house in a poker game to jimmy over here, then I won it from him.... not a gift at all. Reckless spending.
Exppi
Posts: 54
Incept: 2013-10-15

PDX
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This pending disaster is causing a lot of discussion among actuaries. A fair number aren't being listened to...
Exppi
Posts: 54
Incept: 2013-10-15

PDX
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Zappafan wrote..

I read this and it made my blood boil:

https://www.vox.com/policy-and-politics/....

Apparently the plan is to herd everybody into Medicaid, bankrupting the Federal government. Then strip assets from folks 401k's/estates when they die.

Remember it is not just the poor who "die broke" taking the bait of "free Medicaid!"

It probably has similar funny math as the California single payer analysis. It's all a ticking time bomb.

Oregon had the epiphany that the Federal funding for expanded Medicaid actual did run out and they needed $1 billion to pay for these people. How to get it? Add a tax on hospitals and health insurance companies. Morons.
Maynard
Posts: 332
Incept: 2007-11-27

Tejas
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That is probably one of the worst first posts I have seen here. I am surprised there hasn't been some upper body workout. smiley
Fasteddie81
Posts: 2
Incept: 2017-05-11

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Knightowl77 wrote..
Why wouldn't all current employees either immediately demand drastically higher current salaries or quit to find something more lucrative since it is obvious their retirement will Not come from their current pay & benefits package????


Current public sector employees would be free to quit and go find other work. At which point, the public entities would work to hire new employees, who would be covered under a more reasonable (and realistic) retirement plan.

I don't see the problem in that.
Schoolboy13
Posts: 11
Incept: 2016-01-03

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Born & raised in NW suburbs of Chicago, met & married a country girl from Ohio 24 years ago. She was dead set against making the Chicagoland area her home after we were married and finished college. So after we finished school we made a life for ourselves in the town we went to college to.

Glad I listened to her all those years ago. Not enough lifeboats on that sinking ship Illinois.
Tickerguy
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Quote:
I think this ends very badly

You got that right


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Winding it down.
Maynard
Posts: 332
Incept: 2007-11-27

Tejas
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I really try to understand how these people think that is perfectly fine to steal from their neighbors because of a pledge on something that can't be fulfilled promised by someone who doesn't give a ****. AND has NO accountability. My brain literally can't process that.
As TG says their neighbors should be eating them.
Jfms99
Posts: 195
Incept: 2009-10-06

Msumelle, Ar
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The caveat that Medicaid can go after any assets you have for rembursement has been there a long time. Medicaid is almost unlimited in coverage and open ended.

I live in Arkansas and the last governor we had was a Democrat. Now about four years ago we have about a $400 Million Dollar hole in the Dept. of Health and Human Services budget, and the legislature was having trouble figuring out how to pay for it. So Gov. Beebe, our Democrat, took the Obama Care life line where they would pay 100% of the cost for three years then we gradually re-assume our share in 2020.

Well like all states that took that deal they all expanded their Medicaid Roles dramatically. Now as far as I understand it I don't know anything about a buy in for Medicaid. They pushed something called the private option here in Arkansas, where I think they take Medicaid money and get some sort of private insurance to make it work. A stopgap as far as I can see.

The real problem for all states that took the deal is how are they going to pay their assorted shares when the Federal Deal is over. I keep asking that question here in Arkansas and get no answer, my own personal opinion is that we are going to be looking at a huge hole in the budget and no way to pay it.

That is when the various state Medicaid agencies will start being uber aggressive in looking for any asset not tied down to make up the difference. It will end making paupers out of everyone. Add in Balanced Billing for Seniors on Medicare and we are looking at a very dim future.

Wa9jml
Posts: 8
Incept: 2017-04-29

DeKalb, Illinois
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I have been watching this implosion for years. I worked in a number of rural rust belt Illinois municipalities, and could only wince as NAFTA, and the fiscal follies from northeast Illinois, gradually destroyed the employment opportunities and the tax base there.

When the U.S. Supreme Court usurped the prerogative to redistrict all of the state legislatures in the country on the basis of population back in the early 1960s, the rural areas were steamrollered, and eventually it came back to bite the big municipalities in the ass, too. There was no longer any check on urban or rural stupidities. The Crook County and Chicago Democratic delegations to the Illinois General Assembly do not know anything about the rest of the state, nor do they care about the rest of the state. Their only concern in welfare spending. The DuPage and Lake County Republicans are almost as bad.

So, the northeast quadrant of the state has sucked the rest of the state dry. The Democrats have demonized Rauner enough to block any hope of his being re-elected. Their hope is to elect either a Chicago liberal, or a Kennedy carpetbagger as governor, and then the tax raising frenzy will really get up to speed. It doesn't matter how much they raise taxes, because they will always spend more than they take in as revenue. The don't seem to be worried about the almost junk rating on their bonds, nor about the massive exodus out of the state by prudent people who see the handwriting on the wall.

One of my mentors, who is an expert in public finance, told me years ago that he fully expects to get IOUs instead of his SURS pension payments. I also saw that coming, and managed to get into the self-managed option for SURS, when I taught at a state university as an adjunct for about 10 years. My payments come from TIAA-CREF, not the state.

I would dearly love to leave this doomed rat hole, but am taking care of my almost 99 year old father. He is sufficiently frail that I doubt he could survive any move. So, I sit here watching the fun, and hoping that I can get out before it gets really bad.
Aztrader
Posts: 7783
Incept: 2007-09-10

Scottsdale, AZ
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If the people knew the actual union wage and benefits costs, then they may rise up. The numbers always seem to get lost somewhere....
Bodhi
Posts: 97
Incept: 2008-02-23

Georgia
Online
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Quote:
I left the state in no small part because I saw it coming


Economics and over-regulation were two of the primary reasons I left California back in 1993. I lived in the SF Valley part of LA and the Rodney King riots were another major factor in driving me away. I was at Dodger Stadium the night the riots broke out. That was the last straw for me. I don't miss it at all.
Goforbroke
Posts: 6973
Incept: 2007-11-30
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Drain the Swamp!
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It's everywhere.

Local school district (1000 students, budget of $10-11,000,000 a year.

inline

District ate up virtually all of its reserves ($2.5 million) by going on a spending spree hiring teachers and granting unsustainable base, step (years of service), and class (amount of education) raises, and healthcare benefits.

All of this went unnoticed until 2013, when it went close to being in the red.

The school board and administration blamed it on the treasurer who came on board in 2013 (after virtually all of the damage had been done).

Denial is killing all public entities, and they keep going to the taxpayer ATM to keep the bezzle going.

At some point, this will break. But they will fight it with all they have, until the taxpayers say emphatically, "NO more."

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Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our Light, and not our Darkness, that most frightens us. -- Marianne Williamson
Tdurden
Posts: 528
Incept: 2015-01-29

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Suburban school districts:

The doughy, middle class suburban soccer moms have a sense of entitlement that would make the stereotypical inner city welfare queen blush. Those bitches will step over and/or on their elderly, fixed income neighbors to get to the polling place to vote for property tax hikes. Of course if there isn't tax financed football, soccer and band at the local school they might have to actually spend some time with the little bastards after school, and we can't have that! It's bad enough when they lose their deeply discounted day care during the summer months.

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"I'd like to live just long enough to be there when they cut off your head and stick it on a pike as a warning to the next 10 generations that some favors come with too high of a price." -Vir Cotto Babylon 5
Oldno7
Posts: 2567
Incept: 2008-11-14

RECALL STATE USA
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KIGHTOWL77, signed up today and wrote one post and gets banned as he should for posting such BS. That must be some kind of a record? You know one should get a feel for the lay of the land before they dump garbage on it. Rule #1 of survival is to be aware of you surroundings. And this is Karl's house and we who have been around a while are respectfully aware of that and respect the hell out of Karl's contribution to the cause. Thanks for allowing comments again.

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IT'S THE SPENDING STUPID The US must become less a government of men, and more a government of LAW.When people lose everything and have nothing left to lose they lose it -Gerald Celente
Deep6
Posts: 6
Incept: 2015-09-01

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"If the people knew the actual union wage and benefits costs, then they may rise up. The numbers always seem to get lost somewhere....". In California, IF the people really wanted to know, that information is readily available. See--http://transparentcalifornia.com/----typ.... in an occupation of your choice in either 'Salaries or Pensions'. As for people 'rising up', against whom?? The individuals they elect to office that have permitted/allowed the conditions for utter disaster? BTW, they appear to send these individuals or similar back to office EVERY election cycle. Maybe the government employees, who possibly like famed Willie Sutton, work there cuz that's where the money appears to be...supplied by sheep WILLINGLY being sheared.
The majority of those who vote have created this, unfortunately ALL will suffer when it crashes. Who to rise up against? For many it will be that person in the mirror.......
Unknownsailor
Posts: 390
Incept: 2009-04-06

Bremerton, WA
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California re-elects that room temp IQ idiot Maxine Waters every 2 years like clockwork. They deserve what is about to happen to them, good and hard.

The imminent pension collapse has been obvious for many years, but in Illinois, as well as California, as the public unions dictate, so go the state. The Governator found this out the hard way when he tried to do some initiatives to partially reel in the teacher and prison guard unions in CA, and all four of his initiatives went down in flames.

Like Glen Reynolds says, that which cannot be paid, won't be. Contractual promise be damned.
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