Home » Economy » Why Isn’t Illinois A Bigger Story Than Greece?

Why Isn’t Illinois A Bigger Story Than Greece?

by John Rubino on January 22, 2012 · 80 comments

As the Greek default (and it is a default no matter what they end up calling it) is finalized this week, the consensus seems to be that failure to reach a deal would cause a global financial apocalypse.

That may be true. And if it is, why aren’t we more worried about Illinois? It’s more or less the same size as Greece, its finances are in the same generally catastrophic shape, and its leaders are just as feckless and dishonest. It owes tens of billions of dollars to various investors and stakeholders and will clearly have to stiff many of them at some point. The following article captures the “failed state” dilemma perfectly:

Dripping with red ink: Will anyone fix Illinois’ budget mess?

The question isn’t whether Illinois’ finances are in dreadful shape, it’s how to fix the problem. Or perhaps more accurately, will legislators have the political will to fix it when they return to Springfield for their spring session?

Even though the legislature and Gov. Pat Quinn last year imposed a temporary 67 percent state income tax increase, Quinn’s office expects to have a $500 million budget deficit this year.

Quinn is calling for a 9 percent cut in most areas of state government, except education and health care. But even with cuts at that level, the state would have a projected $800 million budget deficit for fiscal 2015, the year when most of the tax hike expires.

Quinn’s budget spokesman, Kelly Kraft, said the state’s fiscal situation is not pretty.

“These projections clearly demonstrate that action must be taken to control not only Medicaid costs but also (pension) costs, or all other areas of government will continue to be squeezed,” Kraft said.

Looking at the bigger picture, the state has a backlog of about $8.5 billion in unpaid bills and owes about $27 billion in outstanding bonds. And then there’s the roughly $80 billion owed to the state’s public employee pension funds.

Now, legislative leaders and Quinn are floating ideas to cut the two areas that account for the biggest chunks of the state budget — pension contributions and Medicaid.

In the proposed $33.7 billion budget for fiscal 2013, the state’s pension payment will be $5.3 billion, and Medicaid will cost taxpayers about $7 billion.

Proposals include reducing the benefits or the eligibility for Medicaid. On pensions, ideas include decreasing the benefits and increasing the contributions for current employees. A new pension system was approved last year, but it’s only for new employees, and there’s debate on whether the benefits for existing employees can legally be changed.

One of Quinn’s ideas for reducing the state’s pension costs is to shift the burden somewhere else: to local school districts.

“About 21 percent of what the state puts in … is for state employees,” Quinn told reporters earlier this month. “More than half of the money we contribute every year is for teachers who are outside of the city of Chicago — suburban and downstate teachers.”

Supporters of the idea say it would make school districts think twice about giving employees big raises at the end of their careers to boost their pensions. School districts would have some skin in the game if they had to pay for those pension boosts, rather than the state, the supporters say.

Opponents argue that shifting costs to local school districts isn’t real reform, and would just force them to increase local property taxes.

Improving the picture won’t be easy when the legislature reconvenes Jan. 31, particularly in an election year, when politicians might find it difficult to cut services for constituents or hurt the feelings of unions that represent state workers.

To summarize, even after a massive tax increase Illinois is looking at a half a billion dollar deficit. That actually sounds manageable in the scheme of things — not even a billion dollars, chump change in this inflation-ravaged world. But the annual deficit is less of a threat than all those accumulated liabilities: “Looking at the bigger picture, the state has a backlog of about $8.5 billion in unpaid bills and owes about $27 billion in outstanding bonds. And then there’s the roughly $80 billion owed to the state’s public employee pension funds.”

The reported deficit, in other words, doesn’t include all the stuff that should have appeared in past budgets but was hidden in order to get through the next election. How a state with a constitutional mandate to balance its budget can do this in the first place — and how an “unpaid bill” can be excluded from the annual budget — is a question for future prosecutors. But for investors it’s a clear sign that some sort of default is coming.

Why then would anyone buy an Illinois municipal bond, or accept a state contract that requires future payments, or move a business to the state, or keep a business in the state, or do anything else that required faith in the willingness or ability of the state to pay its bills? The only possible answer is that Illinois isn’t Greece; it’s Spain or Italy, an entity so big and important that its failure is inconceivable. When it hits the wall, Washington will have no choice but to step in and cover its unfunded pensions and teacher salaries and muni bond interest. In the same way that a Spanish bond is really a German bond because Germany has no choice but to make good on it, the big insolvent US states are wards of the central government.

The bottom line effect of all this stepping up and bailing out is to exchange a solvency/debt crisis for a currency crisis in which the markets at some point figure out that failed states are so numerous and their needs so great that the printing presses will never stop.

{ 63 comments… read them below or add one }

kopavi January 22, 2012 at 11:28 pm

OK, In understand. No state can default as long as Benny and the Inkjets have a printing press. It is inconceivable that a state within the USA would default. Next question. Who will bail out the USA when it simply cannot pay on it’s bonds or sell them for a rate that will allow the game to continue? Will Benny’s press ever run out of ink? Paper?
Just asking.
kopavi

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jferguson60 January 23, 2012 at 1:43 am

No need to print anything. Today money is created through accounting entries for the most part. How hard is it to type a dozen zeros into an account? What the heck…they might as well make it two dozen new zeros while they’re at it.

Life would be simple indeed if wealth could be created so easily.

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Danny Adams January 24, 2012 at 10:44 pm

I’m happy to find this article for no other reason than “Benny and the Inkjets”. I wish I’d thought of that!

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dean February 5, 2012 at 12:46 am

its limited resource world,things only get worst.they will not be able to print money when they need it forever.there going to collapse in the near future

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gman January 29, 2012 at 10:19 pm

no. the fed can “print” forever.

the new “money” allows those at the top, those who receive this new money first, to have first claim on any goods that are still being produced. this allows them to continue to live in their accustomed manner. but it means that those who produce the goods, those at the bottom, are last in line. they have to work harder and harder, and faster and faster, to get anything at all.

when those at the bottom can no longer work hard enough or move fast enough to keep their houses or buy their food, the entire system will collapse. those at the top will say, “all of you owe us everything you have left. we own you.”

and that’s what it’s all about. those who say bernanke doesn’t know what he is doing, are wrong.

read the bible. book of genesis. chapter 47.

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Craig from Belvidere February 1, 2012 at 5:41 pm

The issue is not, “those at the bottom” so much as the young and yet to be born. The beneficiaries are not “those at the top” but the old and established employees.

The Illinois Government implemented “A new pension system … but it’s only for new employees,” just like many unions have done. New employees (the young and the yet to be born) will pay for the older people’s pensions through lower pay and lesser retirement benefits.

The young and yet to be born need to vote in great numbers but they can’t vote and have no voice. They are screwed. And the old people get all the rewards they voted themselves.

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Tim February 3, 2012 at 5:47 pm

I don’t agree. The top 20 percent of the country now controls 93% of the nations wealth, and the rest of us are fighting amongst ourselves over who gets the remaining 7%. The politicians are setting up laws so that the young feel that they are being taken advantage of by the old. All the money is at the top, and we are fighting over a carcass of bones. If you don’t believe, check out the article on Wikipedia. http://en.wikipedia.org/wiki/Distribution_of_wealth

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Cyrus January 22, 2012 at 11:45 pm

It is obvious that our states, many of them anyway, are in very serious straights. California and others do not have long to go before a crisis develops. Who, if anyone, bails them out remains to be seen. So what does this say of the finances of our counties and cities? One word, SHAMBLES. Great article. Keep it up.

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Fred Z January 29, 2012 at 7:25 am

Straits.

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W G Thompson January 23, 2012 at 12:13 am

The deer in the headlights analogy is
applicable to Illinois and much of
the debt in this world. The Swedish
politicians and banks realized this
belatedly, but since they still
have the kroner, and were never in
the EU, they moved away from Social-
ism some time ago and began taking
money matters seriously. Check out
the EWD. It’s a good bet against most
other currencies. WGT

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Darryl X January 23, 2012 at 3:36 pm

Sweden has not solved its debt problem. It merely shifted it from the general population to men by enslaving them. Sweden has devolved into one of the most feminist fascist regimes in the history of the world. It may be stable (for now), but cost of that stability is high and comes at the expense of an inevitable revolution against its feminist fascist regime. Read Welcome to Absurdistan and Bleeding Sweden: the Descent into Ideological Depravity and other articles about Sweden and the rest of the developed world as it devolves into a global feminist fascist totalitarian police state at A Voice For Men. I wouldn’t be putting much faith in Sweden as a model of how to survive our debt problems. It is extremely unstable, if not financially then socially.

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Javelino January 23, 2012 at 8:49 pm

I think a better analogy would be a deer in the headlights… who, in the moment before impact, forces his entire deer family to stand on the road in front of him to slow the truck down.

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Jeremy Bridges January 23, 2012 at 12:21 am

With the Federal Government in debt to the tune of approx $16 trillion and overall debt in the US approaching $60 trillion – the financial “irregularities” in Illinois begin to look like petty cash. Can a State which is an integral part of a Nation State default? Meantime everyone should go immediately to Zero Hedge and attempt to fully / partially comprehend the following:

“Subordination 101. A walk thru for Sovereign Bond Markets in a post Greek default world”

I have just retired defeated accompanied by a thumping headache. Those of the readership possessing the necessary intellectual rigour are hereby cordially invited to assist the rest of us lesser mortals.

Everybody take care out there in this rough old world.

Jez @ Chichester. Sussex Coast. UK.

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Robert January 23, 2012 at 2:07 am

I never realised Illinois was in such a bad way. What is interesting is how the Ponzi scheme others mention on other posts and how the likes of JP Morgan keep on shorting Silver and Gold and that the rates as you show below keep bouncing back. This whole paper/physical debacle should unravel before November this year then things will get interesting!

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Yay Man January 23, 2012 at 3:13 am

Things will unravel but it will take another year or two as they’re “printing” one trillion per year to keep the party going. My advice is take seriously the proposition that we’ll have a Mad Max scenario. You should plan for a retreat in the mountains with friends, weapons and a whole bunker full of bullets, plus another bunker full of food (two years minimum, unless you know how to farm).

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Pal January 23, 2012 at 3:53 am

As long as Helicopter Ben is at the helm; this ship goes DAMN THE TORPEDOS AND FULL SPEED AHEAD!

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Pete January 23, 2012 at 5:19 am

Illinois is nothing compared to just one city IN Illinois…Chicago! They have a $40 billion hole in their balance sheet, primarily due to unfunded pensions. It will get very nasty there…but when?

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Will Bancroft January 23, 2012 at 10:52 am

As a native Chicagoan this situation brings me sadness. However, it is just a small representation of systematic financial irresponsibility around the world. Without sound money financial chicanery is enabled.

Great article!

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Tony D January 23, 2012 at 12:49 pm

2 guys are being chased by a bear in the woods. One guy says to the other, “I sure hope we can outrun this bear !” The other guy says, “I don’t have to outrun the bear, I only have to outrun you.”
As long as the Euro goes into crisis first US politicians will have all the cover they need for what they have already done and what they will continue to do.
Not one expert who indicates that things will “muddle through” has indicated numbers to back up this belief, probably because those numbers don’t/can’t exist.
Illinois won’t be allowed to default before Greece. Greece can’t print, the US can, and will.

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Billy Bob January 23, 2012 at 5:38 pm

If the state would hire better accountants, they could fix the numbers so there is a balanced budget.

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Jason Emery January 24, 2012 at 7:22 pm

Yeah, they could hire Jim Rickards. He probably thinks the average life expectancy will drop sharply, seeings how WW3 is about to happen. Therefore, the Illinois pension system is actually massively OVERfunded. Let’s Party Hardy Marty, lol.

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Big Dick January 23, 2012 at 6:03 pm

Why hasn’t anyone mentioned that OLD BLOWHARD was an Illinois senator before he moved to the White House. And you wonder why we are in even deeper debt than the awful Bush years of spending? When will people wake up and smell the roses and find out that it is the compost underneath that is the true sniff?

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Bruce C. January 24, 2012 at 1:18 am

Why isn’t Illinois a bigger story than Greece?

Because it’s boring.

Because the media hasn’t focused on it.

Because Illinois seems like a random state. What about California or New York or any of the others?

Because we’ve been hearing about impending doom for as long as we can remember and are becoming numb.

Because deficits really don’t seem to matter. When has any government entity not run one?

Because municipal bonds were the third best investment in 2011, behind long-term US Treasury bonds and gold.

Because nothing will allowed to be a problem this (election) year.

Because Obama has tons of political debts in Chicago.

Because of Emmanuel and Daley, Jr.

Because Illinois is part of the “heart land”.

Because Greece is still around and not going anywhere.

Because Illinois isn’t Greece.

Because most people don’t live in Illinois.

Because most people don’t understand what’s going on.

Because most people wouldn’t believe it even if they did.

Because the Fed will bail them out.

Because those with vested interests are protected by the law.

Because those without vested interests are in the minority.

Because nothing human is automatic or date-certain.

Because everything human depends upon political choices and decisions.

Because it’s only money.

Because promises can always be broken.

Because all those promises seemed a little too good to be true anyway.

Because “my” entitlements are protected.

Because Obama will probably be re-elected.

…Among other reasons.

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mark hagen January 24, 2012 at 3:37 am

this ain’t kansas toto…….

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F ALL FREEMASON LIARS January 24, 2012 at 5:00 am

not a word about the criminals that have run this state for decades…GRAFT bankrupted Illinois not teachers and pensions (MONEY THAT THE MAFIAS SPENT)

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Pete January 25, 2012 at 1:25 pm

Well said!

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Blue Lodge Butt Lick January 29, 2012 at 1:30 pm

Blue lodge masons lie, steal, and put Blaine Ammendments in the constitution.

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jazzbow January 24, 2012 at 5:08 am

Illinois says that they can’t cut essentials.Day Care Centers Drug Rehabilitation,Commie-Unity Colleges,and loads of other drains that are NOT essential.
They are doing it on purpose,then they will have to make those “tough”choices that will really SUCK…for you.Not for their cronies.
It’s obvious what is going on here….
Too bad the police can’t stop these crooks.
They have to take orders from them LOL =-/

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WaldenPond January 24, 2012 at 6:54 am

Why pick on Illinois? There are many regions like Illinois. How about California or Maine? How about Ontario and Quebec in Canada? Then start looking at cities. How many cities in the world have debts that cannot be repaid? Too many to count. Banks and investors have made big mistakes if they lend money to people or governments that cannot repay the debts. That fault is not with the debtor, but with the lender. Incompetent banks should go out of business. Period. Stop bailing out banks. Governments should cover the insured deposits and then let the incompetent banks fail. The expression, “Too big to fail”, should be banned from public discourse.

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F ALL FREEMASON LIARS January 24, 2012 at 9:32 am

this site censored my comment, calling into question the article stating that pensions and schoolteachers are the cause of the budgets instead of the myriad former governors still in prison and the mafias that run this state having STOLE said pensions

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EmilyEllen January 24, 2012 at 11:11 am

Never mind the axis of evil – USA/NATO/Israel will have plenty of your money to spend on murdering some millions of Iranians to plunder their country and hand the central bank to the Rothschild cartel.
What does Illinois or any American state matter.
Print the money, debase the currency, and if any of you object you will be arrested, tortured, imprisoned or renditioned on the Presidents whim without any due process or legal rights.
Welcome to the new fascist police state USA.
You wanted it, you voted for it. You got it.
When you and your family get on the receiving end of the flack coming your way from WW3 you will have the comfort of knowing as you die that this happened on your watch by your government and almost certainly I would say without your protest.
Enjoy.
The way things are going Illinois will have more to be concerned about than money.

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Dave January 24, 2012 at 12:29 pm

Ask me if I care if any school bureaucrat loses their pensions in IL, or any other state…
As I type this I have a grin on my face.

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Not A Commie January 24, 2012 at 2:17 pm

I live in the People’s Republic of Illinois since 1974 when I came to the United States.

It is remarkable that when a State adopts socialism, it fails consistently. Look at Cuba, North Korea, and other places. Illinois is no different.

I am NOT A REPUBLICAN. However, I have to say that the Democrat Party = Socialist Party by a different name. It just does not have the integrity and courage to call itself the American Socialist Party.

Socialism ran Illinois and so many other states into financial ruins, i.e., California.

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AgMgr January 24, 2012 at 2:47 pm

The article makes it seem simple. Like the debt isn’t that bad. The conservative estimate of the pension deficit is 44 BILLION
http://www.rrstar.com/news/x194405103/Illinois-pension-debt-worst-in-nation

The state official debt is around 5 Billion. However, it’s more like double that:
http://chicago.cbslocal.com/2012/01/19/topinka-illinois-unpaid-bill-crisis-just-keeps-getting-worse/

Schools aren’t getting paid from the state what is owed. Local schools are putting the shortfall on their own credit cards through issued bonds. Property values have taken big hits and property tax resets are just hitting. Schools aren’t going to just fill in the gap with more debt until things get better.

It’s almost unbelievable how long the scheme has still been running. Running on fumes.

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stonehillady January 24, 2012 at 3:04 pm

Why are we so in debt & the inequality between those that work & those that have a better life On WELFARE ?
I just came back from the supermarket, the women in front of me had family members with her, the food bill came to $350. loaded with all kinds of small pre-pakaged foods, when it came to pay they whipped out 3 Maine cards which are for food Stamps & they swiped 3 of those cards. When I left they were out in parking lot loading up all the food in a brand new Escalade.
It pains me to see how many work the system as I struggle & many with the resources I have & how not only people like them to all the way to the top corporations that do the same thing, no wonder this nation has rotted from the inside out with Massive debt & pure down right corruption.

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Schuz January 28, 2012 at 3:52 am

Stonehillady, You have expressed my sentiments exactly. We all see it and maybe we have gotten to the point where there are more people taking advantage than not so the votes are there to continue the madness. The next few years could be a bumpy ride. Do you remember how seriously people took the House banking scandal in the early 90′s. What is happening now is so much worse and no one seems to care. I saw a report this last week with Bill Moyers on PBS and I couldn’t believe they were actually reporting that Dodd/Frank was going to do nothing to stop the “Too Big To Fail” from happening again. Maybe a sign of things to come. Imagine…Real Journalism!

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Maxwell Jump January 29, 2012 at 2:32 pm

I had a similar experience, they bought a ton of food and paid for it with “food stamp” debit cards. A mom and dad (I’m guessing) and 3 kids, though instead of getting into an Escalade, they got into a Hummer H2….parked in a handicapped spot…and not one of them looked the least bit handicapped, thought they did have handicap license plates. I won’t call them illegals, they were Hispanic, but after what I’ve seen of many of the so called “living in the shadows” illegals, it wouldn’t surprise me if they were.

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Steven Guttman November 1, 2012 at 3:00 pm

I’ll turn 61 in two weeks. I certainly can relate to STONEHILLADY. I see the same
thing here in Florida. I rent a small efficiency apartment and when I am advertising on
Craigslist (God bless Craigslist) many people who are interested in the place want
to know if they can pay the rent with food stamps.If they are not using the food
entitlements for the purpose they are designed for,the should not recieve them.
3 years ago I fell from a ladder crushing my left shoulder,knee and below the knee
was powdered. I can walk with a cane,but because I make too much money,
$1600/month, I can no longer obtain medicade and the carrier for Amerigroup did
everything possible to keep me from getting the necessary surgery to repair my
leg. Everything was a “runaround”. My leg is still detached below the knee.

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Skully January 24, 2012 at 5:25 pm

its all about CAFR comprehensive Annual Finanicail Report and PEOPLE like us need to start asking about this CAFR from the local City governments to the states THEY ARE NOT BROKE!! http://www.cafr1.com Walter has been working on this for years and we people need to start pushing this CAFR info so we can hold them all accountable for the FRAUD they have been committing. Peace

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Dan January 24, 2012 at 7:58 pm

Illinois is simply going to have to go back 10 years on public pension recipients and do a “reset” and calculate pension payouts based on an average of prior years, excluding any increases in the last year of service. The fraud is rampant and nothing is curbing it. A road district truck driver making 30,000/year gets to retire so he spends his last 90 days in an administrative position making 100, 0000 which then determines his pension payout. And, they keep trying to say this problem is in the teachers, but it really isn’t. Most of the fraud of this nature is taking place in the IL State Police, IL Dept Corrections, IDOT and on and on. The teachers have a separate fund that shouldn’t affect general pub employees’ fund. But, Blago stole the money years ago and no one did a damn thing about. That is the money the state has to pay back and whine and blame the teachers for. Pure fraud.

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Robert January 24, 2012 at 9:43 pm

Inflate or die. It must be QE to infinity, no state will be allowed to “fail”.

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Jim Potler January 25, 2012 at 6:15 am

What is never discussed is what are the assets of the State of Illinois. Basically they are taking our pension money, and buying up land and businesses with that money in a way that would be money laundering if anybody else did it. And they have been doing this for decades. Look up the CAFR on your state and be blown away by how much governments on all levels own.

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ron January 28, 2012 at 4:19 pm

I see a lot of money printing into the future,makes you wonder how long things can last? The dept is so insane it makes one wonder why it isnt given more press or concearn. While im sure he isnt perfect i like Ron Paul.At least he relizes we have dept problems and wants to tackle them.

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JR January 29, 2012 at 7:35 am

“Quinn’s office expects to have a $500 million budget deficit this year.”

Well, Illinois ought to just call itself a failing solar company and Obama will give the state $500 million. No questions asked.

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bobby b January 29, 2012 at 10:39 am

“Why Isn’t Illinois A Bigger Story Than Greece?”

Because Greece can’t just stop in to see the godfather and pay him its respects and ask a quiet favor and then leave with with a promise of seven times the GDP of Africa, but Illinois can, so the reporters know that Illinois would be a story that dies early and boringly.

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Frustrated in Illinois January 29, 2012 at 10:41 am

Illinois is run by a bunch of incompetents re-elected with the support of the Chicago “machine” and labor unions. The Governor has no plan because he can’t face the reality of cutting back on public employee pensions like our good neighbors in Wisconsin have wisely done. They helped him win a close election and he “owes” them. So, he decided instead to raise taxes by 67%. In response, taxpayers (both individuals and businesses) are leaving the state. If I could sell my home, I would leave too.

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egoist January 29, 2012 at 11:41 am

And, like Greece, the “lenders” (read bailouters) will take over control from the state. When that happens, perhaps the US government would reimpose the constitution and make gun ownership legal there; the up-side of the down-side.

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wdk535 January 29, 2012 at 12:17 pm

No surprise that corrupt home state of Al Capone & Barack Obama is broke. When Repubs take over in 2013, IL, CA, & NY should be seized by US govt, reverted to territorial status, placed under martial law & military governor.

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Steven Guttman November 1, 2012 at 2:22 pm

To: wdk535, Why ?

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annec January 29, 2012 at 12:19 pm

Aaaaargh!
The day they use my money to bail out these grossly mismanaged states is the day I think seriously about moving out of the country!

Union workers have bloated salaries and benefits while working. (Don’t write me about all the “hard-working teachers out there who deserve it”! I’m talking generalizations!) Union educators and administrators are allowed to retire while still young and live the rest of their lives on very comfortable pensions, spending very little of it on their own health care.

If a state cannot pay its promised benefits, the union must come to the negotiations prepared to make the needed cuts in salaries, pensions and benefits. They must prepare their employees to pay more and make less. After all, THE STATE IS BROKE! Why should we just bail them out and continue to pay those bloated amounts. The only difference being that we are using my money to pay those union workers and retirees instead of using money raised in that state.

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PacRim Jim January 29, 2012 at 12:28 pm

Must I say it?
President Piffle is from Illinois.
Can’t mention his name near the G-word. People might begin to think.

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Tom of the Missouri January 29, 2012 at 12:59 pm

A couple of anecdotes from Illinois from were I grew up but no longer live. I live across the river in Missouri which by comparison is a relatively sane fiscally responsible state. When I go visit my mother I check the papers there and hear stories from my mother as to what is going on. Two examples. 1) My mother’s preacher in her small church was also a pharmacist. A couple of years ago though he had to close his pharmacy because the state would not pay the bills for his Medicaid patients. His was basically a one man operation and he was owed hundreds of thousands of dollars in his small storefront pharmacy and finally ran out of money to operate. You can guess that he was not likely very politically connected but just a small anonymous businessman 2) When I pick up the local Illinois papers they are always filled with stories of new government programs and spending despite the fiscal insolvency rumors. The latest was a story about a small business man from my hometown who received a large state grant to build new facilities for his small manufacturing company. Of course all the local politician built this up as a wonderful thing that would provide jobs. The politicians simply have no since of responsibility. They clearly must know the whole thing is a giant ponzi scheme that is certain to collapse so they are simply giving out money to their cronies like there is no tomorrow and stiffing people who are not their cronies. I also go to Walmart when I go there and of course their are legions of massively obese people there filling their carts with junk and junk food to take home to there federally provided new homes to feed to their morbidly obese children. This whole house of cards is clearly not sustainable. In the meantime people and business slowly leave Illinois for better climes like Missouri , Mitch Daniels’s Indiana and of course Texas. The people who are left of course just keep reelecting the same criminal politicians over and over. This isthe state that elected Blogo not once but twice. Anyone with an ounce of common sense could tell that from day one this guy was a completely corrupt Chicago machine guy who lived to give taxpayer and bondholder money to his cronies. This apparently bothered no one or at least it did not bother a majority of the voters. That same majority has now reelected Blogo’s successor Quinn who is no better except for he hides his corruption a little better. The state of Illinois truly has no hope and if the Feds get into the business of printing to bail out these black holes of corruption and ignorance we as a country truly have no hope. Obama of course with this countless Solandra’s and bailouts of cronies is the Blago of the U.S. Like the small pharmacist he is cutting the military who does not vote for him and is rewarding those who do with trillions in printed money. If he is reelected I predict the great ponzi will be over soon. If Romney is elected it will be delayed for a year or two.

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Mark January 29, 2012 at 1:37 pm

“When it hits the wall, Washington will have no choice but to step in and cover its unfunded pensions and teacher salaries and muni bond interest.” Guess again, bailouts are in bad odor. We’re going to see states declaring bankruptcy and canceling overgenerous pensions.

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Mike Mahoney January 29, 2012 at 1:54 pm

I don’t think the other 56 states are going to be willing to pony up. The option that’s never on the table that will happen is that there will be a bond default. One of the moral hazards present but never spoken is that of bondholders have no skin in the game. Eventually we need a system that prices for taxpayers the costs of programs, pay schemes and pensions. If bondholders get a haircut they will curtail lending, states will have to pass tax increases in a pay-go enviornment and taxpayers will be woken to react. So bondholder shave to be disciplined so tha taxpayers will discipline politicians. It will be that way.

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punditius January 29, 2012 at 2:28 pm

“Temporary” tax increase? The increased rate will just be renewed, and perhaps increased even more, when the time comes.

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Steve Adams January 29, 2012 at 3:00 pm

I’m glad I moved my business out of that messed up state years ago. Wisconsin, Iowa or Indiana aren’t the best but everything is better compared to the worst.

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M. Report January 29, 2012 at 4:41 pm

In both Europe and the US, the heartland will survive, and
the coasts are toast; After the crash, the recovery from the
2nd Great depression will be run by the solvent states, and
the insolvent states will have no say in the matter.
Extreme ? Not really, it is just that the Golden Bubble has
lasted longer than a lifetime, and is now considered normal;
The sudden return to reality will be especially hard on the
Progressives, whose touching faith in the power of the
Federal government to solve any problem by passing a law
ignores the fact that the _only_ real power the FG has is
the power to tax and spend…which it will soon lose; The
solvent states will not allow themselves to be taxed into
bankruptcy in a vain attempt to save the insolvent states.

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SteveC January 29, 2012 at 4:55 pm

Greece is a big story because there’s no consensus about whether they will be bailed out and, if so, by whom?

In the case of Illinois, there’s no doubt whether or by whom. They will drive their car off the cliff, falling into an airbag called the US taxpayer. Sooner the better for Illinois with their favorite son in the Oval Office. After November, there might not be any air in the bag.

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Bruno Behrend January 29, 2012 at 5:39 pm

The policy of shifting the pension payments to the school districts is a good one, but not for the reason everyone thinks. School districts can declare bankruptcy, states can’t. Force it on the districts, and put them in vice of either declaring bankruptcy or hiking taxes.

There is no such process at the state level.

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Andy S. January 29, 2012 at 9:20 pm

If Americans are not truly awakened to the dangers & corruption of socialism (and evil socialist policies, both economic & social, i.e., a man’s right to marry another man, etc), then there is no hope for true, long-lasting & effective reform. This reform would include constitutional amendments as follows: Term limits for congress critters: max 2 terms each for members of the House & Senate (& severely curtailed benefits & pay– why not pay members of congress the same as what an O4 in the military makes?); term limits for all members of all judicial branches (no more life-long memberships); balanced federal budget with teeth (no tricks); eliminate the executive branch’s power to regulate ANYTHING outside of running the executive branch (& include a provision that all new laws & any type of federal regulation– other than as noted above– must be constitutional & approved by 2/3rds of the House & Senate); eliminate all federal welfare, education & social programs, returning all such programs and funding directly to the individual or to new state-run privatized programs; return all other programs & power to the states except for what is required for the national defense & the making of treaties. This would include the federal highway system, the FAA, & etc. Let the states come up with state-to-state solutions for running & paying for such programs. The election of Gingrich or Romney will only shift the blame for the problems caused (mostly) by democrats & Obama onto the GOP. And the American people, busily watching American Idol & sports, whilst Rome burns, will believe what they hear reported by the sycophantic MSM. Also, the policies of Obama have not yet fully taken effect & will only do so in the next few years (we ain’t seen nothin yet). The economy had enough steam under Reagan/Bush I & II & Clinton to make things look almost normal these last three years, only slightly worse relative to what may come when the debt bomb causes true hyperinflation– or whatever form it may take. So, my solution is to let Obama own it. The forest sometimes has to burn before new life begins. If our only alternate is to elect political charlatans such as Romney & Gingrich, then there is no hope. God save us.

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Steven Guttman November 1, 2012 at 2:36 pm

I certainly like the idea about term limits for the US senate and Congress and because
every single senator and corgress person is wealthy to begiin with,limited terms with
a substantially reduced salary for ALL! This crap about lifelong salaries is
a big part of why our country is so far into debt. Lets make sure that the politicians
(senate & congress) are in attendance for all meetings and if they are not,they should
be severely reprimanded with a proportionate amount of their salary forfieted.
THIS WILL NEVER HAPPEN WITH THE CURRENT SYSTEM.Cronyism is a way
of life for those in office,it is not going to get any better.

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William February 7, 2012 at 3:41 am

Just look to Wisconsin for the answers to the budget problem Illinois faces. The answer is not difficult at all. God bless Governor Walker for having the guts to do what is needed. He’ll weather the recall too because the State of Wisconsin is getting onto solid fiscal footing because of his efforts, and the new Republican legislature.

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