Skip to comments.Collapse: Moody’s downgrades Chicago’s credit to junk status as pension reform fails
Posted on 05/13/2015 10:14:28 AM PDT by SeekAndFind
Over the weekend we talked about the Illinois state supreme court decision which effectively terminated any effort to reform the state’s collapsing public worker union pension system and how it was endangering the future stability of the Land of Lincoln. The city of Chicago has the exact same problems, though on a more localized level. With debts in the hundreds of billions of dollars and tax rates which are already driving away businesses and residents alike, the iron grip of the unions on not just the legislature, but the state constitution itself is turning into an albatross around the necks of both the state and the Windy City. How long might it take before the situation goes into complete crisis mode? Perhaps not as long as you might think, since Moody’s has now downgraded the city of Chicago’s bonds to a rating of Slightly Less Valuable Than Gum Wrappers. (From the editorial board of the Chicago Tribune.)
Decades of craven trade-offs by Chicago and Illinois politicians hit taxpayers with costly consequences once again Tuesday. Moody’s Investors Service downgraded the city’s credit rating by two notches, to junk. That means Chicagoans likely must pay much higher interest to borrow money for the city’s many needs. And the spreading awareness that Illinois governments can’t control their pension crises casts new suspicion on the creditworthiness of cities, suburbs, towns and school districts statewide that is, on many of the 7,000 local governments here in what we’ve called The Government State.
In slashing Chicago paper below investment grade, Moody’s said Friday’s pension ruling from the Illinois Supreme Court dims the city’s options for fixing its problems: “The negative outlook also reflects our expectation that Chicago’s credit quality will weaken as unfunded liabilities of (City Hall’s four pension funds) grow and exert increased pressure on the city’s operating budget.”
While the Democrats in charge of the machinery and the union bosses who rule the land will never admit it, the Trib’s editorial board points the finger of blame at the only culprits on the scene.
Warnings of the last decade are coming true: You can blame the collapse of this city’s, and this state’s, credit ratings on the Chicago and Illinois pols who traded sweetheart pension deals to public employee union officials in return for campaign money and muscle.
As we watch the slow motion train wreck of the financial stability of Chicago – and Illinois as a whole – it’s worth noting that this situation is hardly unique. The same thing is playing out in far too many large urban areas and deep blue states where the public worker unions have essentially been running the government for generations. The results have been obvious and would be almost laughable if the effects weren’t so pronounced and dire. Many states still allow unions to charge dues to people who aren’t even members, maintaining an effective monopoly on the labor market while not needing to worry about popular support of their efforts since they can compel it through mandatory participation. Union bosses can make their own rules, handing out lifetime pensions to people for a single day’s work. And it’s not just the cost of bloated, widely abused pension programs weighing the system down. When there is little to no competition from non-union shops, prices paid by the government for contracts go up. All of these costs are passed on to the taxpayer, of course.
These examples only highlight what happens inside the vacuum which is left when competition is removed. As the Trib’s editorial staff noted, the unions essentially buy politicians by ensuring that they will fail to win elections without them. Thus, when it comes time to “negotiate” with the unions for pay, benefits, pensions and all the rest of the items on the table, the foxes have taken charge of the chicken coop. When private sector unions negotiate with business owners there is at least a serious opponent on each side of the table. For the public sector unions, it’s essentially a case of the unions negotiating with themselves since they control who gets elected.
The result of that process, when taken to its absurd conclusion, is Chicago today. So how’s that working out for you?
Shovel ready work in Obama’s Chicago = Bodies needing buried.
The Democrats have looted the city treasury and the state treasury. They need money from other states to pay for their limousines and Bahamas vacations. They couldn’t possibly reduce their own spending.
Democrats have run Chicago for decades. How will they blame this on Republicans???
OK - let’s check the boxes:
1. City controlled by far left democrats for the last 60 years.
2. Union public union goons support/money required for anyone to win ANY political office in the city. The state and city are closed shop.
3. Voted for obama 74%
4. Has instituted every far left program ever imagined.
5. Extremely high taxes (property, income and sales).
6. And the city is in a state with almost all the same problems for the same reasons.
The day is almost here when the progressives finally run out of other peoples money.
Cue up - We are all victims. No one could see this coming. A promise is a promise. We need a BAILOUT - it is only fair.
On the plus side - The perfect city for obama to build his library with foreign donations.
And this doofus Shaw never mentions the T-rex in the room-—bond debt and the usury that goes with it. Also, the bungling incompetence of the officialdom spending those billions and billions.
About 2013 the Chicago Tribune did an excellent series of actual real investigative reporting-— yeah, I was shocked-— concerning the wretched incompetence of the Chicago spending machine in the last twenty years
In the Big Ed arena they dropped hundreds of millions on plant improvements to buildings that were then closed. Another fascinating little tidbit was that they went at least ten years without putting a penny into the teacher retirement plan which had been nearly fully funded but it ain’t now.
Another little factoid-——a law I think the RINO statehouse passed twenty years ago that lets the Mayor of Chicago and cronies push bonds without putting them up for election to the voters. Mayor Daley smiled.
Anyhow, this series contained lots of info and is worth a read for those interested in a slow motion urban finance train wreck. I feel for the population segment of Illinois who don’t deserve to be tax-raped to support their worthless inferiors like Rahm and his ilk.
Another formerly great American city ruined by rat infestation.
I have a bottle of 18 year old Glenfiddich I’m saving for the day of the crash here. I’m going to pour myself three fingers of it, light my last Honduran hand roll, watch the rosy glow as Chicago goes up in flames, and I’m going to laugh and laugh and laugh.
Then the NPP goes to Condition Red.
We’re seeing the dawn of the inedible $100 Chicago deep dish pizza - $25 for the pizza plus $75 in city taxes.