An Illinois bankruptcy could mean debt for other states
Illinois has been ordered by a judge to use 100% of their state budget to pay for pensions in their state now. If I were living there, I certainly wouldn’t play the lottery. They have no money now to cover anything but pension liabilities. Those same pensions are in the stock market which is at an all-time high. If it drops at all, those pensions will go bye-bye and people will have no money, no jobs and lots of anger. People tend to get testy when they are hungry and have no recourse. It’s beginning to look a lot like Venezuela in Illinois these days and it will get just as scary if they don’t do something and fast. Unfortunately, I don’t think there is much they can do. It’s way too late for that. They let the Ponzi scheme go on for too long.
Forever now, Illinois has had the worst fiscal policy in the nation. But there are many states that are not far behind. Both parties in the state have been in a race to the bottom of the money barrel and the Land of Lincoln has repeatedly flirted with near-bankruptcy and junk-bond level credit ratings. For the second year in a row, the legislature has not been able to agree on an operating budget. They are frozen like a dear in the headlights of an oncoming truck.
Illinois is caught in a catch-22. Unlike city and county governments, states cannot legally declare bankruptcy as a means of shedding debt by forcing creditors, bondholders, and government retirees to absorb some of the loss. An Illinois bankruptcy is not possible. They can’t get out of this… there is literally no way out.
At least one writer for the Chicago Tribune, John Kass, is now suggesting that Illinois simply be dissolved. That they be divvied up by the surrounding states who would absorb her. Then we take one star off our country’s flag. Not so fast.
Many people and business have fled the state because of crushing taxation and skyrocketing costs. Not to mention out of control crime… see Chicago, which is nothing less than a killing field. And here is Kass’ explosive plan: “Dissolve Illinois. Decommission the state, tear up the charter, whatever the legal mumbo-jumbo, just end the whole dang thing. We just disappear. With no pain. That’s right. You heard me.” Well, it sounds like the ultimate solution, but there’s just one itsy bitsy problem here. It really solves nothing.
Those pensions won’t just go away because the state does. Other states would have to cover the debt. And if they don’t, then you will have very angry people rioting in the streets. Yes, there would be bankruptcies, but as stated before, bankruptcy doesn’t cover things like state pensions. People are going to get screwed over this. A whole state may get screwed over this. And it is the fault of greedy politicians and those who criminally stripped the state of every dime they could grab on the way out the door.
Maybe Illinois doesn’t deserve to survive as a state. But do other states deserve to take the fall for Illinois? This would affect Indiana, Wisconsin, Iowa, Missouri, and Kentucky. I can’t imagine their citizens and their leadership would be thrilled at the prospect. They’ve got enough troubles of their own these days.
Illinois has $251 billion in unfunded public union pension liabilities. They haven’t passed a budget in years. They have a negative credit rating and they can’t pay their bills. The state is defaulting and if I lived there, I’d get the hell out before the riots and killing begin a la Venezuela. I foresee the federal government having to step in and take things over – they’ve done it before. They will seize businesses and banks. Martial law is a real possibility here and people will go to prison over this. Trust me.
So, no… dissolving the state isn’t the solution. An easy way out of this is long past. Time to dance and it’s going to be a b*tch. If I lived there… I’d pack up my family and leave. Right now.