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Wednesday, Jul 8, 2015 - Posted by Rich Miller * From the twittersphere…
Greece’s government debt as a percentage of GDP: 175.1 percent Puerto Rico’s government debt as a percentage of GDP: 150 percent * OK, now take the absolute worst case bookkeeping scenario on Illinois’ debts…
That “guaranteed basis” will have to be paid in full only if there are very low capital gains on pension fund investments. Some ultra-conservatives have been leading the way on this particular pension debt measure and there is a very hot debate over whether their forecasts are accurate. But, even though I disagree with that estimate, add it all up anyway and you wind up with a worst case scenario of $342 billion in total debt. Illinois’ GDP for last year was $745.9 billion. So, worst case scenario, Illinois’ debt is 46 percent of GDP. That’s really bad. But not Grecian bad. But it’s exactly why we need some economic growth, folks. Disagree with how he wants to get us there if you will, but the governor’s absolutely right that we have to try to grow out of this problem. And we sure as heck won’t get there with extremist austerity measures. We’ve all seen what that did to Greece.
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- foster brooks - Wednesday, Jul 8, 15 @ 11:57 am:
$14 an hour jobs wont do it either
- Roadiepig - Wednesday, Jul 8, 15 @ 11:58 am:
How is @StatehouseChick even considered a reporter? All she is a PR shill for whatever the Trib’s editorial board is promoting. Sad days for a once great paper (that I cancelled about 2 years ago, after being a downstate daily subscriber for over 30 years)
- AC - Wednesday, Jul 8, 15 @ 11:58 am:
Why let facts get in the way of hyperbole? /s
- Roadiepig - Wednesday, Jul 8, 15 @ 11:59 am:
And what- no Detroit in your meme Kristen?
- Liberty - Wednesday, Jul 8, 15 @ 12:00 pm:
The real indicator is economic output which is sorely lacking in Greece and Puerto Rico compared to Illinois. However I would like to ask Statehouse Chickadee how that conservative beloved flat tax is working in Illinois? Shouldn’t our economy be booming and business flush with cash?
- the Other Anonymous - Wednesday, Jul 8, 15 @ 12:00 pm:
The issues driving the Greek crisis are issues faced by countries, not states. They are exacerbated by the intricacies of the Euro, which is not an issue here.
Anyone who think that Greece is an appropriate analogue to Illinois is showing how little they know of economics.
- Salty - Wednesday, Jul 8, 15 @ 12:00 pm:
Also, Greece’s economy has contracted by 25% over the last 5 years and their unemployment rate is 25%. Huge difference.
- Oswego Willy - Wednesday, Jul 8, 15 @ 12:04 pm:
@TribTowerChick - Thanks @capitolfax for pointing out that my credibility matters very little to me. It’s that Simple #7DaysTillPayday
@TribTowerChick - I’d respond to the math hyperbole but the Governor’s Office hasn’t sent me my “own thoughts” yet. #IndependentShill
- The Dude Abides - Wednesday, Jul 8, 15 @ 12:04 pm:
Agree with Rich on all points. Comparing Illinois to Greece is pretty ridiculous but we do need to spur job growth. Severe austerity measures can actually suppress tax revenue which we don’t need right now.
- Oswego Willy - Wednesday, Jul 8, 15 @ 12:07 pm:
@TribTowerChick - something, something, (1st Rauner talking point), something, “simple”, (2nd Rauner talking point) #Owned
- Grendel Drendal - Wednesday, Jul 8, 15 @ 12:08 pm:
500 manufacturing jobs at $55,000/year just moved to Indiana
http://www.nwitimes.com/business/jobs-and-employment/manufacturer-will-hire-around-workers-at-k-salary-in-east/article_35e1d154-58cf-5a9f-ba8c-70010814aaeb.html
- Just Observing - Wednesday, Jul 8, 15 @ 12:09 pm:
Legislators: Let’s please legalize marijuana in the name of economic development (and saneness)!!!
- 47th Ward - Wednesday, Jul 8, 15 @ 12:10 pm:
===But it’s exactly why we need some economic growth, folks. Disagree with how he wants to get us there if you will, but the governor’s absolutely right that we have to try to grow out of this problem.===
It is not as if Rauner is the only enlightened person who realizes that growth is the key. I am tired of hearing people like McQueary and others suggest that if you aren’t pro-Rauner, you aren’t pro-growth. I definitely disagree with much of his agenda but do believe states that invest in education and infrastructure do see more growth than those that choose austerity. And lowering wages, Rauner’s central goal, is the definition of austerity.
As far as I’m concerned, it has been the Republicans pushing austerity since the recession began and our sluggish recovery is a direct result of this failed strategy.
- History Prof - Wednesday, Jul 8, 15 @ 12:11 pm:
Agreed: Austerity will not get us there, Rich. And agreed, neither will $14 per hour, Foster Brooks.
How about massive infra-structure rebuilding and massive re-investment in education, including returning university tuition to the nominal fee it used to be? Wouldn’t this be a plausible growth agenda?
Fund it with a progressive income tax. Are there the votes in the House and Senate to put a Constitutional Amendment allowing for a progressive income tax? Didn’t voters approve it in the non-binding referendum?
How about this: the military asks for what, a 6 year commitment in exchange for attendance at the military academies? Leave Illinois within 6 years of your almost free education and you have to pay for it! No more race to the bottom (of the country.)
- Me too - Wednesday, Jul 8, 15 @ 12:12 pm:
I’m sure the state cancelling all contracts for this fiscal year will in no way be similar to austerity measures, nor will cutting 4 billion from the already reduced budget
- Streator Curmudgeon - Wednesday, Jul 8, 15 @ 12:14 pm:
How ironic it is now that U.S. corporations have shipped so many manufacturing jobs overseas that Republican governors are crying for economic development and job growth.
Didn’t anybody realize 30 or 40 years ago that when you ship jobs overseas, you ship income taxes with them, not to mention the spending workers do with their paycheck?
Illinois may not have a business-friendly climate, but to some extent this is a corporation-created problem, and I don’t look for corporations to solve it.
Profits trump patriotism. That’s why there are so few new factories being built in the U.S.
- PublicServant - Wednesday, Jul 8, 15 @ 12:14 pm:
Right on 47th.
- Stuff Happens - Wednesday, Jul 8, 15 @ 12:14 pm:
I am not an accountant, so this might be a stupid question.
What is ‘unfunded pension liability’ vs. ‘Market value of unfunded liability’? I thought I understood, but then I don’t understand why the market value is used in the calculation against GDP.
- Grendel Drendal - Wednesday, Jul 8, 15 @ 12:14 pm:
47th Ward & History Prof:
Is the infrastructure plan to help more manufacturers get to Indiana? And the progressive tax plan to give them more encouragement them to leave?
- Oswego Willy - Wednesday, Jul 8, 15 @ 12:17 pm:
===I am tired of hearing people like McQueary and others suggest that if you aren’t pro-Rauner, you aren’t pro-growth.===
You’re either with Rauner or not, in this instance, it’s grown, and it’s very tiring to be so divided.
Rauner admits revenue is needed, and Rauner won’t make (then own) these draconian cuts he stands in front of groups and waits for cheers from his enlightened supporters.
When Rauner understands vetoes mean ownership too, then the cuts and revenues needed will finally be honestly discussed.
Not one moment before then.
- History Prof - Wednesday, Jul 8, 15 @ 12:19 pm:
Grendel,
You might lose a few, but not that many. And the gains over time outweigh the loss. Look around the country and around the world: high and progressive taxes correlate with greater economic prosperity, virtually without exception.
Low taxes are like crack: they yield a temporary high, but then the infrastructure and the brain rot.
The rich in third world countries (or Greece) pay little tax.
- Ghostbusters - Wednesday, Jul 8, 15 @ 12:21 pm:
@ foster brooks - “$14 an hour jobs wont do it either”
Not alone but it’s a huge, instant lift. Higher minimum wage has been shown to improve economies time and time again.
The logic is simple - more disposable income across a broad base* leads to more spending leads to better economies.
* the broad base is key. The more people you have with disposable income the better it gets. The obverse is why trickle down/ voodoo economics never worked - not a large enough broad base.
- Norseman - Wednesday, Jul 8, 15 @ 12:21 pm:
Well said 47.
- Any Mouse - Wednesday, Jul 8, 15 @ 12:23 pm:
To get a true sense of the citizen;s debt load, you need to combine the State debt, with federal (72.5% publicly held debt to gdp) in 2014. That comes in at 118% before local government, not catastophic but not trivial either.
The guarantee basis is overstated but the assumed return of 7.75% is too high and understates the liability. The important thing is we know what the benefit payouts will be, we don’t know what the investment returns will be.
If we really believe in the assumed 7.75% return on pension assets we could borrow the entire deficit at less than 7.75%, invest the proceeds and and as long as the loan was big enough, the taxpayers wouldn’t have to pay a dime.
That is obviously a crazy strategy because the taxpayers are on the hook for both the pension promises and the loan repayment regardless of how the markets perform.
It’s not going to take “extreme austerity” to fix this, it is going to take some combination of higher taxes, fewer services, and making total compensation (salary, pensions and health care) for state jobs comparable to the private sector.
(We have a big problem with stagnating middle class jobs and compensation, but that is not going to be solved by making government employment an insulated island.)
- Tha missin g - Wednesday, Jul 8, 15 @ 12:29 pm:
I would like to know, specifically, how the governor’s turn around agenda would lead to economic growth in our state. Please show your work with examples of how these policies are helping turn around other states/countries/hemispheres.
- Fight Fair - Wednesday, Jul 8, 15 @ 12:30 pm:
Nice to see that all those here who piously pledged to have a more civil forum, minus the personal attacks, are keeping their word — and mindful of the site’s warning to commenters against “gratuitous insults.”
- ihpsdm - Wednesday, Jul 8, 15 @ 12:31 pm:
If you read Boomerang by Michael Lewis, you’d understand that the problem in Greece was that they weren’t collecting taxes. In election year, tax collectors were pulled off the streets. Furthermore, they weren’t enforcing the tax laws. A self-employed individual is exempt from paying taxes if they made $12,000 or less. Thus, doctors could report that they made $12,000 in any given year and no one would question it. If they were challenged by y the government, it could take up to 8 years before the court process was exhausted and back taxes could be collected. The government workers, for the most part, were the only ones paying taxes through withholding upon receipt of their paychecks. Greece fudged the books for years in order to comply with the requirements to maintain EU status.
There are no reforms that are going to generate billions of dollars right now. The Turn Around Agenda even includes a line item that lowers revenues for local jurisdictions. None of these items help balance the FY ‘16 Budget, which should be the Governor’s main priority. There are no reforms that are going to create enough jobs in the FY that would generate billions of dollars. The only action the Governor has made is signing a bill that increases spending.
- History Prof - Wednesday, Jul 8, 15 @ 12:35 pm:
Ghostbusters,
Thanks for the clarification of Foster’s remaks. I agree with the minimum wage hike as well. I was agreeing with Foster that even at a higher rate, minimum wage jobs in and of themselves are not the answer. In a global economy, you want, in general, to be in the high education, high wage market if at all possible. But yes, there do not seem to be any empirically justified reasons for a low minimum wage, econ 101-level modeling not withstanding.
- Anonymous - Wednesday, Jul 8, 15 @ 12:39 pm:
[This commenter has been banned for life.]
- History Prof - Wednesday, Jul 8, 15 @ 12:39 pm:
Any Mouse,
Much of what you say seems sensible, but are you sure state workers are overpaid? I’m a quasi-state worker, and when I talk to people they are shocked at how little I make. And how do you make the comparison to the private sector since it is not always apples to apples. Did you run your comparison controlling for education level, for instance?
- @MisterJayEm - Wednesday, Jul 8, 15 @ 12:42 pm:
She misspelled “Tribune”.
– MrJM
- Cassandra - Wednesday, Jul 8, 15 @ 12:44 pm:
But, history prof, how are we going to get to that progressive income tax. And how progressive will it be. Everybody making over, say, $250k getting taxed a bit more is hardly progressive, in this age of income inequality. But even plain vanilla progressive continues to fail in supposedly liberal Illinois, even with the supposedly more liberal Democrats in charge for over a decade.
The next income tax increase, which the Democrats want and the guv too, will fall disproportionately on the middle class, not the rich, who will be about where they were before the tax in terms of economic comfort.Maybe better, if their share of the national income keeps rising. In any case,it’ll be years before the pols want to talk tax increase again, progressive or no. And there’s no service tax refuge either. Notice how little we’ve heard about expanding service taxes in recent weeks.
- VanillaMan - Wednesday, Jul 8, 15 @ 12:49 pm:
A state without a governor, or with a governor who ends up in prison, lacks executive branch leadership. We’ve had a decade of this and we are seeing the consequences of electing incompetents and crooks into the Mansion.
Secondly, since 2007 - we’ve been experiencing a national economic problem. As one of the largest US states economically, we’ve had more to lose.
We’ve been experiencing a perfect storm of gubernatorial maladministration and economic downturn. Finger point at the Speaker all you want, but you are doing that because we’ve hadn’t had a real governor since 1999. Speakers are not governors, bub. Different jobs, different duties, and they need one another to make a state work.
Politically, Illinois hasn’t had a “Four Tops” - it has had “A Flat Tire”. Without a governor, the other three can only survive. In this economy, that doesn’t work well. Look around. Governors are important.
We have catching up to do. We have infrastructure to build. We have infrastructure to maintain. We have important tasks that would have been done a decade ago - getting worse.
This does not mean we need to throw away Illinois and replace it with Arkansas, Kentucky or Idaho. We are not Wisconsin. We are Illinois, and we need to return to what we used to do before we started electing sucky governors.
Comparing us to Greece or Puerto Rico is really, really dopey. Pointing out a crisis, doesn’t make your solution to it viable.
- tominchicago - Wednesday, Jul 8, 15 @ 12:59 pm:
IF there is any newspaper that knows how to spell bankruptcy, it is the Chicago Tribune.
- Oswego Willy - Wednesday, Jul 8, 15 @ 1:01 pm:
Oh - Fight Fair -
@TribTowerChick is just doing her job,… being a shill… and ignoring just about everything learned at a statehouse.
It’s not my fault, lol
- foster brooks - Wednesday, Jul 8, 15 @ 1:01 pm:
How did Minnesotas economy improve after raising taxes on the rich? Anyone anyone?
- lake county democrat - Wednesday, Jul 8, 15 @ 1:03 pm:
Meanwhile, Texas just became a lot more business friendly:
http://www.slate.com/articles/news_and_politics/jurisprudence/2015/07/texas_supreme_court_strikes_down_eyebrow_threading_regulations_return_to.html
Don’t like it, but this is the kind of stuff we’re competing with.
- Oswego Willy - Wednesday, Jul 8, 15 @ 1:03 pm:
@TribTowerChick - thanks “Fight Fair”, unless I get my words from the Guv’s Press Office I didn’t know how to respond anymore. #SimplyProgrammed
- History Prof - Wednesday, Jul 8, 15 @ 1:06 pm:
Cassandra,
Good question. That’s why I was asking about the constitutional amendment and for a reminder about how it fared as a ballot measure last time.
The Ballot initiative was designed to provide cover to raise taxes on a progressive basis, one would have thought.
And anyway, I see not viable alternatives mentioned here. Service cuts are contractionary, as Rich alludes to in his comment about Greece. This is what the British have also proven, since they no longer read Keynes. (By the way, what is going on in Britain? The Island that produced Wilfred Owen now gives us Downton Abby? Yuck! Good to know there is a country out there making us look smart.)
- horse w/ no name - Wednesday, Jul 8, 15 @ 1:10 pm:
#StateHouseChickIsAHack Say it w/me phonetically
- Oswego Willy - Wednesday, Jul 8, 15 @ 1:13 pm:
@TribTowerChick - I was told to tweet that the Governor Rauner isn’t at fault for anything & isn’t responsivje for any actions. Ever. It’s just that Simple #HowsThat #7DaysTillPayday
- History Prof - Wednesday, Jul 8, 15 @ 1:14 pm:
Foster,
Fill us in briefly on that history.
- Oswego Willy - Wednesday, Jul 8, 15 @ 1:22 pm:
@TribTowerChick - I didn’t just cut and paste my last article from an email I got from the Guv’s Press Office, I fixed the margins. Simple. #CutAndRepeating
- Jonathan - Wednesday, Jul 8, 15 @ 1:23 pm:
FYI: The latest actuarial valuations put the unfunded liability for other post-employment benefits (retiree health insurance) at $56 billion.
http://www.illinoispolicy.org/wp-content/uploads/2014/04/OPEB1-1024×335.png
- Jonathan - Wednesday, Jul 8, 15 @ 1:25 pm:
Not sure if that link worked.
https://www.illinoispolicy.org/reports/illinois-owes-more-than-56-billion-for-retiree-health-insurance/
- OneMan - Wednesday, Jul 8, 15 @ 1:27 pm:
Well perhaps intelligent spending you might be talking. But to use just one simple and handy example…
Union Station. They are going to be spending decent money to fix the facade up, add AC to the grand hall, etc.
However if you are actually trying to get on or off a train there, it is a third world experience. Rain on the platforms (nice touch when the water coming from the ceiling is warm) or when they have to close platforms due to falling debris. But lets fix the facade.
The nicest outside in the world isn’t going to help with Amtrak ridership much if the platforms and the inside of the station is a pit.
Voters voted in favor of something in a non-binding referendum. Big difference… Not a whole lot of non-binding referendi that don’t pass at the state level.
Even if they decided to do that tomorrow it would likely be a two plus year process.
Also you really want the Illinois general assembly setting progressive tax rates? Give Rod a hard time for a lot of things, but he was right about one thing. The legislature spends like a bunch of drunken sailors. If you make it that easy for them to raise taxes on some income levels than others, they are going to go nuts.
I am fine paying more taxes (heck lets tax some services, I am fine with that). But just like they got it right on the constitution about pensions, they got it right about the flat tax IMHO.
- dupage dan - Wednesday, Jul 8, 15 @ 1:48 pm:
=== - foster brooks - Wednesday, Jul 8, 15 @ 1:01 pm:
How did Minnesotas economy improve after raising taxes on the rich? Anyone anyone? ===
First, you have to get a GA with the cojones to pass the legislation. Is there anyone like that around here? Anyone? anyone?
- CapnCrunch - Wednesday, Jul 8, 15 @ 1:48 pm:
“As far as I’m concerned, it has been the Republicans pushing austerity since the recession began and our sluggish recovery is a direct result of this failed strategy.”
Some austerity strategy.
Since the recession began the boys and girls in Washington have pumped over $6.25 trillion of stimulus into our economy and are on track to add another $500 million this year. And this number doesn’t include the $trillion the FRB printed to buy mortgages.
- Mama - Wednesday, Jul 8, 15 @ 1:48 pm:
++- Streator Curmudgeon - Wednesday, Jul 8, 15 @ 12:14 pm: ++
You are 100% correct.
- History Prof - Wednesday, Jul 8, 15 @ 1:52 pm:
Capncrunch,
Over half the stimulus consisted of tax cuts, which remain unspent and which therefore have not stimulated anything except some minor luxury spending. Compare the U.S. to Britain. Compare Minnesota to Wisconsin.
But it is actually only common sense. Should we wait for a booming economy, high wages, and high interest rates to fix our infrastructure? Does that make sense? And why haven’t all those tax cuts been invested? Lack of demand ring any bells?
- Willie Stark - Wednesday, Jul 8, 15 @ 1:53 pm:
This is the level of wit we get from @statehousechick: “It’s time for a good Samaritan to blindfold House Speaker Michael Madigan and escort him to the governor’s office. Promise him an apple, sliced thin, and a Palermo’s pizza. He’ll comply.” So begins her column coincidentally quickly re-tweeted as a link on the governor’s feed. That’s Kass-wannabe level writing. But, it’s always good to have that fallback plan in place and a healthy clips file for when the Trib starts cutting staff from non-profit centers of the paper; she’ll fit right in with Lance, Rich G. and ck.
- History Prof - Wednesday, Jul 8, 15 @ 2:12 pm:
One man,
Amtrak is not hurting for riders is it? And if you think Union Station is a pit, that seems to argue for more rather than less investment. I do ride the train, and I agree with you that our Airports and railway stations are like the third world. That’s because the wealthy pay third world tax rates. You are making my point.
I take your point that a progressive system would take a while procedurally. Fair point, but not a good reason not to do it.
If the G.A. “spends like drunken sailors,” then how come Republicans, including the current governor, but going all the way back to St. Ronald of Reagan, have never, underscore never, been able to find and slay the mythical dragon of “fraud, waste, and abuse.” Why can’t Rauner just propose meaningful but relatively painless cuts to all that drunken sailor walking around money?
Hmm. . . .Why can’t Rauner find those cuts? Why was his budget so big? Why does he acknowledge the need for revenue? ‘Splain me that one, Cap’n.
- Allexa - Wednesday, Jul 8, 15 @ 2:32 pm:
“500 manufacturing jobs at $55,000/year just moved to Indiana”
Just wanted to say it’s not so simple. Indiana just doesn’t have the qualified factory workers. I know 2 manufacturers who moved close to Indiana border and they are losing customers right and left because the people they can hire there really can’t cut it and they can’t keep up with the quality or time. I was stunned recently by the behavior of their shipping. Stunned. Not possible it would occur in Chicagoland. So, seriously NOT simple. I wouldn’t worry about the nonsense the press sells. Hence, unnamed, I would think.
- Downstate AgMan - Wednesday, Jul 8, 15 @ 2:34 pm:
Love it how the lefties here want to blame a downward move in the states economy on the GOP. Haven’t you owned the Governor and both Houses for over a decade. It’s clear your way hasn’t worked.
- Judgment Day (on the road) - Wednesday, Jul 8, 15 @ 2:43 pm:
Certainly to date haven’t seen any type of ‘growth’ agenda coming out of either Madigan’s or Cullerton’s corners - well, maybe government job growth, but certainly nothing that’s going to grow the private sector.
Where’s their growth agenda? - other than higher taxes.
A few ideas:
1) The University of Illinois - Urbana/Champaign has three Colleges within the University that really need to get the bulk of the funding going forward.
(a) College of ACES (College of Agricultural, Consumer and Environmental Sciences). Illinois has the three things we need to become a giant in Agriculture: Growing climate (not the best, but good enough), reliable and competitively priced energy, and ABUNDANT CLEAN WATER.
Take advantage of our strengths.
(b) College of Engineering
Again, take advantage of our strengths.
(c) Carle - Illinois College of Medicine.
Create a new set of strengths. Opportunity knocks. One of the side effects of ACA is negative financial impacts on current medical teaching environments. That’s opportunity for us to break into an new area, and that will have positive spin-off effects for Illinois.
Concentrate our money where our strengths are, and where we can start to grow our economy.
We need to do the same thing for all our other state universities.
Plan on closing Chicago State University. If they can’t straighten up their operation, the University needs to be shut down.
- K3 - Wednesday, Jul 8, 15 @ 3:12 pm:
I used to have a lot of respect for McQueary. Always thought she was hardworking and thoughtful. It’s tough to see her toe the party line like this.
Regardless, these comparisons move us no closer to a solution in Springfield.
- CapnCrunch - Wednesday, Jul 8, 15 @ 3:13 pm:
“Over half the stimulus consisted of tax cuts, which remain unspent ….”
-History Prof-
I think we are talking about two different things. I think you are referring to stimulus legislation while I am talking about budget deficits. If the government spends $2 and collects only $1 the extra dollar is in someone’s pocket.
- Grandson of Man - Wednesday, Jul 8, 15 @ 3:40 pm:
Some on the right compare us with Greece because they want to push their anti-tax/anti-union agendas. At least I hope that’s what they’re doing. I hope they’re really not dense enough to believe what they’re saying.
Illinois has had an average individual state income tax rate of 2.75%, between 1969 and 2010. That is an unacceptably low rate and helped cause our debt. For years, those who make up false equivalences between Greece, Detroit and Illinois enjoyed low state income taxes. Now they don’t want to pay up. Gasp! Fiscal irresponsibility from the fiscally-responsible crowd! I can’t believe it. Who’da thunk that those who accuse others of being takers are takers themselves?