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Our own worst enemy, part 243

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Illinois

* Illinois is one of the states that would find itself with an even bigger budget hole if the feds don’t act by the end of this year…

Having counted on Washington for money that may not be delivered, at least 30 states will have to close larger-than-anticipated shortfalls in the coming fiscal year unless Congress passes a six-month extension of increased federal spending on Medicaid.

Governors and state lawmakers, already facing some of the toughest budgets since the Great Depression, said the repercussions would extend far beyond health care, forcing them to make bone-deep cuts to education, social services and public safety.

Gov. Edward G. Rendell of Pennsylvania, for instance, penciled $850 million in federal Medicaid assistance into the revenue side of his state’s ledger, reducing its projected shortfall to $1.2 billion. The only way to compensate for the loss, he said in an interview, would be to lay off at least 20,000 government workers — including teachers and police officers — at a time when the state is starting to add jobs.

And that means an even bigger drag on GDP and GSP…

If fiscal stimulus is so great, then why hasn’t the Obama administration’s massive stimulus program helped improve the economy? Well, via Mark Thoma, the answer is that there hasn’t been any net fiscal stimulus, all the Obama administration’s efforts plus the automatic stabilizers have done is mitigate the contractionary impact of state and local policy

Yeesh.

* More…

States and localities cut 22,000 jobs in the past month, wiping out half the month’s gain in private-sector jobs… In total, state and local governments have cut 231,000 jobs, including 100,000 local education jobs, since the summer of 2008.

A handy chart…

* The inescapable reality…

There has been much talk of the size of the US federal stimulus, and much debate about whether or not it has been an effective counter-cyclical policy instrument.

But it’s important to remember that the proper measure for fiscal stimulus is not spending by the federal government; it is spending by all levels of government. And when you look at the contributions to US GDP growth (Table 1.1.2 at the BEA site), total government spending has been a drag on growth over the past two quarters. The increases at the federal level have not been enough to compensate for the spending cuts at the local and state levels.

I suppose that this could be interpreted as good news: despite a contractionary fiscal stance, the US economy is in recovery. But it raises the question of how much better it could be doing if it had an expansionary fiscal policy.

Yes, the deficit is a very important consideration, but history has shown (FDR during the Great Depression when he tried to cut the deficit after the economy had stopped spiraling downwards and Japan when it did the same thing) that cutting spending too soon - for instance, as in Japan, while business were starting to recover but were using profits to pay down debt - is a dangerous thing indeed. I’ve said it before and I’ll say it again, if the feds don’t step in to help out the states, we’re heading for some real trouble in the economy.

…Adding… I forgot to post the bond rating downgrade by Moody’s…

On Friday, Moody’s lowered Illinois’ bond rating down one notch to A1 in reaction to the failure of lawmakers to address the state’s long-term structural budget woes.

“We view the failure to enact significant new recurring fiscal measures as a troublesome indicator with respect to Illinois’ governance and management profile,” Moody’s said.

Although the rating service said Illinois’ outlook is stable because it can raise taxes and cut spending, it warned that recent budgeting failures don’t bode well for the future.

“The longer the solutions to the state’s challenges are deferred, the more difficult they will become to implement,” Moody’s said.

Bill Brady responds via press release [NOTE: What’s now posted is an updated release. The campaign has asked that the original statement, which was in draft form and contained an edit suggestion - “is this correct?” - be taken down. No biggie, so here you go with the new one]…

“The most recent Moody’s report is yet another independent voice proving the failed economic policies of Governor Quinn has driven our state into the ground.

The decision by Moody’s to further downgrade our credit now gives Illinois the dubious distinction of having the same rating as California.

While the Governor continues to blame others for his failures, Moody’s cited a ‘chronic failure of political will’ for this downgrade. Voters have had enough. We need a clean break in Illinois.”

posted by Rich Miller
Monday, Jun 7, 10 @ 2:05 pm

Comments

Where do the Feds get the money?

Comment by Greg B. Monday, Jun 7, 10 @ 2:14 pm
David Broder and George Will teed off on each other on the issue of stimulus for teachers in Sunday’s Washington Post. I’ll give you three guesses on which sides they took, and the first two don’t count.

Deficits are a symptom of a struggling economy, but they’re not a disease. I agree with Reagan, Keynes, Robert Novak and Alexander Hamilton. Sometimes deficits are not only necessary, but vital.

Everyone remember the deficits “as far as the eye can see” with Reagan? Everyone remember Clinton paying them back? The answer to both is no.

Money and finance are how you keep score, the lubricant to the economy. They’re not the be-all and end-all to anything. Those pieces of papers and computer entries only have value because you think they do. They don’t plow the field or build the house.

Comment by wordslinger Monday, Jun 7, 10 @ 2:15 pm
I don’t see how rewarding bad fiscal behavior at the state level and local level is a good thing. See stroger, todd, cook county.

Comment by shore Monday, Jun 7, 10 @ 2:18 pm
If our economy is so dependant on government sector spending to stay afloat, they we’re already in deep trouble.

Comment by truthman Monday, Jun 7, 10 @ 2:21 pm
Shore, this is not only about fixing behavior in the short-term. You’ve gotta have a bigger picture perspective than that.

There are a lot of economists who would argue that focusing on the long-term defecit issues now and confusing that for the short-term need for more stimulus is a bad idea. One of the reasons we’re in this mess is because business are not creating enough jobs. And that’s partly because consumers don’t have the money to spend (or the confidence and security to spend the little they have). And one of the reasons consumers don’t have the dough is because we’re continuing to whack away at the “Public Sector Ruling Class” and we’re losing more and more middle-class wage earners daily. They might be finding short-term, temporary, poorly-paying service jobs, but that’s not the same thing.

There’s a good economic argument to be made that we need MORE short-term stimulus, perhaps in the form of federal money sent to states to preserve some of the PSRC jobs (i.e. teachers and social service providers). We could also extend unemployment benefits. And, of course, in the big picture, we might need to look at other ways to bolster a struggling and dwindling middle class.

It’s too bad Bill Brady doesn’t get that.

Comment by ShadyBillBrady Monday, Jun 7, 10 @ 2:27 pm
–If our economy is so dependant on government sector spending to stay afloat, they we’re already in deep trouble.–

It’s not. A big problem was that the U.S. economy was dependent on consumer debt — housing, associated purchases, and credit cards — and that collapsed because the smart guys thought housing would never go down.

The economy churned on 401k confidence, equity borrowing and personal credit. That’s a cotton-candy diet that was bound to lead to a breakdown.

Comment by wordslinger Monday, Jun 7, 10 @ 2:28 pm
Don’t expect it. We are in the eye of the hurricane. Our fiscal storm isn’t half over yet.

We have an election year where the spenders are worried their spending will ruin their re-elections. Those out of power are pledging to not to spend, not to tax and not to stimulate. They are the candidates with the wind at their backs electorally. Incumbants have targets on their backs in even safe districts. So those in power are now paralyzed to try anything but short term spin and attack. They will not offer any new controversies in this election cycle because they are too scared to keep moving in the direction they naturally gravitate.

Voter’s guts are telling them to pay off their debts first. They are voting that way in November.

Those who believed we could borrow our way out of this cannot stem the panic their borrowing has already caused. The only folks in office thinking they can tax their way out of this are the lonely true believers. Like a hunter facing a charging bear, that first shot needed to have worked. It is June 2010 - that Stimulus didn’t work, and now the bear is closer and angrier.

This weekend shows that we have not hit bottom. The anemic growth since the Stimulus was spent will be lost when the calendar meets 2011 with the massive tax increases that will wipe it all out.

2011 will be worse than 2010. Yeah - I’m worried!

Comment by VanillaMan Monday, Jun 7, 10 @ 2:30 pm
Greg, the Feds get the money by printing it (to simplify). The states don’t have that ability. After a few good years of recovery, the deficit can be turned back into a surplus. (See wordslinger, above.) Since states don’t have their own Federal Reserve or monetary policy, we have to rely on Washington in the down times. Deficit spending is not (necessarily) debt we are handing to our grandchildren, and can indeed make things better in times of emergency.

Comment by Ray del Camino Monday, Jun 7, 10 @ 2:33 pm
VM,

Thanks for telling us what you think the voters are thinking. You’ve been doing yeoman’s work channelling the thoughts of our fellow citizens.

But is it possible that voters who oppose new taxes or borrowing are in fact choosing a course that will make the economy worse instead of better? And you seem to suggest the stimulus failed, but you don’t seem to offer much support for your assertion.

If you had a time machine, VM, would you go back and “undo” the stimulus? Do you think today’s economy would be better, worse or about the same without the stimulus.

And for the record, I’d appreciate your thoughts, not what you think the voters think.

Comment by 47th Ward Monday, Jun 7, 10 @ 2:48 pm
Wordslinger:

Increased government spending will not solve the problem. World War II got us out of the Depression, not the New Deal (which did allieviate some of the suffering).

Our economy has always been dependant on consumer spending….

Comment by truthman Monday, Jun 7, 10 @ 2:57 pm
===Increased government spending will not solve the problem. World War II got us out of the Depression===

And, of course, there wasn’t a massive increase in government spending during WW2. It’s amazing that you can write those two sentences one after the other without your head exploding from extreme cognitive dissonance.

Comment by Rich Miller Monday, Jun 7, 10 @ 2:59 pm
So let me get this straight. Moody’s downgraded Illinois because of the failure to increase taxes. Quinn supports the tax increase, Brady opposes yet. Yet Brady is trying to use the downgrade against Quinn??? Very Blagojevichian.

And his campaign employs people who forget to take the factchecking notes out of the release before sending it?

Comment by Don't Worry, Be Happy Monday, Jun 7, 10 @ 3:00 pm
==Government spending will not solve the problem // World War II got us out of the Depression==

Phew, it’s a good thing Wars are not part of Government spending.

Comment by ShadyBillBrady Monday, Jun 7, 10 @ 3:01 pm
===Moody’s downgraded Illinois because of the failure to increase taxes.===

Wrong. “Recurring fiscal measures” can also mean cuts to base spending.

===And his campaign employs people who forget to take the factchecking notes out of the release before sending it? ===

Yeah. That was weird.

Comment by Rich Miller Monday, Jun 7, 10 @ 3:01 pm
lol … for once, Rich and I were thinking exactly alike.

Comment by ShadyBillBrady Monday, Jun 7, 10 @ 3:02 pm
Raising taxes on some members of the middle class to retain employment for others in that same middle class doesn’t make sense, though. Robert Reich has suggested that tax breaks currently directed at working class earners should be expanded into the middle class–well into the middle class. This could be funded by raising taxes on upper-income earners, most of whom appear to be doing just fine during this recession.

Unfortunately, Quinn seems stuck in the old days when the middle class was not under the economic stress it is under at present…and likely to be under for the foreseeable future, even as the recession recedes.

Comment by cassandra Monday, Jun 7, 10 @ 3:10 pm
Yes! Please bring the issue to the Illinois voters asking them to spend (via tax dollars) our way out of this problem.

Just look to New Jersey to see what will happen here. Voters are turning against public sector unions and teachers. Tax payers, earning less than $50,000/year are tired of hearing the griping from public sector employees that are earning sometimes double that amount.

The issue this fall, for the voters, will be whether we have a taxing problem (Quinn’s solution), or a spending problem (Brady’s approach).

Voters don’t care about the details. They just know they are tired of paying taxes to fund public sector employees that earn more than they do and retire with a fat pension.

The anger is real.

Comment by Downstater Monday, Jun 7, 10 @ 3:12 pm
Cassandara, I agree with you on the idea that raising taxes on one sector of the middle class to retain jobs for others in the middle class doesn’t make sense.

I believe the best solution lies in a progressive income tax structure. Quinn’s proposal for a tax increase isn’t perfect (partly for the reason you’ve identified) BUT it’s better than what we have now (because it at least brings in more revenue).

And it’s better than Bill Brady’s plan.

And, Downstater, actually Brady’s approach is also that we have a taxing problem. He thinks we tax too much (apparently for everyone but him).

Of course, Brady’s also said we need to do “more with less” in this State. Talk about the magic beans approach.

Comment by ShadyBillBrady Monday, Jun 7, 10 @ 3:16 pm
Those looking at the decline in government headcount should look further. Politicians attempt to give the impression of increased efficiency by “doing more(or the same) with less”, the increased cost of consultants and contractors brought in to do the tasks of the civil-servant workforce outweighs the touted savings. The ‘privatized” workforce is temporary, untrained, and more costly. So, the decline in the gov’t workforce is misleading, and even more so when considering the increase in unemployment created by the cuts.

Comment by JustaJoe Monday, Jun 7, 10 @ 3:17 pm
–Increased government spending will not solve the problem. World War II got us out of the Depression, not the New Deal (which did allieviate some of the suffering).–

WWII was done on the cheap? I missed that.

For the record, government spending in the U.S. is significant to the economy, but not dominant. You can’t have guns and butter without it.

But brains and innovation have always lead to better products and productivity rule. Government investment in R&D are huge. For a little Champaign victory, read up on the Mosaic project. With all apologies to Al Gore, the kids in Champaign invented the Internet.

Comment by wordslinger Monday, Jun 7, 10 @ 3:17 pm
Downstater:

Why are you angry at public employees? You have bought into the myth that public employees make boatloads of money and then retire to West Palm Beach on a big pension. That is simply false. Check with the retirement systems and they will tell you that lavish pensions are few and far between - though they are always the one’s that are publicized. I will never understand why some view public employment as a sin, and seem to believe public employees should just volunteer their services. Guess what? Public employees have families to feed and I happen to live paycheck to paycheck on my government salary. So take your anger and stick it somewhere. Public employees pay the same taxes you do and have the same concerns you do.

And, by the way, we have BOTH a revenue and a spending problem. Until people accept that the state’s fiscal condition will NEVER EVER improve!!!!!!!!!!!!

Comment by RJW Monday, Jun 7, 10 @ 3:18 pm
–Our economy has always been dependant on consumer spending…–

No sir. The U.S. consumer economy started with Sears and Henry Ford, but didn’t explode until the folks on the GI Bill started cashing in. It’s a relatively new phenomenon.

Comment by wordslinger Monday, Jun 7, 10 @ 3:19 pm
What is Brady going to do to cut the structural deficit? He lobbied against a tax increase, borrowing at a lower interest rate and failed to file any amendments (to my knowledge) to cut the budget. This guy is quick to complain but never seems to have any answers (at least none that make sense).

There is a right way and a wrong way to cut the budget. We should not depend on the government to get us out of this economic mess. We need businesses to spur job growth. Businesses create jobs and tax revenue that fund government. Without business there is no funding mechanism for government. We need to focus on policies that are going to create jobs in the private sector.

However, this is not the time to worry about cutting the deficit. Right now we just need to stop it from getting worse. We need responsible government spending that is going to get a rood return on investment, such as investing in infrastructure, education, workforce development and technology for the future. There are positions out there that do not have the qualified workers to fill them.

They also need to start encouraging workers to get a job and stop taking unemployment. Businesses are having a hard time finding qualified workers right now because it’s easier for people to just collect their unemployment insurance. This is where we need to look more at the European model of unemployment. You get it for a certain amount of time, but then it’s time to put on an orange vest and earn the check.

Comment by Ahoy Monday, Jun 7, 10 @ 3:22 pm
I love the criticism of Bill Brady’s tax situation. No mention is made of the six figures he paid in taxes for several years.

His firm suffered a serious downturn. His taxes fell as well. As they should have.

Did he do anything illegal? Nope
Is there evidence he didn’t pay what was owed? Nope

He complied with the state and federal tax laws and now you want to criticize him for following the law. Too bad you didn’t have as high of standard for Gov. Blago or his enabler, Governor Quinn.

Here’s a fun experiment for you. Ask any Illinois taxpayer whether they realize that Illinois State workers pay NO state taxes on their pension benefits. It’s fun to see their reaction when they realize that fact.

The anger is real.

Comment by Downstater Monday, Jun 7, 10 @ 3:25 pm
Ahoy:

People are collecting unemployment because some of them aren’t ready to have their old salaries adjusted yet. I lost my job at the end of 2008 and was lucky enough to get another job in 2 months time. The price was a 16% cut to my old salary. Until people can accept such choices, they will remain on unemployment looking for that old salary.

Comment by RJW Monday, Jun 7, 10 @ 3:26 pm
===Businesses are having a hard time finding qualified workers right now because it’s easier for people to just collect their unemployment insurance.===

Yes, because $350 per week is soooo sweet. Where exactly are these employers who are desperate for qualified employees? And I hope the orange vest isn’t from IDOT, because then you’d be depending on government to create jobs…

Comment by 47th Ward Monday, Jun 7, 10 @ 3:28 pm
Downstater … got anything to include with your latest comment that’s relevant to the actual topic at hand? I mean, I’ve got a clear agenda. But I can still contribute to the discussion. You’ve apparently got nothing but talking points.

And, for the record, the topic of this post isn’t really about Illinois “spending its way out of this problem”. It’s about the Federal government aiding states like Illinois who find themselves in such a dire financial situation.

And, apparently, your boy Billy doesn’t seem to have a problem accepting a government bailout when it comes from the Feds and benefits him … so maybe he’d feel the same about the state (sorry, couldn’t resist).

Comment by ShadyBillBrady Monday, Jun 7, 10 @ 3:29 pm
Downstater:

“Illinois State workers pay no taxes on pension benefits” - Are you serious. NOBODY in Illinois pays state taxes on retirement income. Check your facts.

Comment by RJW Monday, Jun 7, 10 @ 3:29 pm
RJW,
Here’s a test for you. And maybe I’ll be wrong on this. But go to wikipedia and enter your town name. Then look at what the median salary is for males or females (as the case may be for you). Are you making more or less than the median, as a public sector employee.
I’m guessing your salary AND benefits are a lot more. Also remember you get a pension. Most private employees get a little money into their 401(k), and that’s it.
You can also check out the salaries for teachers and administrators against the median salary.

The anger is real.

Comment by Downstater Monday, Jun 7, 10 @ 3:30 pm
RJW,
No one pays taxes on pension benefits? OUTSTANDING!!! Can I have my accountant call you as a witness when I draw on my 401(k) and refuse to pay any state taxes?

Comment by Downstater Monday, Jun 7, 10 @ 3:33 pm
Downstater:

I don’t have to look b/c I know I make more than the median. It doesn’t change my individual situation though, b/c, as I described above in another post, I lost my job and ended up making 16% less than what I was making. Also, that comparison is bogus as I would need to compare my salary to the median income for those in my type of work since I have a job with specific technical requirements.

Also, my mother worked in the private sector in an automobile factory (not one of those that have failed) and she made a lot more than me as a laborer (no degree) AND got dollar for dollar match to her 401(k).

Comment by RJW Monday, Jun 7, 10 @ 3:35 pm
Downstater, pension income is not taxed in Illinois.

Comment by Rich Miller Monday, Jun 7, 10 @ 3:35 pm
Downstater:

I didn’t say 401(k). I said PENSION (traditional meaning). If you get a regular pension from your employer you DO NOT pay state income tax on it. Call the Department of Revenue if you don’t believe me.

Comment by RJW Monday, Jun 7, 10 @ 3:38 pm
Thanks for telling us what you think the voters are thinking.

I think that is the bottom line. We spin here all day, but bottom line - voters are not believing in spin. Not even the stuff they like to hear.

But is it possible that voters who oppose new taxes or borrowing are in fact choosing a course that will make the economy worse instead of better?

Yes it could, but voters have enough collective wisdom to sense that borrowing hasn’t worked, so more borrowing wouldn’t be the proper way to go. If say, the Stimulus did keep unemployment below what the Administration forecasted, then that would be a plus with voters. If say, the Stimulus did create new private industry jobs as predicted by the Administration, then that would also be a plus with voters.

You can work with that earned trust.

If the Stimulus worked as predicted, we would be seeing more spending because we would see that it worked. Congress and Illinois has one-party rule right now. If the Stimulus worked, there would be anothers, and include Republicans who wanted to enjoy the Stimulus’ political benefit.

But that isn’t happening, right? Hint! Hint!

And you seem to suggest the stimulus failed, but you don’t seem to offer much support for your assertion.

I don’t have to make any assertions. I don’t even have to pretend to channel voter’s morose on this. I’ll just point you back to what the Administration said the Stimulus would do when they were selling it.

Then I would be kind enough to point you to what the Administration was claiming would happen after the economy still fizzled. If you recall, the Administration went from “jobs created” to “jobs saved” to now counting temporary US Census jobs. Next week, I guess they’ll start calling unemployed people “pre-employed”?

I will even be kind enough to point you to what the Administration claimed would happen to unemployment after they altered their claims.

At what point do you either listen to what the initial critics worried about, or even listen to what the Administration’s supporters are now worried about? By both critics and supporters claims, the Stimulus - didn’t work. You don’t have to challenge me. I’ve moved on.

Look up. See? We’re in the deepest hole we’ve ever dug. Want to keep digging? Why? At what point does your faith hit reality?

Comment by VanillaMan Monday, Jun 7, 10 @ 3:40 pm
Downstater:

Even I was wrong. 401(k) distributions are not taxed either. Maybe you should talk to your accountant. See the material below from the State Department of Revenue.

Does Illinois tax my pension, Social Security, or retirement income?
•llinois does not tax distributions received from:
•qualified employee benefit plans, including 401(K) plans;
•an Individual Retirement Account, (IRA) or a self-employed retirement plan;
•a traditional IRA that has been converted to a Roth IRA;
•the redemption of U.S. retirement bonds;
•state and local government deferred compensation plans;
•a government retirement or government disability plan, including military plans;
•railroad retirement income;
•retirement payments to retired partners;
•a lump sum distribution of appreciated employer securities; and
•the federally taxed portion of Social Security benefits.

Comment by RJW Monday, Jun 7, 10 @ 3:42 pm
And here’s the link to RJW’s list… http://www.revenue.state.il.us/individuals/pension.htm

It’s amazing how much ignorance is out there. Your 401k is safe from taxation, downstater. And you didn’t even know it.

Comment by Rich Miller Monday, Jun 7, 10 @ 3:44 pm
RJW,
My point is that most of today’s workers (and voters) no longer get a pension. Hence, when they hear that the state workers get their pension benefits (tax free) they are outraged, because they are clearly paying taxes on their 401(k) dollars.
Whether their anger is misplaced or not, doesn’t matter. They clearly sense an inequity with state-paid workers (who they are supporting with their tax dollars).

As was reported on this very blog. Wood Dale District 7 instituted a pay freeze for teachers. Why do you think this is happening? Some are starting to realize that many voters have had enough. Public sector unions have hit a wall. They no longer have the sympathy of voters.
We are laying off teachers in our district. And I haven’t heard one complaint from the parents. They are simply tired of unions spending us into a rathole.

Comment by Downstater Monday, Jun 7, 10 @ 3:47 pm
Downstater, are you unable to read plain English?

Comment by Rich Miller Monday, Jun 7, 10 @ 3:48 pm
VM,

I respect your opinion. I respect this guy’s opinion more, however, since he’s done some research and offers some facts. This is a pro-con story, so you can find something to work with here too. His point, like Rich’s, is that the federal government’s second stimulus package should be focused on aid to states and local governments.

http://www.nytimes.com/2010/02/17/business/economy/17leonhardt.html

I have faith in government VM. Our system is not even close to perfect, but it’s better than the alternatives. I’ll take my chances here.

PS: The anger is real. It’s just misguided.

Comment by 47th Ward Monday, Jun 7, 10 @ 3:51 pm
I remember all the news stories of what a financial powerhouse Brady became as the budget process went on. The way he took the lead and demonstrated a strong bipartisan effort was simply awesome. He was clearly the go to guy. Can’t wait to see him in action.

The stimulus was there to stop the bleeding. What would have happened if all the big banks had gone the Lehman way? How many trillions in investment and retirement money would have been wiped out? Remember those governors saying no to any Fed money? Suddenly they cannot get enough, ..now. This may sound like a real rant, but how many electronic anythings sold in Illinois are even made in North America? Where does 1/2 the stuff at WalMart and other big box stores come from and the jobs to make that stuff? Is that $400,000 home in Lombard really worth that much when the exact same house in Springfield may be priced at $180,000? The economy needs to stabilize over a long period with steady, decent paying jobs. It will require government financial intervention because there are no other entities big enough for the infrastructure, services, and regulation required. As Regan said ‘Government is the problem’, but then you can always rely on groups like BP, Enron, and Goldman Sachs to always do the right thing and never cut corners.

Comment by zatoichi Monday, Jun 7, 10 @ 3:51 pm
Downstater:

I’m not in a union and my pay has been frozen for a while, plus I’m taking furlough days.

Also, as Rich said, do you read? Please re-read the post on pensions. They are NOT TAXED by the State of Illinois. It is not some special perk enjoyed by government workers.

Sheesh!!!

Comment by RJW Monday, Jun 7, 10 @ 3:51 pm
Okay (egg on face).
I’m wrong. Sorry to waste everyone’s time.

Comment by Downstater Monday, Jun 7, 10 @ 3:56 pm
RJW, Downstater will get back to you as soon as he’s passed the question on and received his newest talking points.

Comment by ShadyBillBrady Monday, Jun 7, 10 @ 3:58 pm
Shady,
I apologized already. Geesh.

Comment by Downstater Monday, Jun 7, 10 @ 3:59 pm
Yes, yes … you apologized at the same time I wrote my alst comment.

Of course, you never actually answered the questions that were directed at you. But, I suppose your apology will have to suffice.

It is interesting though that so many in the Brady camp are advocating for severe cuts to teachers, social service workers and other taxpayer-funded jobs (and turning away Illinois jobs because of idealogical issues - like the Thompson prison sale and repurposing), all the while whining because jobs are disappearing and leaving the State.

Things like the education jobs bill at the Federal level could save THOUSANDS of jobs in Illinois, could preserve THOUSANDS of consumers in the state … and could help the State and municipal/local governmening bodies get through this mess.

But, if you’re idealogixally against that, and instead favor creating temporary, service-sector, low-wage jobs that benefit business owners and protect profit-margins, well then it makes sense to not be willing to see the benefit in such things.

Comment by ShadyBillBrady Monday, Jun 7, 10 @ 4:09 pm
Shady,
How do we benefit the state economy, long term by adding even more public sector (and public funded) jobs?
Illinois and the Federal Government have scared the heck out of business owners. Businesses are putting off hiring, because they don’t know what’s coming down the pike. Whether it’s Obamacare, Card Check, even the Gross Receipts Tax - most business owners are scared about the economic and legislative future of this country and this state.
They are putting off hiring, and probably will for the foreseeable future.
Seeing even more public sector jobs added now, only adds to employers angst that more taxes are coming.

Comment by Downstater Monday, Jun 7, 10 @ 4:24 pm
===Seeing even more public sector jobs added now===

It’s not about more at this point, it’s about not cutting jobs even deeper.

You really need to take a little time to read things before you post here from now on, Downstater.

Comment by Rich Miller Monday, Jun 7, 10 @ 4:27 pm
The loss of state, county, municipal, and school jobs was slowed by the Stimulus package, but I’ve always said we would see the unemployment rate stay the same or go even higher once those positions started to be terminated.

Comment by Fan of the Game Monday, Jun 7, 10 @ 4:27 pm
===Businesses are having a hard time finding qualified workers right now because it’s easier for people to just collect their unemployment insurance.==

That’s just stupid, wrong, vulgar and not backed by ant evidence.

Are you in business, brother? Have you tried to get a loan recently? Have you tried to renew your old line of credit, the lifeline of small business?

Banks aren’t lending. They’re borrowing with no interest at the discount window and paying back what they owe. It’s a beautiful scam.

The shrinks will tell you that the key to happy life is health, someone to share it with and good work.

You ever been out work, brother? You think it’s a sweet deal, collecting unemployment?

John McCain got whacked, unfairly, when he said the fundamentals of our economy are strong. They are. We have the people, the resrources and the wealth.

We got screwed by the high-flying, bipartisan financial whiz kids.

They are way worse than the Mafia ever was.

Comment by wordslinger Monday, Jun 7, 10 @ 4:28 pm
Rich,
My apologies. I’m obviously having trouble with multi-tasking today.
Here in my downstate county, we have multiple school administators with $100,000 jobs. An athletic director makes $80,000 plus a year, while our median income is in the $30,000 range.
This is a disparity that has people seeing red. While it’s doubtful that any budget cuts would even touch the top earners (because of seniority and tenure), people no longer care about the details. (Sadly, maybe I’m falling into that category, as well.)
Teachers unions in New Jersey that used to be loved by voters, are now feeling “not so loved”.

Comment by Downstater Monday, Jun 7, 10 @ 4:36 pm
We have a structural deficit. While spending CAN be cut in theory, in practice nothing meaningful in scale can be done while still maintaining a level of services most people want. Yes, pension reform is long overdue but you can only reform going forwards, we are stuck with what we have already committed to. Therefore, raising taxes is necessary. Brady is against that. It is incredible that he would bring up Quinn’s lack of leadership on this issue. Quinn knows we have to raise taxes. Brady doesn’t admit it. Was Brady’s nose growing while he allowed his campaign to release this statement?

Comment by Far Northsider Monday, Jun 7, 10 @ 4:37 pm
Downstater … wow. Just wow.

The anger is real. The facts aren’t.

Next time you blow up spectacularly, take Cassandra with you.

Comment by Reality Check Monday, Jun 7, 10 @ 4:38 pm
GDP is not as important as GPI.

Comment by Squideshi Monday, Jun 7, 10 @ 4:45 pm
Downstater - At least here where I live school administrators and athletic directors work for school districts which are run by locally elected school boards. Not much to do with municipal or state govt. Yes, I know the state partially funds education, but the voters can vote out their school board anytime they think administrators and athletic directors are overpaid. Are they doing that?

Comment by Far Northsider Monday, Jun 7, 10 @ 4:49 pm
Does any one know if we had reasonably good cause to believe we would get additional fed stimulus money for the 4th quarter? I had just assumed we wouldn’t.

Comment by steve schnorf Monday, Jun 7, 10 @ 4:54 pm
Thank you for the link. I read the article.
I suppose we could spin this for a while, but to me, the bottom line in June 2010 is that enough voters out there do not believe that the Stimulus worked well enough to do again.

That is the environment we find ourselves in. There are times when even the right solutions can’t be sold. There are times when the right solution was sold at the wrong time. However it happened - the Stimulus, unlike other similar spending bills, didn’t meet the political standards set by either critics, or supporters.

Consequentially, voters are not accepting of more. There will have to be a different approach taken to assist the states. Instead of fighting voter apprehensions, I believe it should be accepted and pandered to in order to craft something that will address the concerns exhibited by voters at this time.

I have no idea what that is. I have no idea what is going to happen when populists, tea partiers, libertarians, conservatives and others take control - if the take control - next year. What I do know is that if history is a guide, voters will give this new group as much a honeymoon as they normally do and will be patient as long as they normally are. I personally do not believe that the anti-tax, anti-government and others will deliver a solution that will address our fiscal crisis. Yet, it is important to recognize that it is better for voters to believe they are doing something, than nothing or giving up.

We are at the point where a majority have given up. Voters are no longer accepting excuses from those currently in power. History shows that is normally a good thing. We’ll see.

Comment by VanillaMan Monday, Jun 7, 10 @ 5:02 pm
===There are times when even the right solutions can’t be sold.===

I agree. And I hope our elected officials have the guts to put state and country above politics and do the right thing, regardless of political consequences.

Thanks.

Comment by 47th Ward Monday, Jun 7, 10 @ 5:07 pm
VM: You don’t think Illinois voters buy spin? Really? “What was she thinking?”

Downstater. I missed your apology to me. At what point did I say anything about ADDING public sector jobs? I could have sworn I said saving and preserving. You “apologize” and then repeat the exact same behavior over and over.

You even did it in your “apology” to Rich.

Tenure and seniority aren’t really the point when talking about administrators … and the incomes you used as your examples were administrator positions. Again, the facts don’t match up to your rhetoric.

Then you claimed that at some point “voters” “loved” teachers unions in New Jersey and that they don’t love them as much anymore. Really? Voters loved teachers unions? Not sure there was ever a lot of love there. But certainly things like pension envy and the fact that often the impact of a recession lags in the public sector has a lot of people bashing teachers and the “public sector ruling class” …

Comment by ShadyBillBrady Monday, Jun 7, 10 @ 5:29 pm
Brady…..I’ve been a life long republican and am offended that you would take cover behind ” a chroniuc failure of political will” being the dems alone. Give me a break you’re all gutless and I’m disgusted with you and every other member of the general assembly (other than those who came up with some solutions recently, (none being repubs, however). You and most other members only care about the “spin”. You can spin this…….YOU’RE A BIG PART OF THIS MESS AND DON’T TRY AND DENY IT. How can anyone believe either caucus?

Comment by downhereforyears Monday, Jun 7, 10 @ 5:42 pm
Growth comes out of the private sector; where else would they get the wages, anything, to tax? Instead of taking and borrowing our money to give it back to us as a stimulus, after taking a third of it for their biddies, they should cut and get rid of a lot of taxes (and regulations)!

WWII didn’t end the Depression, getting rid of the New Deal did: Truman didn’t ask them back. Otherwise we could have a great economy from drafting millions of men and sending them out of town. Then, we could use our money to build things and blow them up. We had to fight the Axis to survive, so it was a good long-term investment; but it didn’t work any economic wonders.

Comment by Morning in America Monday, Jun 7, 10 @ 6:47 pm
“I’ve said it before and I’ll say it again, if the feds don’t step in to help out the states, we’re heading for some real trouble in the economy.”

But that might have some kind of negative impact on some slice of a wealthy person’s investment income, Rich.

Obviously that is completely unacceptable.

– MrJM

Comment by MrJM Monday, Jun 7, 10 @ 6:52 pm
===getting rid of the New Deal did===

When FDR cut spending in an attempt to balance the budget in 1937, the economy went right back down into the toilet.

Comment by Rich Miller Monday, Jun 7, 10 @ 6:53 pm
the only thing to pull Illinois out of the muck!! Sucession, independence, we have all the resources, fuel-minerals-education-science-transportation-energy-agriculture-natural resources-labor-the party of yes and the party of no…and we still have Oprah even tho we take her for granted! I say MARCH on Peducha and show the USA U.S Grant was the real deal!!!! Oh maybe we should wait til the NHL playoffs are over…..sorry

Comment by bwana Monday, Jun 7, 10 @ 7:41 pm
==When FDR cut spending in an attempt to balance the budget in 1937, the economy went right back down into the toilet.==

Exactly! The fact was that FDR built the foundation of the economy on “political sand” rather than the solid bedrock of building a self sufficient private economy.

Without inflating a floundering, ineffective and inefficient economic base by printing and borrowing massive amounts of money, the economy toppled.

Until the Wars, the US economy couldn’t stand on its own two feet, and likley never could have with FDRs economic policies.

Like many of our battles of WWII, it seems that FDR was more “lucky” than good, considering our industrial capacity was the only one spared the ravages of the war.

Comment by PalosParkBob Monday, Jun 7, 10 @ 8:34 pm
Guess we’ll have to cut some programs. Start with all the Blago initiatives, then take a look at where we are.

Comment by Park Monday, Jun 7, 10 @ 8:45 pm
Rich,

The Panic of ‘37 had to do with the Federal Reserve pulling another of its dumb stunts from atop Mt. Olympus, while the rest of us ar laboring in the real world below.

The academics at the Fed wanted banks to reduce their reserves which had built up into 1935 (the stock market hit bottom in 1932), so it could force them to borrow from its “discount window” and control policy, which is why it increased their reserve requirement. The idea was to raise the amount they were required to hold to lower the amount they had to lend. Smart, huh?

From mid-August of 1936 to the beginning of May, 1937, the Fed used its newly granted power to double the reserve requirement. Guess what? There was a Depression on — the bankers really did want the extra cushion to protect themselves. They turned around and build them right back up again by chopping lending (any of this starting to sound familiar?). That caused the “Roosevelt Recession” from May ‘37 to June ‘38. The stock market had seen it coming and crashed earlier to beat the rush.

The private economy is the engine that powers government and the country. When Washington shut off its credit, aka the fuel, it stopped running.

Mr. JM,

The federal government has to sell bonds with a deficit (and always) to get the money to send back to Springfield. It takes dollars away from the private, productive sector. That may be voluntary, although it still takes money away from us — capital that cannot be lent as a mortgage or turned into a car loan, or even to buy a strip mall.

You don’t suppose our august leadership, Dan Proft’s “Chicago Nine”, had been raising spending to absorb all the money available in a booming economy rather than set a budget of what we needed, do you? A surplus would have led to a courtyard full of peasants with pitchforks and torches demanding tax cuts right in front of the castle.

It really depends upon how the government in Springfield wants to make the money disappear. They can build bridges and buildings or create new and expanded departments, hire people. The bridge will last a long time without too much attention, and you can shut off the lights and close the building during a recession, New employees can vote for you, so it was a no-brainer. Load up the payroll. But now, we still need to feed the payroll, or they’ll get mad at election time.

Comment by Morning in America Monday, Jun 7, 10 @ 9:32 pm
Re: the Panic of 1937: you can take Morning in America’s word for it, or you can take the Chicago Fed’s word for it. One is easier and shorter, the other not as easy or short, but that one has graphs! And footnotes!

http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2009/ep_4qtr2009_part2_velde.pdf

Sometimes it’s easy to misremember history wrong.

Comment by 47th Ward Monday, Jun 7, 10 @ 9:51 pm
47th Ward,

Thanks for looking into it, see page 7 of the Chicago Fed’s piece.

The point we have to worry about is government operates within its own protected world. It has taxes for revenue; we have to make sales in the real world. It has laws to force people do business with it; we have competitors to give the customer choices and us fits as we innovate to address his interests, not ours.

This leads to the additional concern of Quinn getting his income-tax high, only to see less money than expected come in, because it slowed the economy down. Whereupon, he will be tempted to raise taxes some more, which will cause the economy to slow down some more, which will…

Comment by Morning in America Monday, Jun 7, 10 @ 10:21 pm
“Does any one know if we had reasonably good cause to believe we would get additional fed stimulus money for the 4th quarter? I had just assumed we wouldn’t”

Yes. The Magic 8-Ball Oracle, when consulted, said ’signs point to yes’.

Seriously, though I had heard there was some reason to believe that it would happen, but I don’t know the source enough to know if that qualified as ‘reasonably good’ over just ‘hope’.

Comment by Returning Dog Monday, Jun 7, 10 @ 11:45 pm
“Here in my downstate county, we have multiple school administators with $100,000 jobs. An athletic director makes $80,000 plus a year, while our median income is in the $30,000 range. This is a disparity that has people seeing red.”

How many of those seeing red have 6-8 years of college education? Most administrator gigs require something on that line. 1 in 4 public school superintendents in IL have their PhD.

How many of those seeing red are on some form of public assistance, or are dependent upon agricultural subsidies? Glass houses and all that…

Comment by Returning Dog Tuesday, Jun 8, 10 @ 12:17 am
Someone should tell Bill Brady that Moody’s supports a tax increase.

Comment by Yellow Dog Democrat Tuesday, Jun 8, 10 @ 6:50 am
Thanks Rich for this great post and thread.
Characteristically, Public opinion during severe economic downturns is fooled by the “Paradox of Thrift.” Thinking that applying austere household economics and cut back mentality to the aggregate government spending is smart policy. It’s not, as government needs to step in to replace private demand. The crowding out argument that government is competing with private borrowers doesn’t apply during economic downturns.

Contrary to public opinion, Obama didn’t provide enough stimulus, as Paul Krugman, Joe Stiglitz, and others said last year and continue to urge a second stimulus package for this year.
Unlike FDR, Obama didn’t throw out the previous economic policy makers and deliver real change. For this failure, Obama and the democrats are about to pay a terrible political price, but the country will be languishing economically for years to come. As Krugman has said, we are facing a Japan-like “Lost Decade.”

Comment by Louis Howe Tuesday, Jun 8, 10 @ 6:55 am
According to a May, 2010 Zogby poll published today in the Wall Street Journal, consisting of a short, qualitative “test” of eight basic economic questions, the following results were obtained from 4,835 American adults based upon their self identified political leanings:

Politics percent incorrect

Libertarians 15.7%
Very Conservative 22.3%
Conservative 17.6%
Liberal 60.1%
Progressive/very liberal 67.6%

Obviously, there’s a clear trend here. The more politically “liberal” you are, the more likley it is that you’re grossly ignorant of basic economics and economic policy cause and effect.

What I’ve been reading in this blog certainly seems to validate this poll’s results.

Comment by PalosParkBob Tuesday, Jun 8, 10 @ 7:42 am
It’s probably just time to ban private property and give it all to the state… deficit = solved.

Comment by John Bambenek Tuesday, Jun 8, 10 @ 8:53 am
VM: You don’t think Illinois voters buy spin? Really? “What was she thinking?”

You are not completely reading what I wrote. I didn’t say that.

Comment by VanillaMan Tuesday, Jun 8, 10 @ 8:56 am
Sorry, VM, could have sworn at 3:40 you wrote:
“I think that is the bottom line. We spin here all day, but bottom line - voters are not believing in spin. Not even the stuff they like to hear.”

Comment by ShadyBillBrady Tuesday, Jun 8, 10 @ 11:54 am