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Illinois Stops Paying Its Bills, But Can’T Stop Digging Hole

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http://www.nytimes.com/2010/07/03/business/economy/03illinois.html?_r=1&ref=business

CHICAGO — Even by the standards of this deficit-ridden state, Illinois’s comptroller, Daniel W. Hynes, faces an ugly balance sheet. Precisely how ugly becomes clear when he beckons you into his office to examine his daily briefing memo.

He picks the papers off his desk and points to a figure in red: $5.01 billion.

“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.

Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”

For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget.

Then there is the spectacularly mismanaged pension system, which is at least 50 percent underfunded and, analysts warn, could push Illinois into insolvency if the economy fails to pick up.

States cannot go bankrupt, technically, but signs of fiscal crackup are easy to see. Legislators left the capital this month without deciding how to pay 26 percent of the state budget. The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.

“Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”

As the recession has swept over states and cities, it has laid bare economic weakness and shoddy fiscal practices. Only an infusion of federal stimulus money allowed many states to avert deep layoffs last year.

Cuts in Work Forces

The federal dollars are nearly spent. Last month, local governments nationwide shed more than 20,000 jobs. Should the largest struggling states — like California, New York or Illinois — lay off tens of thousands more in coming months, or default on payments, the reverberations could badly damage a weakened economy and push housing prices down still further.

“You’re not seeing these states bounce back, and that could be a big drag on the national economy,” said Susan K. Urahn of the Pew Center on the States. “It could be a very tough decade.”

In Illinois, the fiscal pain is radiating downward.

From suburban Elgin to Chicago to Rockford to Peoria, school districts have fired thousands of teachers, curtailed kindergarten and electives, drained pools and cut after-school clubs. Drug, family and mental health counseling centers have slashed their work forces and borrowed money to stave off insolvency.

In Beardstown, a small city deep in the western marshes, Ann Johnson plans to shut her century-old pharmacy. Because of late state payments, she could not afford to keep a 10-day supply of drugs. In Chicago, a funeral home owner wonders whether he can afford to bury the impoverished, as the state has fallen six months behind on its charity payments, $1,103 a funeral.

The end game is approaching.

How much longer can this farce continue?

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http://www.nytimes.com/2010/07/03/business/economy/03illinois.html?_r=1&ref=business

The end game is approaching.

How much longer can this farce continue?

You've been searching the net for over two years for these bad news stories to post on here. I suppose when Illinois sorts itself out then you will be able to find some bad news in the property section of the Mogadishu Echo.

Edited by headrow

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To be fair, you don't really need to search very hard or very far these days. More than 40 US states are either essentially bankrupt or in serious financial trouble.

There is no easy way to fix it.

Edited by Errol

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You've been searching the net for over two years for these bad news stories to post on here. I suppose when Illinois sorts itself out then you will be able to find some bad news in the property section of the Mogadishu Echo.

Bad hair day?

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Bad hair day?

I just find it very strange that somebody can spend their saturday night looking for bad news from Illinois to post on an english web site about house prices.

We all want a HPC but do you really think that the troubles in Chicago are going to drive down the price of a semi in Cleethorpes to levels that are affordable to most?

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I just find it very strange that somebody can spend their saturday night looking for bad news from Illinois to post on an english web site about house prices.

We all want a HPC but do you really think that the troubles in Chicago are going to drive down the price of a semi in Cleethorpes to levels that are affordable to most?

God damn it! Someone always has to re-introduce reality :lol:

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I just find it very strange that somebody can spend their saturday night looking for bad news from Illinois to post on an english web site about house prices.

We all want a HPC but do you really think that the troubles in Chicago are going to drive down the price of a semi in Cleethorpes to levels that are affordable to most?

Actually I do. The USA is imploding gradually, but it is gathering pace. It will lead to worldwide markets crashing again, if the Eurozone does not beat them to it. It is debt deflation and it now beyond stopping. It can be slowed by more printing, but the stone rolling down the hill is too heavy to stop.

The Baltic Dry Index (another thread on here today) beinga measure of shipping and therefote world trade has dropped over 40% since May. Make no mistake the recession will be back and will be much worse - even Depression Mk 2. The HPC proper is in the early stages now. The only sad part about that, is it will be very painful for us all. But it is necessary to wipe the debt slate clean.

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We all want a HPC but do you really think that the troubles in Chicago are going to drive down the price of a semi in Cleethorpes to levels that are affordable to most?

Yes, at least in real terms. if not nominal.

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We all want a HPC but do you really think that the troubles in Chicago are going to drive down the price of a semi in Cleethorpes to levels that are affordable to most?

Absolutely. And I'm not kidding.

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The state of Illinois simply cannot afford the level of pay and number of employees and contractors it has on the state payroll. And of course it cannot fund the pensions as promised as they are too massive.

Its not even about morality anymore about how much public sector workers are worth or not worth. There simply isn't enough money to go to everyone on the public payroll. There is about enough to go to half of them.

States/sovereigns do not need to go through bankruptcy, as they can decide at any moment to not honour any contract without legal repercussion. The only question really left is who is going to get fired or downgraded in pay.

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The state of Illinois simply cannot afford the level of pay and number of employees and contractors it has on the state payroll. And of course it cannot fund the pensions as promised as they are too massive.

Its not even about morality anymore about how much public sector workers are worth or not worth. There simply isn't enough money to go to everyone on the public payroll. There is about enough to go to half of them.

States/sovereigns do not need to go through bankruptcy, as they can decide at any moment to not honour any contract without legal repercussion. The only question really left is who is going to get fired or downgraded in pay.

Sovereigns can of course change the law, and [then*] print the means to pay their bills :)

US states don't even have that luxury, I suppose when push comes to shove they either get bailed out by their sovereign, or go bankrupt (as several US municipalities have done).

* presuming the present law restricts their money-printing abilities, as EU and EZ treaties do.

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Sovereigns can of course change the law, and [then*] print the means to pay their bills :)

US states don't even have that luxury, I suppose when push comes to shove they either get bailed out by their sovereign, or go bankrupt (as several US municipalities have done).

* presuming the present law restricts their money-printing abilities, as EU and EZ treaties do.

:D

I'm not sure if US states are considered sovereigns under the law. I know the municipalities have to go through bankruptcy, but it sounds like the states do not have to honour contracts.

You know that municipal bankruptcy last year was a landmark case, I read it had been something like 140 years since a municipality had gone bankrupt in America. It also show imo the real severity of the challenges that you have to look back more than a century including past the great depression to look at precedent.

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An amazing thing is these states are going bankrupt now, before the mass of baby boomers even retires.. With dozens more states nearing bankruptcy. Imagine 5 years out when the mass is retiring.

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I just find it very strange that somebody can spend their saturday night looking for bad news from Illinois to post on an english web site about house prices.

We all want a HPC but do you really think that the troubles in Chicago are going to drive down the price of a semi in Cleethorpes to levels that are affordable to most?

If only the US had been driving the global economy for 60 years.

God I feel such an idiot.

I mean subprime had no affect on the UK banking system, it just affected the US.

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Needs more Keynesian economics.

The Austrian's plan isn't working.

Keynesian economics applied consistently through the cycle might work.

Austrian economics applied consistently through the cycle might work.

Applying Austrian economics during booms and Keynesian economics during busts is doomed to fail abysmally.

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You've been searching the net for over two years for these bad news stories to post on here. I suppose when Illinois sorts itself out then you will be able to find some bad news in the property section of the Mogadishu Echo.

Spot on. After all, what impact did the Sub Prime crisis in the US have on the UK economy?

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Spot on. After all, what impact did the Sub Prime crisis in the US have on the UK economy?

Last time I heard it was contained and could never happen here.

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According to US law, states are not legally allowed to declare bankruptcy. Municipalities and counties are though.

EDIT: they can of course just default (and wait for the riots, lynchings etc.)

Maybe they'd better default on out-of-state bondholders rather than their local employees :)

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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