Showing posts with label Bailout. Show all posts
Showing posts with label Bailout. Show all posts

Sunday, May 24, 2015

[Economy/Commentary] What Will Drive Illinois to Ask Washington for a Bailout by Steven Moore

 Earlier this month the Illinois Supreme Court overturned a state law that would help fix the state’s notorious pension crisis. What a tragedy for the state’s taxpayers. The justices basically ruled that the pension arrangements are iron-clad, although these pensions are on a course to bankrupt the state and imperil public services that Illinois families depend on. The unions come first. This could have negative consequences for more than half the states that are trying to defuse government employee pension time bombs.
By way of background: Illinois has one of the deepest public employee pension holes in the nation. The long-term deficit is estimated at above $110 billion and the red ink rises every year. Even in California—where several cities have declared bankruptcy—the pension sink hole isn’t as deep on a per capita basis.
The watchdog group Open the Books reports that there are more than 5,000 teacher and other education officials who receive an annual pension of more than $100,000 a year. Worse yet, half of all government employees retire with benefits before age 60. That’s more than twice what a typical private worker gets for having worked 12 months, not nine months, a year.
The Illinois court invalidated a 2013 pension fix that was enacted by a Democratic legislature and a Democratic governor, Pat Quinn. That law cut off the front door to the pension swindle—switching new workers into defined contribution programs like 401k plans. The law also adjusted the automatic cost of living adjustments (now at 3 percent annually regardless of inflation). The reform also adjusted the retirement age for new employees after January 2011, highly important because at least half of the employees covered are retiring before age 60—including 70 percent of teachers. Even the features of the law dealing with new employees entering the bankrupt system were unbelievably tossed out by the court meaning that the costs must keep rising inexorably into virtual perpetuity.
The victims of these daunting pension costs are citizens who rely on state services. Pension checks are crowding out funding for everything else and last year rose 12 percent as most state spending is being cut or frozen.
More than 5,000 teacher and other education officials receive an annual pension of more than $100,000 a year. Worse yet, half of all government employees retire with benefits before age 60.
Thanks to this ruling, there is no way out of the pension calamity absent a repeal of the pension clause in the Illinois Constitution.
The state can’t borrow—it already has the worst credit rating in the nation. It has to borrow less—not more. Last week’s court decision sent interest rates on Land of Lincoln debt to even higher levels—near junk bond status. Days later, Chicago bonds were marked down to junk status.
The state is already making deep cuts in other spending programs. To accommodate lavish government retiree pensions, the court has rules that everything else—from funding for schools, roads, bridges, prisons, and police services—gets whacked. Current Governor Bruce Rauner is taking on the unenviable job of cutting at least $6 billion from state spending in order to balance the budget. The Court just made his job doubly excruciating.

Monday, December 23, 2013

Democratic senator says Obamacare could have 'meltdown,' hurt party

WASHINGTON (Reuters) - President Barack Obama's healthcare law could have a "meltdown" and make it difficult for his Democratic Party to keep control of the U.S. Senate next year if ongoing problems with the program are not resolved, a Democratic senator said on Sunday.
Senator Joe Manchin of West Virginia, who has urged delaying a penalty for people who do not enroll for health insurance in 2014 under the law, told CNN that a transitional year was needed for the complex healthcare program, commonly known as Obamacare, to work.
"If it's so much more expensive than what we anticipated and if the coverage is not as good as what we had, you've got a complete meltdown at that time," Manchin told CNN's "State of the Union" program.
"It falls of its own weight, if basically the cost becomes more than we can absorb, absolutely."
The White House has been scrambling for months to control the damage from the botched October 1 launch of the law, formally called the Affordable Care Act, which aimed at making sure that millions of Americans without health insurance are able to receive medical coverage.
There have been complaints from consumers about higher premiums than they previously had to pay for health insurance after their old plans were canceled because of new standards under the law, as well as lingering problems with the main web portal used to sign up for insurance, HealthCare.gov.
Manchin said Senate Democrats who are up for re-election next year are "feeling the weight" of the program's woes and could have trouble keeping their majority in the chamber.

Tuesday, July 23, 2013

FORMER OBAMA CAR CZAR: BAIL OUT DETROIT

President Obama’s former car czar, Steven Rattner, now says that federal taxpayers should bail out the entire city of Detroit. In a Friday op-ed for the New York Times, Rattner writes, “neither the state nor the federal government has evinced any inclination to provide meaningful financial assistance. That’s a mistake. No one likes bailouts or the prospect of rewarding Detroit’s historic fiscal mismanagement. But apart from voting in elections, the 700,000 remaining residents of the Motor City are no more responsible for Detroit’s problems than were the victims of Hurricane Sandy for theirs, and eventually Congress decided to help them.”

Except, of course, that the citizens of Detroit have voted repeatedly for the same politicians who got them into this mess over and over. But Rattner continues, “America is just as much about aiding those less fortunate as it is about personal responsibility. Government does this in so many ways; why shouldn’t it help Detroit rebuild itself?”
The big problem with this proposal is that it puts the burden on federal taxpayers for bad local decisionmaking. But that doesn’t bother Rattner: “Given the depth of Detroit’s hole, no one should doubt that one of the important principles of the auto rescue — shared sacrifice by creditors, workers and other stakeholders — should be maintained.”
The only problem is that the sacrifice is consistently made by taxpayers, not by those who make policy or benefit from it.

Monday, October 1, 2012

DeMint joins national effort to keep feds from bailing out state pension systems


Illinois Democratic Gov. Pat Quinn is getting hit with a nationwide backlash over his suggestion that the federal government bail out the state employees’ pension program
.
Critics have in the past several days pounced on the suggestion, made last year when Quinn, in announcing the state’s fiscal 2012, said part of Illinois' long-term effort to reduce the estimate $167 billion in under-funded liabilities would be to seek “a federal guarantee of the debt.”

Among those leading the charge is Republican Sen. Jim DeMint. The South Carolina senator has joined the Illinois Policy Institute’s national “No Pension Bailout” campaign -- an effort to stop Congress from attempting to rescue failing state and municipal pension plans.

“Our greatest concern is states will assume they can run their pension systems into bankruptcy and then turn to the federal government for bailout,” DeMint said Thursday.

He also suggested the problem is the result of state legislators trying for decades to win over voters through pension promises based “on accounting methods that would put any business in jail.”

The conservative policy group estimates the total amount of under-funded pension liabilities in states is at least $2.5 trillion, with Illinois leading the nation.

The basic plan floated by Quinn would be for the federal government to rescue the pension program through buying the state’s bonds, which critics say are too financially risky to attract investors.  

Quinn said after announcing the budget that seeking the federal guarantee was only a precaution, then later called the related wording a “drafting error,” according the non-partisan Citizens Against Government Waste, which nevertheless gave the governor its September 2012 “Porker of the Month” award.

Via: Fox News


Continue Reading...

Popular Posts