Thursday, June 29, 2017

Illinois, Porto Rico and...Connecticut.

Are Illinois & Puerto Rico Our Future? by Patrick Buchanan
Excerpt: If Governor Bruce Rauner and his legislature in Springfield do not put a budget together by Friday, the Land of Lincoln will be the first state in the Union to see its debt plunge into junk-bond status. Illinois has $14.5 billion in overdue bills, $130 billion in unfunded pension obligations, and no budget. "We can't manage our money," says Rauner. "We're like a banana republic." Speaking of banana republics, Puerto Rico, which owes $74 billion to creditors who hold its tax-exempt bonds, and $40 billion in unfunded pension liabilities, has already entered bankruptcy proceedings. The island's imaginative 38-year-old governor, Ricardo Rossello, however, has a solution. Call Uncle Sam. ... Then there is Connecticut, a state that has long ranked in the top tier in per capita income and wealth. Connecticut, too, appears wobbly. Rising pension benefits, the cost of servicing the state debt and falling tax revenue due to fleeing residents and companies like Aetna and General Electric, have dropped Connecticut to near the national bottom in growth prospects. "The state's population is falling: Its net domestic out-migration was nearly 30,000 from 2015 to 2016. In 2016, it lost slightly more than 8,000 people, leaving its population at 3.6 million," (Excellent if very worrisome article, and gee, here's Connecticut, my home state, getting prominently mentioned again. There's a principle that says "if something can't go on forever, then it won't", and we can see examples of how that works out in Greece and most recently and even more dramatically in Venezuela. Or the three cities in California that have declared bankruptcy because of impossible pension obligations. What is going to happen long term with states and cities that dig themselves into holes so deep they can't see the sky anymore? Well, either everyone of us gets to suffer and pay for their foolishness in higher taxes and inflation, or they get to undergo some unpleasant adjustments. Personally I favor the latter, and for politicians to finally start to act responsibly. A fantasy, perhaps, but if it doesn't happen, there will be unpleasant adjustments for all of us. -Del)

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