Illinois Wakes Up?? – Part 2

Well, Illinois continues to be at the forefront of the news, albeit the part of the news that you want to avoid. Budget deficit. Crushing debt. Crumbling pension system. Bankruptcy?? The Land of Lincoln, home of the Daleys, the City of Big Shoulders and Caterpillar? Say it ain’t so!

Sadly, it is so.

Two recent articles highlight Illinois’s ongoing issues, as related to my original post:

The deficits will continue, despite the ongoing embarrassment. Granted, the current governor in Illinois is hobbled by years of mismanagement not of his making, but Mr. Quinn will need to continue to look for a long-term solution to our issues. Of course, making that “temporary” tax increase will be the first step. 🙂 It is somewhat relaxing to see that Illinois has had some of the lowest income taxes across the country (see graphic below), so it is about time we caught up?

With a more frightening prospect, we now hear about a movement by which states might be able to claim bankruptcy. Huh? Just so that a state can avoid pension obligations? This would be bringing the worst of corporate culture to an institution (state government) that has long prided itself on being different from a corporation. Any person in the state that is tied to a public pension should begin to worry. Those pensions, while maybe overly generous, have always been a source of stability for state workers. Keep in mind that state pensioners (like teachers) were never obligated to contribute to Social Security precisely because the pension was their retirement nest-egg. If the pension must be adjusted, it should be for state employees entering the system today, not 20 years ago.

[following was posted on Jan 18]

According to a recent editorial in the New York Times, the State of Illinois has “awoken” to its fiscal mess. How so? By raising state income taxes by 66%, and passing a significant increase in the corporate tax. According to the editorial,  Illinois has finally come up with a plan to help reduce its deficits and to close the budget gap. The deficit has been projected to be about $15 billion in the next fiscal year, but the “temporary” tax increase will reduce that deficit by only about $7 billion. Across the nation, Illinois is held up as a major financial basket-case, so something needed to be done. Yes, something needed to be done. Of course, how are we going to close the budget gap even further? More taxes?

Citizens – both private and corporate – are outraged for sure, but the  investors who track the fiscal stability of states see this move as very positive, and trumpet it as a signal of the creditworthiness of Illinois. Wow, how different can be the perspectives of those paying the taxes and those making money by lending even more money to the State?

Of course, nobody believes that this tax increase will be “temporary.” The last time Illinois raised income taxes, in 1989, the increase was supposedly temporary – until 1993 when all was made permanent. So, let’s call a spade a spade...it will be permanent. Granted, taxes had not been raised since the late 1980s, and our taxes remain below some of the states that have criticized our tax increase (New Jersey and Wisconsin). Nevertheless, such an abrupt and large tax raise gets one pretty excited. After all, the lack of tax increases has been easily rectified by the raising of every fee imaginable (multiple times) in Illinois. So, the State has received its fair share even without the income tax. But, what has the Land of Lincoln done with my taxes and fees?

Now, I am the first to support taxation and reasonable state and federal use of those taxes. In fact, I am likely a more strident proponent of taxation than your average American. Aside from all of the inevitable government waste that worries me about the destination of my taxes, I believe strongly that our governments in the United States need sufficient taxation to support the services that we all require. While some need unemployment support and welfare, I need roads, fire, police, schools and the military.

In an effort to make us feel better, the Democrats in the Illinois legislature passed a restriction that will potentially eliminate the tax increase if the state surpasses its self-imposed spending caps. If the budget rises more than 2% per year over the next few years, the State may rescind the tax increase. Sorry, but how come I do not believe this will happen?

But when are the true budget cuts going to happen, and from where are they coming?  The Democrats in the legislature claim that they will make the budget cuts necessary, but can we really expect Michael Madigan to faithfully make that happen? He has been there for too long, and he has overseen this mess as much as the two disgraced former Governors Ryan and Blagojevich.

This State needs leadership. Quinn is not it, and the Republicans have been unable to field a true leader. What will Illinois do?

Goldman Limits Facebook Investment to Foreign Clients – NYTimes.com

I am all for people making a buck, but this was simply a scam to provide the already-wealthy with yet another advantage over everyone else. Good thing the SEC took a look at it…happy my taxes are hard at work at least this time! Of course, now we have to wonder who will represent all of the foreign money that capitalizes on FB’s uber marketing machine….

Goldman Limits Facebook Investment to Foreign Clients – NYTimes.com.

Meet The Press, Dec 5: McConnell, Kerry

This was a great show. David Gregory is becoming a great influence, despite what Senator McConnell said on the show:  Meet The Press: McConnell, Kerry, roundtable.

Possible New Path to Bipartisan Agreements??

So, do we call it a compromise? Smart politics? Waffle? Sell-out? Cave-in? Breaking a campaign promise? Either way, it is a tough set of decisions for President Obama. Granted, he secured lower taxes for all of the people he wanted, he secured continued assistance to the unfortunate folks without jobs, and he made a deal on payroll taxes that will benefit many (including this writer). But was this the right deal for the country, for the people and for the Democrats? Not sure. In this age of deficit reduction and economic uncertainty, keeping the taxes the same for everyone and cutting payroll taxes was probably a bridge too far – the deal will mean another $900 B added to the debt just like that. The compromise to get this bill crafted feels too much like a thumping. As I stated earlier in a comment, President Obama should have threatened a veto and let the government ground to a halt in the name of standing up to key values, such as equity. How much have the truly wealthy compromised in the last two years?

As the article suggests, will this be a pattern? Let’s hope not.

Possible New Path to Bipartisan Agreements – NYTimes.com.

Amended 12/13 – In retrospect, this was a pretty good step by Mr. Obama. The tax bill is a major compromise for the president, but he really needed to go this route in the face of Republican opposition. Besides, Republicans wanted permanent extensions of the wealthy, and they did not get it. Of course, we will see in 2012. The key for Mr. Obama is to make sure he stays in the driver’s seat rather than continually reacting to what the Republicans want. With ownership of the WH and the Senate, he should be able to do this.

Will We Riot Too?

Today, the co-chairmen of a bipartisan commission in the United States published a draft set of recommendations for how we might be able to get a handle on our deficit and crushing debt – an economic tsunami that all experts agree must get addressed. The commission’s final report is not due until December 1, and it must be reviewed and accepted by the full commission. The commission has no actual power, but will provide recommendations to Congress.

Already, various commissioners are questioning some of the initial recommendations. Why? Because many of the recommendations are political hot-potatoes that will likely be debated incessantly for many congressional sessions. Recommendations include a complete revamping of the tax code, reduction in all tax rates (in exchange for closing of loopholes), 15-cents-a-gallon increase in the gasoline tax, and Social Security benefits cuts and an increase in the retirement age. Clearly, the commission is hitting all of the hot-button issues.

We all know that something needs to be done. Many people have been suggesting some of these changes for years, but political lobbying, a volatile electorate, and the focus on military expenditures over the last decade have ensured that nothing has happened. Now, clearly, something will happen. The “reformed” Republican Party that is supposedly now more fiscally responsible, the ascendancy of the Tea Party movement, the rising cacophony of the expert opinions, and common sense tells us that there will be many debates that will result in some action. What action? I suppose that is the question now, isn’t it?

So, will we riot when the recommendations become actual government decisions? Should we riot?

Although the cultures are different and the decisions are different, the European experience gives us some insight into what we might expect. Maybe there will not be blood, but there will be protests. Maybe those protests will get ugly. The decisions may be that tough. But do our politicians – and do the people – have the toughness to make something happen for the good of this country?

So what has happened in Europe? First, the government of Greece announced austerity measures to help address significant economic issues related to heavy government debt and financial instability; then Greek protests led to violence and deaths. More recently, the French government decided to adjust the age at which French workers become eligible for their state pension. French workers showed the French leadership that they were none too happy. Now, in Britain, students have raised a ruckus due to significant increases in university tuition. This comes after the British government announced other “austerity” measures designed to – like the Greeks – get the economy under control.

Ok, so Europeans generally like to protest more than folks in the US. They have more passion, free time and historical precedence. But the US has had its share of protests, so we are not immune. We reserve our significant protests to what really matters, and this may be that time.

The changes are coming. We need to make some sort of change. All sectors need to “feel the pain,” right?  After all, without doing anything wrong, many of our houses are worth less, wage increases have been smaller, and yet taxes are still due and college must be attended. We as a country need to address these issues – with or without a riot.

[Amended on 11/12: just another example of how tough this will be, which is another example of what can go wrong when the moderates get booted; and for the liberal perspective on the commission and its recommendations, see Paul Krugman’s lashing. But we need to start the conversation somewhere, right? ]