Posted by Stephen Moore @ The Patriot Post
When I grew up in the north suburbs of Chicago in the 1960s and ‘70s, Illinois
was still a financial and industrial powerhouse. The Land of Lincoln had a
low-rate flat income tax, the property taxes were reasonable, the state ran
budget surpluses, and Illinois was the home of such iconic mega-employers as
Caterpillar, Sears Roebuck and the Chicago Mercantile Exchange.
The public schools were pretty good back then and a dedicated corps of teachers
put kids first — they didn’t walk out on strike, and they didn’t have the fat
pensions they can get now when retiring at age 55.
Mayor Richard Daley (“the Boss”) ruled Chicago for decades, and it was “the
city that works.” Yes, you had to pay off the unions to get things done, but
this was a cost of doing business. Things did get done.
Fast forward to today, and what a sad state of affairs. Last week the state had
to sheepishly announce that it doesn’t even have the money in the bank to pay
lottery winners. Now jackpot winners are suing the state to get their rightful
Perhaps the state will need a second lottery to raise money to pay off the
winners from the first lottery.
Chicago is so broke that its bonds are junk status, and Mayor Rahm Emmanuel had
to go hat in hand last week to the state capital, Springfield, for bailout
money to pay the bills.
According to Forrest Claypool, the new chief executive for the Chicago school
system: “We are really now at a point where further cuts would reach deep into
the classroom.” Teachers have been laid off, and extracurricular activities
have been cut. Yes, the financial crisis is wreaking havoc, but to ask the
state to kick in money is a laughable proposition — like Puerto Rico asking
Greece for a loan. Springfield is plum out of money, too.
To protest additional service cuts, The Wall Street Journal reports, parents
are going on hunger strikes. But it will take more than divine intervention for
the cash inflow to meet expenditures.
Why should residents of other states care about this financial meltdown in
Chicago and Illinois? The answer is that Chicago is the canary in the coal mine
when it comes to the government pension crisis. Pensions for teachers and state
employees are bleeding the state dry. A state budget office spokesman tells me
that “nearly one of three state tax dollars now goes to paying pensions for
retired municipal and state employees.”
Meanwhile, tax increases on the rich under the previous governor failed to
raise much money, but did accelerate an exodus of money and talent out of the
state. A new Illinois Policy Institute study, based on latest IRS data, finds a
record number of people have been fleeing Cook County, home to Chicago. “The
income of the people who left Cook County in 2012 was $2 billion more than the
income of the people who moved into Cook County. … The 2011 and 2012
outmigration will cost the county nearly $30 billion in taxable income over the
It couldn’t get much worse, right? Wrong. The state has been operating without
a new budget for more than two months. Vendors are routinely going two or three
months without getting paid because the vault is empty. The Democrats who rule
the state Legislature and serve their masters, the Illinois teachers unions,
passed a $34 billion budget this summer that is $5 billion in the red, flouting
the state’s balanced budget requirement.
Republican Gov. Bruce Rauner, who inherited this calamity, is the state’s last
best hope. He has vetoed the state budget and rejected the unions’ demands for
more taxes. Property taxes and sales taxes (which can reach 10 percent in Cook
County) are already nearly the highest in the nation.
The rich whom the unions want to tax have been leaving for Florida, Arizona and
Texas. Rauner argues that Illinois already has one of the five worst business
environments in the nation.
Worst of all, the Illinois Supreme Court ruled that pensions can’t be touched
because they are contractual obligations. So funding for schools, roads, and
public safety get shortchanged so that public employees can keep cashing in on
benefits far more generous than what private sector workers/taxpayers receive.
This is justice? No wonder residents are going on hunger strikes.
It’s a battle royale that pits the union bosses against the taxpayers. And it’s
a fight that Mr. Rauner can’t lose. If he does, the exodus from the state will
look like the floods of Middle Eastern refugees trying to get to Western
The shame of all this is that Chicago is a world-class city. It is the capital
of the Midwest and by far the most desirable city in the region to live in. It
should be, and could be, America’s Hong Kong if it weren’t for the labor
agreements that are shredding basic government services and making the city unaffordable.
What is scary is that the fiscal virus that has incapacitated this once-great
city and state may soon spread to a city or town near you.
Amazingly, national Democrats are saying with straight faces that to help
American workers and make the country great again we need more powerful unions.