+- Waukegan Talk (http://wauktalk.com/forum)
+-- Forum: Politics (http://wauktalk.com/forum/forumdisplay.php?fid=13)
+--- Forum: Politics (http://wauktalk.com/forum/forumdisplay.php?fid=7)
+--- Thread: Illinois Is The Eighth Most Volatile Debtholder, Worldwide (/showthread.php?tid=1047)
Illinois Is The Eighth Most Volatile Debtholder, Worldwide - ClassicalLib17 - 06-28-2010
How much information do you people need to make a choice for this November? Do you want your voice to be heard? Join a local patriot movement. You may find that you have more in common with them than the two major political parties.
Crunch enough data and you can write lists on which any state would be proud to see its name: Best in Job Growth, Best Climate for Employers, Best Public Finances. Illinois, though, would wallow far down on any of those lists. Instead, Illinois now is a fixture on a list relentlessly updated by CMA, a London-based credit information company. CMA's "Sovereign Risk Monitor" ranks "the world's most volatile sovereign debt issuers" â governments so threadbare they may not make good on their bonds.
Friday night in London, these were the governments worldwide that CMA ranked as having the highest percentage probabilities of defaulting on payments to bondholders:
Greece: 67.93 percent
Venezuela: 58.05
Argentina: 48.15
Pakistan: 38.80
Ukraine: 35.69
Iraq: 29.29
Dubai/Emirate of: 29.20
Illinois/State of: 27.35
California/State of: 27.00
Portugal: 25.11
There's more than humiliation to ranking worse than left-for-dead California (and not much better than recuperating Iraq). The financial press has reported in recent days that bond buyers are so concerned about this state's reliability that they're demanding higher rates of interest from Illinois. From Illinois taxpayers, really. That's one costly result of Illinois' lazy political culture of overspending and overborrowing: We citizens aren't merely drowning in debt that our leaders incurred â and that we and our descendants must repay. Bond rating firms also have been downgrading their estimation of Illinois' willingness to discipline its finances. Illinois is perceived as such a risk of default that we're having to squander millions in additional interest payments to get people to buy our bonds.
If Illinois was a company, the directors long ago would have fired the executives.
Illinois isn't a company, so its stakeholders have to wait for elections to appoint managers.
On Nov. 2, those stakeholders will have a clear choice on whom to hire or fire. We don't know what policies our candidates for governor and legislative office will advocate between now and Election Day. But as of now:
⢠Gov. Pat Quinn wants to borrow $3.7 billion to make the state's payments into its pension funds. That new borrowing would be yet another temporary bridge to the income tax hike that Democrat Quinn long has advocated.
⢠State Sen. Bill Brady, Quinn's Republican challenger, wants to reduce state spending and restructure the pension and Medicaid obligations now strangling Illinois. Brady opposes Quinn's proposed borrowing and tax hike.
By electing Quinn or Brady, voters will choose what happens after the election. The urgent concern, though, is Quinn's debt bomb â the $3.7 billion he wants to borrow. This is a maddening dilemma: Illinois already should have reduced expenditures by this much and more. Instead, Quinn, House Speaker Michael Madigan and Senate President John Cullerton have done virtually nothing to refashion the overspent, overborrowed government they inherited from a defrocked Rod Blagojevich early in 2009. Senate Republicans thus far have blocked Quinn's dangerous plan.
Last week, Manhattan Institute public finance specialist Josh Barro synthesized the Illinois debacle in an essay titled "Is Illinois the new California?" An excerpt:
"Unlike California, Illinois cannot blame its budget woes on a particularly volatile revenue system or on outsize exposure to the housing bubble. Illinois's crisis is unique in that it is purely a creature of mismanagement by elected officials.
"Like California, Illinois hasn't balanced a budget in nearly a decade, and instead uses gimmicks and borrowing to close gaps. Like California, Illinois regularly issues bonds to pay for current government operations. But unlike California, Illinois has some of the country's least-funded public employee pension plans. â¦
The bond markets are screaming that Illinois needs real fiscal reform ⦠."
Disarming Quinn's latest debt bomb is a first step toward that era of reform â an era that may require more gifted managers in the Statehouse. Want to see how miserably the current managers have failed? Monitor this state's probability of default at CMAvision.com/market-data. And read Barro's disturbing essay about Illinois at chicagotribune.com/california.
Remember, these debts are yours.