American PIIGS - Is IL Prepping for a Federal Bailout?

inlet13

interesting read:

PIIGS In America: Is Illinois Preparing To Request A Federal Bailout?


Moments ago we saw the following amusing headline crossing the BBG:

ILLINOIS TEACHERS' PENSION FUND CUTS RATE OF RETURN TO 8% FROM 8.5%

It's amusing because these are the same teachers who were demanding, and received, higher pay - 17% higher over four years in fact - following a several day strike. It is even more amusing considering that in a fiscal year in which we saw QE2, Operation Twist 1 and 2, and LTRO 1 and 2, the nation's largest pension fund, Calpers, managed to eek out a measly 1% gain (and this is including the end of June surge following the then announced European bailout which turned out to be yet another dud). It is, however sadly, most amusing, because it may be a harbinger of something truly sad: the advent of the "PIIG bailout" to America, when a US state demands a Federal bailout. We have seen how eager Europe has been to bailout its insolvent nations. We are next about to see just how "united" the US is when its own solidarity is tested as state after state repeat the European bailout experience. But hey: at least we have the dollar so all should be well.

From the WSJ:

Now that Chicago's children have returned to not learning in school, we can all move on to the next crisis in Illinois public finance: unfunded public pensions. Readers who live in the other 49 states will be pleased to learn that Governor Pat Quinn's 2012 budget proposal already floated the idea of a federal guarantee of its pension debt. Think Germany and eurobonds for Greece, Italy and Spain.


The city is already facing upwards of a $1 billion deficit next year with hundreds of millions of dollars in annual pension costs for retired teachers coming due. But despite the fiscal imperatives, the negotiation didn't even discuss pensions. The final deal gave unions a more than 17% raise over four years, while they keep benefits and pensions that workers in the wealth-creating private economy can only imagine.


As a political matter, public unions are pursuing a version of the GM strategy: Never make a concession at the state level, figuring that if things get really bad the federal government will have no political choice but to bail out the pensions if not the entire state. Mr. Quinn made that official by pointing out in his budget proposal that "significant long-term improvements" in the state pension debt will come from "seeking a federal guarantee of the debt."

So when the time comes to bail out Chicago we can just tell America's insolvent state(s), who will soon pursue the MAD strategy of Europe's PIIGS, to demand a bailout with the ECB. We are confident the ECB will be more than happy to comply: after all quite soon Mario Draghi will realize that his goal should be to push the EUR down not up, and taking on more and more bailouts and money printing is precisely what he should be doing to once again retake the lead in the global FX race to debase.

After all, as it was already made clear earlier, Obama's promise in exchange for European votes, is to bail out Europe. It is only fair that Europe reciprocate after the election.

Quid pro quo.

whygohome

My stance on teacher's salaries and taxes on the uber-wealthy are likely quite clear, but in this case it is quite simple: you have to cut the pensions; or ask them to pay into them more.

blackredyellow

whygohome wrote:

My stance on teacher's salaries and taxes on the uber-wealthy are likely quite clear, but in this case it is quite simple: you have to cut the pensions; or ask them to pay into them more.

Pension for state workers piss me off. I will usually get behind them on other points of negotiation, but I can't justify the taxpayers footing the bill for their retirement.

whygohome

blackredyellow wrote:

whygohome wrote:

My stance on teacher's salaries and taxes on the uber-wealthy are likely quite clear, but in this case it is quite simple: you have to cut the pensions; or ask them to pay into them more.

Pension for state workers piss me off. I will usually get behind them on other points of negotiation, but I can't justify the taxpayers footing the bill for their retirement.

Well, I can....to a point. They provide a public service and I feel that teachers, fireman, police officers, etc should be taken care of. But, as it seems is the case here, it can get excessive.

Also, privatization will not alleviate these problems.

blackredyellow

whygohome wrote:

blackredyellow wrote:

whygohome wrote:

My stance on teacher's salaries and taxes on the uber-wealthy are likely quite clear, but in this case it is quite simple: you have to cut the pensions; or ask them to pay into them more.

Pension for state workers piss me off. I will usually get behind them on other points of negotiation, but I can't justify the taxpayers footing the bill for their retirement.

Well, I can....to a point. They provide a public service and I feel that teachers, fireman, police officers, etc should be taken care of. But, as it seems is the case here, it can get excessive.

Also, privatization will not alleviate these problems.

But they can be taken care of while working. Fireman and police, I might have an exception for. They put themselves in harms way to serve us.

But the average administrative assistant, accountant, toll booth worker, etc., and even teachers... they get paid to a do a job, probably at a higher rate than they would through a private company, and then get a pension after they retire.

whygohome

blackredyellow wrote:

But they can be taken care of while working. Fireman and police, I might have an exception for. They put themselves in harms way to serve us.

But the average administrative assistant, accountant, toll booth worker, etc., and even teachers... they get paid to a do a job, probably at a higher rate than they would through a private company, and then get a pension after they retire.

Not everywhere. And I agree that we need to look at all of those who receive publicly-funded pensions and reassess.

iwasatpj20

I think that there is a statute of some kind in Illinois for the annual state budget to be balanced every year. I have no problems or issues with a firefighter or police officer being better taken care of than a toll collector or worker at a DMV.

Either put more money in from their own salaries or take a cut in benefits.