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NYT: Chicago The Next Detroit


How much trouble is Chicago in? According to the New York Times front page this morning, this much trouble:

The pension fund for retired Chicago teachers stands at risk of collapse. The city’s four funds for other retired city workers are short by $19.5 billion. At least one of the funds is in peril of running out of money in less than a decade. And starting in 2015, the city will be required by the state to make far larger contributions to the funds, which could leave it hundreds of millions of dollars in the red—as much as it would cost to pay 4,300 police officers to patrol the streets for a year.

“This is kind of the dark cloud that’s coming ever closer,” Mr. Emanuel said in a recent interview, adding that he had no intention of raising his city’s property taxes by as much as 150 percent—the price tag, he says, that it might take to pay such bills. “That’s unacceptable.” […]

Among the nation’s five largest cities, Chicago has put aside the smallest portion of its looming pension obligations, according to a study issued this year by the Pew Charitable Trusts. Its plans were funded at 36 percent by the end of 2012, city documents say. Federal regulators would step in if a corporate pension fund sank to that level, but they have no authority over public pensions.

That 2015 mandatory increase? $1 billion.

The fact that the Times is giving Chicago’s long-festering mess such prominent coverage this morning is a testament to how Detroit’s thunderous collapse has made all these sorts of previously over-the-horizon problems seem a lot closer and menacing. Also prominently featured in the article is the blue civil war simmering beneath the surface: public unions are squaring off against Mayor Rahm Emanuel, who has threatened to increase retirement ages and freeze inflation adjustments to union benefit plans in order to help cushion the impact of those approaching mandatory increases in the city’s outlays.

The article’s best quote goes to another close Obama aide who’s running against Governor Pat Quinn in next year’s elections, William M. Daley: “Anyone who thinks that this is just a problem on paper, those are the same people who looked at Detroit 20 years ago and said, ‘Don’t worry about it, we can handle it.’” We’re glad to see that at least a couple of the cogs in Chicago’s long-ruling Democratic machine have awoken to the crisis at the city’s doorstep. Better late than never.

The one unspoken question: can Obama stand idly by if his hometown starts going down the tubes on his watch?

[Image of Chicago skyline courtesy of Shutterstock]

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  • Pete

    Calling Chicago as Obama’s ‘home town’ is a joke. It’s like calling New York City Hillary’s home town.

    The fact is that Obama is a rootless character. He’s a citizen of the world, whatever than might be.

    The fact is Obama is more of the Third World than he is of any part of America.

    • wolfie773

      Ironically, Chicago (or at least the toney part of suburban Park Ridge) is Hillary’s home town. Obama comes from white privilege in Honolulu–he just was opportunistic enough to use Chicago as his political launch pad.

  • Bruce

    On CNBC yesterday, a guest made a really good statement. He said, “When governments promise more than they can deliver, there has to be a re-negotiation. This re-negotiation has to involve the pensioners, the bondholders and the taxpayers.” There is no other way. The bullies will keep doing what they do, but eventually, they need to negotiate.

    • cubanbob

      Which taxpayers? There ain’t no we here Kemosabe. Good luck trying to persuade the average private sector taxpayer who is kicking in 12.4% of salary non-voluntarily towards FICA for an average of forty years and if lucky gets to collect eighteen years to get to chocked-up by the plight of Chicago’s public sector retirees. The local Chicago-land taxpayers no doubt will have to kick in but to expect the rest of the state’s taxpayers to kick in is iffy and to expect of the country’s taxpayers to kick in isn’t going to happen.

      • VictorErimita

        Well, the average Chicago taxpayer has been electing the fools and criminals who created this mess forever. Their Democratic tribal identity trumps all else. They will learn nothing until they become Detroit. Then many will leave (many are already leaving).

        • cubanbob

          They leave at retirement. Usually to some place like Florida or Arizona.

    • M_Becker

      Just who do you see representing the “taxpayers”? HINT: Nobody. The CNBC guest is an idiot. The cities and states (see IL) are in the mess they’re in BECAUSE nobody represents the taxpayers.

      This will go to Chapter 9 and:
      1. The bondholders will get cents on the dollar without regard to any “security” they think they have. Good riddance to them because they didn’t do a lick of due diligence.
      2. The retirees will have their pensions and healthcare premiums axed. Tough. They voted for Democrats who made them promises and never bothered to fund those promises because it was inconvenient, they had other votes to buy.
      3. Current employees will find their pensions converted to 401K type plans and will start paying the freight on their cadillac healthcare plans. Again, tough. Welcome to the real world.

      • VictorErimita

        The taxpayers have been electing Democrats in Chicago forever. They are being represented. By the people they deserve.


    At least Chicago has got a lot more `stuff’ to sell vs. Detroit: the outstanding Museum of Science & Technology and lots of lake front public beaches and marinas… carry it over for a year or two…..LOL!

    • TMLutas

      Chicago’s already selling that stuff off. What do you think the Daley privatizations were all about? They raised cash when standard operations weren’t cutting it.

  • RDG

    This is a life lesson for leftie nitwits. The goose and the golden egg is the parable. While they have grown government beyond all imagination, they have systematically attacked those who pay for it. All lefties are to blame, but should listen up now. Government produces nothing including golden eggs. Business produces the eggs and is the goose and you killed it. Instead of fostering it so they could have more golden eggs, they killed it. Leftie nitwits.


    Isn’t William Daley a cog in the Chicago Democrat machine? Now he’s glad to see “at least a couple of the cogs in Chicago’s long-ruling Democratic machine have awoken to the crisis.”

  • Ritchie The Riveter

    Yet another example of what you can expect, when you are led to outsource your responsibility and initiative to secure your future, to others … you leave yourself vulnerable to the failures of those who have led you on.

  • jmatt55

    >>> Detroit’s thunderous collapse has made all these sorts of previously over-the-horizon problems seem a lot closer and menacing.

    The monster finally caught up to and ate its first fleeing villager.

    How many more will fall before it is sated?

  • Rick Caird

    I just cannot see Congress going along with a bailout of blue cities. In fact, if the Senate even broaches the idea, good bye to Reid as majority leader.

    The only question is if Obama would try to be a law unto himself again, but I do think he would lose if he tried to spend unauthorized money on any city.

    • TMLutas

      Who would stop him and how?

      Stroke of the pen, law of the land leads to dark places. I thought the decline would be at a gentler slope.


      • cubanbob

        Not so fast. He would have to sell bonds and who would be dumb enough to buy bonds of dubious legality?

        • TMLutas

          Germany largely funded its rearmament in the 1930s using MEFO bonds with just such a dubious provenance. The bonds were wrapped in secrecy and their number and value were considered a state secret. Those bonds violated Germany’s treaty obligations under Versailles and everybody who bought some knew that. They just didn’t care as the yield was very good and was backed by the full faith and credit of the German state.

          In short, it’s been done before.

          • cubanbob

            And how successful is the Greek government today in selling bonds? Or Argentina? Chasing yields is predicated on the greater fool theory: there is a reason why to be wary of buying above market rate yielding bonds. For your premise to work it would require the functional equivalent of a coup. Most people with money are dumb enough to buy sovereigns of sketchy legality. True some will buy them but even those will only buy a relatively small amount-in essence they would be gambling-but not enough to cover the government’s needs.

          • TMLutas

            MEFO never funded the entire German government, just the illegal rearmament of same. It was a temporary scam that ran 6 years in the 30s case from the ascension of Hitler into power in ’33 to 1939 when WW II started in earnest.

            With the Fed pushing ZIRP for all its worth, there are a lot of people hungry for yield. I actually agree that only a fraction of that would flow into such securities, a small fraction. But with enough people unsatisfied with current options, a small fraction would be enough, depending on how much money they would like to raise, a figure that’s not known at all.

  • bankerdanny

    Stand by? Of course he can. Chicago is not his “home town” and he is done standing for election, so Chicago has nothing to offer him.

  • solotar

    You’re joking, right? Of course Obama’s not going to sit & watch this happen. He’s going to bail out Detroit, he’s going to bail out Chicago.

    Interesting thing the Times story didn’t mention (I wonder why): in Illinois, if you get a teacher’s pension from a municipality in the state of Illinois, it’s not taxable in the state.

    • teapartydoc

      He needs the votes of many congressmen who stand to get voted out of office if they help him.

  • vpMA

    Not that it matters but
    Chicago is not Obama’s home town. He grew up in Hawaii and Indonesia. He lived in Chicago for one year between Occidental/Columbia and Harvard Law. Then he lived in Chicago for five years running for one job or another.

  • VictorErimita

    Obama has spent his entire life standing idly by. He thinks the tough part of life is spotting problems and insisting others solve them. When nothing happens it’s always someone else’s fault. He has no clue how to do anything because has never done anything except yap about things. And he has no clue of the depth of his own ignorance and incompetence. Neither do the fools who voted for him, including those in Chicago.

  • teapartydoc

    Interesting. No left-wing comments on this. Where are all the excuses? How about throwing some blame around? Isn’t this all some right-wing conspiracy dreamed up By Falwell and Robertson? C’mon guys, we can do better than this!

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