Pension Meltdown
Moody’s Junks Chicago

Moody’s downgraded Chicago’s credit rating yesterday to junk status, after the Illinois Supreme Court struck down a landmark pension reform last week. The law attempted to raise the retirement age for younger workers and reduce cost-of-living increases for current retirees, but was ruled unconstitutional. Moody’s argued that, due to this decision, Chicago Mayor Rahm Emmanuel’s own reform plan for city pensions is now in greater danger of being struck down by the courts. The Mayor lashed out at Moody’s in response:

“It is irresponsible to play politics with Chicago’s financial future by pushing the city to increase taxes on residents without [pension] reform,” Emanuel was quoted as saying in an emailed statement. […]

“Their decision was driven solely by the overturning of a state pension bill that did not include Chicago’s pension reform, yet they did not downgrade the State of Illinois,” the mayor was quoted as saying.

“They refuse to acknowledge Chicago’s growing economy, progress we have made on our legacy financial liabilities, balancing four budgets without raising property taxes while adding to our reserves, securing pension reforms for two of the City’s four funds . . . that were previously in danger, and the progress we are now making with our partners in labor at the other two city funds.”

Rahm’s attack on Moody’s for playing politics is absurd. A corrupt, crony-loving, public union-pandering Democratic Party machine has been playing politics with Chicago’s future for decades, generations even, and now the chickens are coming home to roost. The smoke alarm isn’t playing politics when it goes off. The gas gauge isn’t playing politics when it points to ‘E’. And Moody’s isn’t playing politics when it correctly calls out Chicago for its pension crisis. Chicago’s bonds are junk because the city’s blue model governance is junk. The assumptions and ideas that seemed to work a generation ago in Chicago—and nationwide—don’t work now.

A technocrat and a reformer, Rahm in many ways is a more modern mayor than the Daley dynasty and many of the Democratic pols now seething with rage at his attempts to bring city finances into some kind of order. But this may not be enough. Chicago needs more change than he is politically able to put through. The blue sunset in Chicago, as elsewhere in the country, is going to be both painful and protracted.

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