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Blue Model Blues
Chicago Is Falling Apart

Budgetary pressures and low investor confidence are forcing Chicago’s public school system to borrow money at ruinous interest rates just to stay afloat. Reuters reports:

The Chicago Board of Education managed to sell only $725 million of an originally planned $795.5 million of tax-exempt bonds, and yields on the deal topped out at 8.5 percent, a massive premium relative to higher-rated debt sold in the U.S. municipal bond market and a clear indication of investors’ view of the depths of the district’s fiscal woes [. . .]

“It’s a Puerto-Rico grade yield and clearly signals that the district is on an unsustainable path,” said Matt Fabian, a partner at Municipal Market Analytics.

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  • Andrew Allison

    “until relatively recently considered a well-governed municipality with a promising future”? Surely you jest? What I don’t understand is why anybody would lend money to the bankrupt in every sense Chicago Board of Education. Chicago (and Detroit) make PR look good. And where in the historical record is there any evidence of the federal government requiring meaningful reform in exchange for taxpayer bailouts (see, e.g. the financial crisis, the health insurance disaster, the auto-industry bailout, etc.)

  • iconoclast

    It is difficult to envision a federal government that wouldn’t underwrite further subsidies to government employee unions.

  • Dale Fayda

    No “profound institutional reforms” from the any of the Blue cities will be forthcoming. See Detroit. The Left is what it is and it does what it does – no amount of post-apocalyptic destruction and misery it may bring about will change that. To paraphrase an ancient saying about the Roman Empire: “They create a desert and call it progress”.

    • Joseph Lammers

      You are correct. The left is immune to evidence that their policies don’t work. Some of them grow up and move right as they age, but most do not.

      • Johnathan Swift Jr.

        But, but look what an incredible success the left’s polices have been in Venezuela, the greatest economic success story in Latin-American history! The Blue Model lives under Manureo!

        • VictorErimita

          And don’t forget Cuba. They have Free Health Care, you know.

  • slovokia

    I think there will be hyperinflation before we see significant institutional reforms – it is easier to keep borrowing and printing money. Look at Japan – does anyone seriously think the Yen will not lose a lot of purchasing power in the future?

    • CapitalHawk

      Sure, except Chicago is going to have a difficult time printing Federal Reserve Notes.

      • Jim__L

        It just has to go through extra steps — Obama issues Treasury Bonds, which the Fed then buys, and the money gets sent to Chicago.

        What’s the smart money say about whether Barack will bail out his old buddy Rahm?

        • Dale Fayda

          Unlikely, INHO. Obama only has less than a year left and he has already mentally checked out of dealing with minutiae like some silly school bond crisis. Chances are the Chicago school system will stagger on for a few more years, at which time Obama will be safely collecting 6-figure speech honorariums from his corporate cronies.

      • slovokia

        I am assuming the dysfunctional Blue States and cities will get federal bail outs and the resulting debt will be monetized.

  • Anthony

    Only the Bond Holders Win – a yield of 8.5% on Munis in today’s bond market!

  • CapitalHawk

    I wonder how long it will be before Chicago’s drinking water will be full of lead, a la Flint?

    Bonus question: How long until Republicans will be blamed for said water full of lead?

    • Fat_Man

      Chicago takes its drinking water from Lake Michigan. It was one of the great engineering feats of the 19th Century. It won’t be undone because the really rich folks in Chicago live along the lake front. They will not let the city dump anything into the lake.

      • CapitalHawk

        I hope you are correct. Lead poisoning is truly bad news for the children that suffer it, and it never gets materially better even after the lead is removed from the water.

        Unfortunately, there are significantly more non-rich people than rich people, they get to vote, and they don’t always select the best representatives.

  • adk

    Doesn’t Illinois have a Republican governor now? Then he must be responsible for the mess.

    • John Morris

      That does seem to be the solution to any problem. Search up the org chart until a Republican is located and place all blame there. If the Republicans win the WH we know all of Obama’s chickens coming home to roost will be declared failures of the unfortunate sap. As will any State failure where the Gov is a D, they will just move up the org chart one more step and give it to the POTUS.

      • Tom

        I mean, they blamed the Dot-com bubble and the results of Clinton administration’s failures on Bush. Stands to reason they’ll blame Repubs if we go back to war in the ME.

  • Boritz

    Obligatory post denying that the blue model is a meaningful concept and seeking to deflect blame.

    • JCA100

      Too funny.

      Maybe Obama can help, just ask him media.

    • Chris Prestridge

      Except that they fiscally fail, every time. Do you expect other states, read red, to supply the funding needed to correct the blue state failed pensions. Do us a favor, istead of a drive-by meaningless post, please explain how the blue model is fiscally sustainable? Please enlightened knuckle dragging, slopped forehead bitter climbers w/o an ounce of intellect.

  • Um, who was it thought Chicago was well governed municipality with a promising future until last week? Not I, said the pig. Not I says anyone who had a passing familiarity with Chicago’s financing or the routine financial condition of America’s big cities. And there were many, many voices who said Rahm would deliver the deathblow. Or perhaps have it delivered upon him, by those rascally ‘events’.

  • Lewfarge

    1) What is the ethnic make up of these cities

    2) What does this say about the education system in each of these cities

    3) This proves libs/ progs /
    dems / leftists / are mentally insane – the have been doing this OVER
    & OVER For almost 100 years WITH THE SAME RESULT !!!!
    See info at:

  • VictorErimita

    I blame George Bush.

  • klgmac

    Obama cut his political chops in Chicago Illinois. Both are functionally bankrupt. He has brought the same failed policies to the national stage.

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