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Blue Model Blues
In Chicago, Rumblings of the B-Word

After decades of kicking the can down the road to buy off the city’s rapacious public employee unions, the fiscal vise is tightening around the Windy City—and policy elites are starting to openly broach a topic that should send a chill down the spine of bondholders and public employees alike. Crain’s Chicago Business reports:

Once unthinkable, the idea of Chicago filing for bankruptcy is becoming less far-fetched as the city stares down the barrel of $25 billion in pension obligations that it can’t meet. The topic sparked one of the more animated debates at Crain’s Future of Chicago conference last week.

Bankruptcy, or the threat of it, may be the only way to bring politicians, unions and investors to the table to do what needs to be done to right the ship for the next generation, three panelists argued as part of a discussion on budget issues at the city and state level.

“Bankruptcy was the opportunity to bring together a number of parties . . . both on the financial and on the labor side,” said Kevyn Orr, who was the emergency manager for Detroit when it filed three years ago.

This news should be setting off alarms on Capitol Hill. Municipal governments across the country are groaning under the weight of unsustainable pension obligations, and the next economic downturn could well force a dozen or more to go belly-up all at once. Such a scenario will necessitate a stronger and more deliberate response from the federal government than we have seen thus far in the case of Puerto Rico. Congress and the Treasury ought to have a plan for handling the unfolding disaster in America’s biggest blue cities—including a framework for a relief-for-reform agenda that will prevent this kind of catastrophic misgovernance from happening again.

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  • Andrew Allison

    No Federal relief in any way, shape or form! The Municipalities, the unions they bought off and their lenders got themselves into this mess and, as in the case of PR, there should be no Federal bailouts. The list of State and Municipalities which are effectively bankrupt is a very long one, and the camel must be kept out of the Federal tent at all costs.

    • Blackbeard

      If only. The Blues control the federal government, the courts and the media so of course they’ll bail out their sinking buddies and the rest of us will pay and pay. That’s the whole point of politics isn’t it? Help your friends and hurt your enemies.

      • Ofer Imanuel

        I think they need budget and / or laws for that. As long as GOP holds at least one of the two houses, we should be OK.

        • Rodney

          I disagree. The past several years have seen the GOP in control of one or both of the houses. What do they have to show for it? Continuing resolutions instead of budgets and continued spending at astronomical levels. Their recent performance is not confidence inspiring.

          • Blackbeard

            It’s not clear what the GOP can or could have done. There is a case pending in the SCOTUS concerning billions in Obamacare subsidies that Obama spent despite explicit refusal by Congress to appropriate money for this purpose. He just took the money from somewhere else. Congress is suing and obviously the outcome is unknown at this time, but opinions I respect say that Congress will be found to lack standing. If this turns out to be correct it will mean that no one has standing and therefore there is no remedy.

            So much for the idea that Congress controls the purse strings, and so much for the idea of checks and balances.

          • seattleoutcast

            Congress could just reassert its rights despite a SCOTUS ruling. I see no problem with this as their rights were taken away in the first place (with their permission.)

          • CapitalHawk

            Uh, how exactly? If the President can take any money in the US Treasury and use it in any way he sees fit, without any sort of appropriation from Congress, and the Supreme Court refuses to enjoin or punish the President for his acts, Congress has no remedy short of impeachment.

          • seattleoutcast

            Congress has the power of the purse. Are you saying that he can just take money out of the treasury and spend it as he sees fit? How so? Aren’t all funds appropriated in some way?

          • CapitalHawk

            Did you not read what Blackbeard posted? The case is about “Obama spent [billions] despite explicit refusal by Congress to appropriate money for this purpose” and the likely outcome seems likely to be that SCOTUS will do nothing. So, what exactly is Congress supposed to do to prevent that from happening repeatedly?

          • seattleoutcast

            I’m saying that Congress should not follow SCOTUS. I guess you didn’t read my reply.

          • CapitalHawk

            I did read it, I guess I just don’t understand it. You haven’t answered my question as to how Congress can fix the problem short of impeachment. If they say “Don’t do this” and the President does it anyway and there is no outside remedy, what do they do? Please answer that question.

          • seattleoutcast

            I’m not politically shrewd, so I will just say, I don’t know.

          • CapitalHawk

            I don’t pretend to be politically shrewd either, but I think there isn’t anything the could do there. It’s impeachment or roll over and let the president become an emperor. Not good.

  • Pete

    Municipal employees, the the extent that they have been over compensated and underworked, are the parasite class.

  • klgmac

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

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