Sunday, December 29, 2013

Chicago: The Next Detroit

You are one of the three loyal Ushanka visitors.  I have no doubt you can tell me which solution Democrat Mayor Rahm Emanuel and his fellow Liberal Progressive Communist cronies will select for Chicago's pension problems.
The Chicago teachers’ pension fund is roughly 54 per cent funded, far below the 80 per cent threshold considered healthy. But it is better off than the city’s municipal workers, police, labour and firefighters’ pension funds, which Fitch, the credit rating agency, estimates are collectively 33 per cent funded.

Mr Emanuel has warned that failing to reform Chicago’s pensions by next year could force cuts in services – including the police department, at a time when the city has had the highest number of murders in the US. The alternative, he says, would be a 150 per cent rise in property taxes.
Which will it be?
A) Pension "reform," or
B) Increase property taxes 150%?

The downside of being a liberal (aka parasite) is that while it is your secret mission to destroy your host, your secret is always uncovered at the exact moment you find yourself in the spotlight.  

We suspect there is a third option that isn't being discussed in public:

C) Federal taxpayer bailout.

Some questions.  Talk among yourselves...

Why is "80% funded" considered healthy?   Maybe in a pension fund's first year.  Or decade.  But the Chicago city pensions have been around for a while.  No?  Shouldn't these pensions have hit that self-perpetuating momentum to exceed 100% by now?  If not, why not?  And why is it George Bush's fault?

Remember the near-trillion dollar "Stimulus?"  Do you remember that most of the "Stimulus" money went to shore up public pensions?  Just how bad off were those pensions then, when those same pensions are now in distress just 5 years later despite the hundreds of billions of inflow?

And, to acknowledge the elephant in the room here, there are some economic theories out there that suggest bad times are ahead for the stock and bond markets.  If anything, those pension funds have likely shifted their investments into more risky vehicles that, in theory, will pay higher returns and help the pension managers make up the shortfalls.  What happens to these pensions if the stock market drops 30% in a week?  Will they have to raise property taxes 200%?

The photo above is from the 1939 Communist Party Meeting in Chicago.  It was standing room only then, and still is today.

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