What Happens When Public Unions Control Everything for Decades? Just Look at Chicago and Illinois

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Written by Mike “Mish” Shedlock

Chicago’s public schools are effectively bankrupt. The city’s pension plans are countless billions of dollars in the hole, the worst in the nation. And Chicago bonds carry a junk rating, the worst of any major U.S. city.

There is plenty to fix, but city leaders are fiddling while Chicago burns. Instead of addressing the enormous problems the city faces, politicians opt to nickel-and-dime residents and businesses to death, scaring away companies in the process.

Property-tax hikes are likely to be enormous.

Pension economics

Michael Bargo, writer for the American Thinker, provides more commentary for the mix.

Here is a lengthy snip from Bargo’s recent, well-written article, “Public Pensions Prove Zero Sum Economics:”

“One of the major appeals in Democrat presidential campaigns is to explain to voters that they need Democrats in office to take money away from the rich. And since the rich own big corporations, they will pay workers as little as possible. This idea is what Barack Obama had in mind in 2008 when he said he will redistribute money to the working class and poor.

“But so far this analysis has only been applied to the private sector; the ‘rich’ who own stocks or run corporations. If public sector workers, particularly pensioners who are not working, are taking significant amounts of money from taxpayers, then this may also be seen as contributing to the shrinkage of middle class incomes.

“Of course, Illinois is not the only state dominated by high Democrat taxes and public sector spending but it serves as a good case study of what Democrats do when they have total control of budgets for decades.

“The results are startling. Today, Chicago’s public sector unions are underfunded, according to the City itself, by $26.8 billion. This is just the City of Chicago. When the state debt is added, the total amount of debt owed by each Chicago household to the city and state rise … SEC Commissioner Gallagher stated the number is $88,000.

“Pension payments to Chicago public union employees have become so high that today all the property taxes paid by the households of Chicago go exclusively to pensions. The operating expenses are paid by additional taxes on things from packs of cigarettes, to gasoline, sales tax, and cable TV bills. Given these facts about how Chicago’s property taxes are used, it’s not surprising that its new Republican governor wants to freeze property taxes to rescue the middle class’s paychecks from Democrats.

“Illinois Democrats have indentured the taxpayers of the state to turn over historic amounts of their incomes to government, shrinking Illinois’ middle class.

“All public debt creates taxation and the effects have an impact, sooner or later. The more time allowed for debts to go unpaid, the greater the amount of taxes eventually wasted on interest payments.

“Chicago is now the slowest growing of all major cities. In 2014 Chicago only gained 82 people in population. Residents are fleeing Illinois, taking their purchasing power with them. Illinois is also the slowest state to recover from the recession.

“Chicago households will have to pay, through taxes, muni bond and unfunded pension debt for decades to come. Far into their lifetimes, and the lifetimes of their children. Zero sum theory is true, but the lion’s share of the proof shows that government spending, not private sector investing, takes money from average Americans.

“Zero sum theory has been used by Democrats as nothing but a rhetorical tool used to exploit voters’ emotions of envy and greed. But in the end, the greed is exercised by Democrats while taxpayers in Illinois find themselves deep into a hole of government-created debt.

“The private Illinois Policy Institute has uncovered most of the facts used here, and often had to file FOIA requests. In some cases, they had to take state agencies to Federal court to find out how much they were earning, and how much debt they had accumulated. This is all planned, it is a strategy used by Democrats to con taxpayers into putting them into office; saying they want small class size and to help the elderly; while all along they were secretly passing huge public pension contracts and dumping the cost onto average middle class and poor taxpayers.

“These facts show two things. One is that these payments are so high that all Chicago households are under a crushing debt burden that takes many thousands per year away from their household budgets. And secondly, these figures provide an opportunity to measure whether this transfer of wealth from households to public pensioners negatively impacts economic grow. Illinois has the most public debt, the lowest credit rating, and the slowest growth.”

Who really runs Illinois?

Little or no legislation passes through the Illinois General Assembly without the approval of House Speaker Mike Madigan.

Madigan has been a House member since 1971, and speaker in all but two years since 1983.

Taxes not the answer

The results of Madigan’s tenure as the long-serving leader of Illinois are as follows:

  • Pension holes in the hundreds of billions of dollars
  • Budget deficits
  • Corruption
  • Business exodus
  • Taxpayer exodus
  • High taxes
  • A shrinking middle class

Tax hikes are clearly not the answer. Illinois has a spending problem, not a revenue problem.

Unfortunately for Illinoisans, other than kowtowing to government-union demands, raising taxes is about the only thing Madigan knows how to do.

The results of Madigan’s tenure speak for themselves. Isn’t it time to try a new tack?

Here’s where to start 

  1. Pass bankruptcy legislation to allow municipal bankruptcies
  2. Pass Right-to-Work legislation
  3. Scrap prevailing-wage laws
  4. Freeze property taxes
  5. Freeze defined-benefit pension plans
  6. Enact pension reform
  7. Pass fair redistricting
  8. Reform workers’ compensation laws

That’s a big list of things that need to be done, and Madigan is on the other side of every one of them.

City leaders are fiddling while Chicago burns.

At the state level, Madigan fiddles while Illinois burns.

Originally published at IllinoisPolicy.org.