Puerto Rico a dire warning for blue states

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Puerto Rico a dire warning for blue states

[cap­tion id=“attachment_97284” align=“alignright” width=“199”] Lake Michi­gan at Evanston, IL. Is Puerto Rico’s present Illi­nois’ future?[/caption]

By John Ruberry

If you believe that states – and com­mon­wealths – can­not declare bank­ruptcy, you are tech­ni­cally cor­rect. But last week a com­mon­wealth, Puerto Rico, filed for bank­ruptcy in all but name, uti­liz­ing the Puerto Rico Over­sight, Man­age­ment, and Eco­nomic Sta­bil­ity Act, which Pres­i­dent Barack Obama signed into law in 2016.

That bill of course was writ­ten for Puerto Rico in mind, but with Repub­li­cans in con­trol of all lev­els of the fed­eral gov­ern­ment, sim­i­lar bills can be pro­posed for the fifty states, or just some of them, includ­ing Cal­i­for­nia, New Jer­sey, Con­necti­cut, and Illi­nois. Those three are among the states that have fallen vic­tim to what New York City Mayor Michael Bloomberg dubbed the “labor-​electoral com­plex” in his farewell address four years ago.

What’s that? It’s when public-​sector unions, con­sist­ing of work­ers on the tax­payer pay­roll, cajole politi­cians – almost always Demo­c­ra­tic ones – to increase their salaries or defer their pay hikes by way of gen­er­ous yet unaf­ford­able pen­sion plans.

And of course these pols are cajoled by these unions through cam­paign contributions.

[cap­tion id=“attachment_97285” align=“alignleft” width=“252”] Puerto Rican flag flies between two aban­doned Chicago homes[/caption]

Many local gov­ern­ment work­ers don’t pay into social secu­rity and many of them have no other pen­sion plans. In states like Illi­nois, if you work for the state gov­ern­ment, funds deducted for your retire­ment only go to one place – an Illi­nois retire­ment plan. So far so good – unless the politi­cians neglect to prop­erly fund those pen­sion programs.

And that has been the sad case in those blue states I men­tioned ear­lier, as well as Kentucky.

Now that Puerto Rico has declared, well, some­thing, investors will very likely take a closer look at sink­ing cash into what may be sink­ing ships. Puerto Rico has neg­a­tive pop­u­la­tion growth. So does Illi­nois. That means fewer tax­pay­ers are par­tic­i­pat­ing in fund­ing these fail­ures. And it’s the pro­duc­tive cit­i­zens who are leav­ing Illi­nois and Puerto Rico.

Yes­ter­day Puerto Rico announced it was clos­ing 184 schools and there is spec­u­la­tion that com­mon­wealth retirees may suf­fer a 20 per­cent cut in their pen­sions. Expect much more bad news from there.

[cap­tion id=“attachment_54680” align=“alignright” width=“206”] John “Lee” Ruberry of Da Tech Guy’s Mag­nif­i­cent Seven[/caption]

It doesn’t have to end up this way in states like Illi­nois – if cor­rec­tive action is taken imme­di­ately. Let me define “imme­di­ately” for those politi­cians who may be read­ing this post.

Imme­di­ately means 2017, not ten years from now.

Ten years ago the finan­cial sit­u­a­tion in Puerto Rico wasn’t as dire.

John Ruberry reg­u­larly blogs at Marathon Pun­dit.

Lake Michigan at Evanston, IL. Is Puerto Rico’s present Illinois’ future?

By John Ruberry

If you believe that states–and commonwealths–cannot declare bankruptcy, you are technically correct. But last week a commonwealth, Puerto Rico, filed for bankruptcy in all but name, utilizing the Puerto Rico Oversight, Management, and Economic Stability Act, which President Barack Obama signed into law in 2016.

That bill of course was written for Puerto Rico in mind, but with Republicans in control of all levels of the federal government, similar bills can be proposed for the fifty states, or just some of them, including California, New Jersey, Connecticut, and Illinois. Those three are among the states that have fallen victim to what New York City Mayor Michael Bloomberg dubbed the “labor-electoral complex” in his farewell address four years ago.

What’s that? It’s when public-sector unions, consisting of workers on the taxpayer payroll, cajole politicians–almost always Democratic ones–to increase their salaries or defer their pay hikes by way of generous yet unaffordable pension plans.

And of course these pols are cajoled by these unions through campaign contributions.

Puerto Rican flag flies between two abandoned Chicago homes

Many local government workers don’t pay into social security and many of them have no other pension plans. In states like Illinois, if you work for the state government, funds deducted for your retirement only go to one place–an Illinois retirement plan. So far so good–unless the politicians neglect to properly fund those pension programs.

And that has been the sad case in those blue states I mentioned earlier, as well as Kentucky.

Now that Puerto Rico has declared, well, something, investors will very likely take a closer look at sinking cash into what may be sinking ships. Puerto Rico has negative population growth. So does Illinois. That means fewer taxpayers are participating in funding these failures. And it’s the productive citizens who are leaving Illinois and Puerto Rico.

Yesterday Puerto Rico announced it was closing 184 schools and there is speculation that commonwealth retirees may suffer a 20 percent cut in their pensions. Expect much more bad news from there.

John “Lee” Ruberry of Da Tech Guy’s Magnificent Seven

It doesn’t have to end up this way in states like Illinois–if corrective action is taken immediately. Let me define “immediately” for those politicians who may be reading this post.

Immediately means 2017, not ten years from now.

Ten years ago the financial situation in Puerto Rico wasn’t as dire.

John Ruberry regularly blogs at Marathon Pundit.