James Pethokoukis

Politics and policy from inside Washington

Civil War 2.0 may turn governors into presidents

Feb 24, 2011 18:04 UTC

Six men with the rank of general during the Civil War went on to become  president of the United States. But a new kind of union battle — one being fought in places like Trenton and Madison and Columbus and Indianapolis — may be forging the next generation of leaders who will ascend to the White House. How state governors fare as commanders in this escalating conflict with Big Government Labor may determine who makes it all the way and who falls short.

For the most part, the political backlash against public unions is happening in the states. That’s where employee benefits are creating long-term budget problems. Total unfunded pension and healthcare liabilities could be as much as $3.5 trillion.

Savvy governors can thrust an issue like public sector compensation into the national consciousness and create a political niche for themselves.  And American voters like to promote state bosses  to national CEO. President Barack Obama was never a governor, but two-term predecessors George W. Bush, Bill Clinton and Ronald Reagan all were. The last sitting U.S. senator before Obama to go directly to the White House was John Kennedy in 1961.

In New Jersey, Chris Christie’s efforts at austerity have made him a leading 2016 GOP contender with many Republican activists still hoping he’ll change his mind and make a run against Obama next year. Wisconsin Republican Scott Walker has burst into national prominence by trying to strip public unions of some bargaining rights. And in liberal New York, Democrat Andrew Cuomo’s adversarial approach to labor might help his centrist appeal should he cast an eye on the Oval Office.

Among Republican activists, it’s almost impossible to be too tough on unions. That’s where the risk of overreach starts cropping up. Indiana’s Mitch Daniels, a possible 2012 candidate, already has killed collective bargaining for state workers. Yet conservatives balk because he won’t prohibit making union membership a condition for employment. Daniels sees that as a needless fight with organized labor, whose influence is already waning. As Josh Barro of the Manhattan Institute notes on his blog:

As of 2010, only 8.2 percent of private-sector workers in Indiana were members of unions. That’s a bit above the national average of 6.9 percent, owing to the state’s industrial base, but it’s also falling faster than in most states: down 37 percent in the last decade, compared to 22 percent nationally. Private firms don’t appear to fear excessive union power in Indiana; indeed, the state has had significant success in drawing non-union Japanese auto factories.

The political subtleties sometimes get lost in the heat of battle. Some in the Tea Party are bashing Christie for increasing the state’s spending in his newly announced budget. But the governor is trying to negotiate a deal with Democrats to go easier in exchange for sweeping pension reform. And if Walker should settle for something less than total surrender or go too far by firing workers, his sudden ascent could come to a halt.

The fight against public unions and for fiscal responsibility may look like to create a clear path to the presidency for now. But governors going down that road will need to beware of the many political mines strewn along the way. Still, a future American president may have his or her mettle tested in this new civil war.


Cal13, even if they can’t begin collecting signatures yet, whoever wants to recall Gov. Walker can certainly get started organizing. Has that happened?

At all?

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Obama’s centrist shift evaporates

Feb 18, 2011 19:45 UTC

President Barack Obama’s much-trumpeted move to the center? Apparently, it doesn’t go much beyond using buzzwords such as “innovation” and employing CEOs as stage props. His 2012 budget introduction and Wisconsin incursion make that clear.

This was the week for the president to show that he had really learned the lessons of both the 2010 midterms and the shortfalls of his own economic policies. Instead, it was the American public that learned something. It learned that Obama pretty much is who he is – and he’s probably not going to change.

He’s the guy who was the U.S. Senate’s most extreme liberal. He’s the guy who told Joe the Plumber that he wanted to “spread the wealth around.” He’s the guy who tried to use the Great Recession to greatly expand the welfare state.

He’s that guy.

Obama’s 2012 budget was the first revelatory moment of the week. Even with rosy economic projections, it would still add another $9 trillion to the national debt from 2011 through 2021. And it did nothing to address entitlements, the key drivers of America’s long-term fiscal problems, even though his own debt commission gave him a plan with bipartisan support.

Even worse, Obama attempted to hide the budget’s alarming profligacy. In his news conference, Obama stated that by the middle of the decade, his just-released budget would “not be adding more to the national debt. …  We’re not going to be running up the credit card anymore.” Yet from 2015 through 2021, the Obama budget would add $4.7 trillion to the national debt. And public debt as a share of the overall economy would rise to 77.0 percent from 76.1 percent.

But the president tossed in a qualifier: “Our annual spending will match our annual revenues.” Well, that clears things up. If you don’t count $3.7 trillion in interest payments as part of spending, the budget is balanced in 2017 and then slowly builds a tiny surplus.

Yet Obama’s narrowly define surpluses will quickly disappear in coming decades as government healthcare spending explodes. And if the economy grows a bit more slowly than what White House economists now forecast — say, more like the predictions from the Congressional Budget Office — Obama’s primary deficits would never disappear at all.

But just as entitlements are the root problems of the federal budget, at the state level it’s the fat pension and healthcare benefits — unfunded to the tune of $3.5 trillion — awarded to government unions by the politicians they elected.

The result is the Battle of Madison as Gov. Scott Walker of Wisconsin tries to get a handle on a budget shortfall of $3.6 billion, as well as longer-term fiscal problems. He probably didn’t expect an encouraging word for the White House, and he was not disappointed.

As Obama told a Milwaukee television reporter: “Some of what I’ve heard coming out of Wisconsin, where they’re just making it harder for public employees to collectively bargain generally, seems like more of an assault on unions.”

Entitlements and government unions are both products of the heyday of American liberalism from the 1930s through the 1970s. Just like when Mikhail Gorbachev ascended to power in the old Soviet Union with the goal of modernizing and preserving that system, Obama hopes to do the same with America’s union-backed welfare state by making it — and funding it — more like Europe’s.

If Scott Walker in Wisconsin and Chris Christie of New Jersey are successful at the state level and Rep. Paul Ryan at the national, Obama may instead preside over its collapse.


Obama is clearly and without doubt a MARXIST. Just review his past and present associations.

COMMUNISM is alive and well in the U.S.A.

Americans need to wake up and see that liberals have bankrupted the country with entitlement programs that are too costly for American taxpayers, rich and poor alike.



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When states go bust

Feb 7, 2011 16:54 UTC

That is the headline for my piece in the latest Weekly Standard about letting US states declare bankruptcy. Here’s a taste:

It’s a solution of apparent Alexandrian elegance and simplicity: Empower America’s cash-strapped states to slice cleanly through a strangling knot of debilitating debt and government union cronyism by letting them file for bankruptcy. Long-term liabilities could be restructured, unaffordable labor contracts rewritten, fiscal health restored. No federal bailouts necessary. … Kevin Drum of Mother Jones put it this way: State bankruptcy “promises to become a pretty serious battle. For Republicans it’s got everything: The tea parties will love it, it provides an alternative to raising taxes, and .  .  . it helps defund a key Democratic interest group. What’s not to like?”

Surprisingly, quite a bit—at least among some Republicans and conservatives. In a January 24 session with reporters, House majority leader Eric Cantor brushed off the idea. … A more pointed critique was offered by members of the highly respected free-market Manhattan Institute, Nicole Gelinas and E. J. McMahon, in the op-ed pages of the Wall Street Journal and other papers. Among their many objections to state bankruptcy: It would violate the constitutions of many states; it would damage the balance sheets of banks holding a quarter of a trillion dollars in state and municipal bonds; it might even cause such investor panic as to risk repeating the 2008 financial meltdown. “Bond-market brinkmanship and bankruptcy threats can’t save the states from themselves,” Gelinas wrote in the Boston Globe on January 23.


The states do not need bankruptcy. They can simply default. They can outlaw public sector unions and freeze their pension liabilities. And if they modify their constitutions and their laws the states creditors will have no recourse.

As long as this is done in a roughly even handed way the creditors would not be able to challenge these actions in federal courts.

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The latest on states declaring bankruptcy

Jan 27, 2011 20:34 UTC

Some Republicans are against the idea, but a couple of heavy hitters — Jeb Bush and Newt Gingrich — continue to be for it. Here is a bit from their LA Times op-ed:

First, as with municipal bankruptcy, it would have to be completely voluntary.

Second, as with municipal bankruptcy, a new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations. In such a reorganization, a state could propose to terminate some, all or none of its government employee union contracts and establish new compensation rates, work rules, etc.

Third, the new law should allow for the restructuring of a state’s debt and other contractual obligations.

When California refused to bail out Orange County, the county entered bankruptcy and emerged within 18 months. Within three years, the county returned to an investment grade rating, and it repaid 100% of the principal of the vast majority of its investors by 2000 without raising taxes.

Fourth, the federal judge reviewing the state’s reorganization plan would have the power only to accept the plan as permissible under the federal bankruptcy law, or reject it as inconsistent with that law.

Fifth, the new law should provide for triggering mechanisms to initiate the bankruptcy process that respect the sovereignty of the people of a state.

An additional benefit of a new voluntary bankruptcy law for states is that its mere existence may deter any state from ever availing itself of its provisions. If government employee union bosses know that they could have all their contracts annulled under federal bankruptcy law, either through a plan of reorganization voluntarily entered into by state leaders or by the voters through proposition, they may be far more accommodating with state governments to restructure government employee union workforces, pensions and work rules.

Also, Moody’s has begun to take a closer look at state pension obligations, creating new metrics that combine debt and pension liabilities:



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Did Wall Street nix GOP push to let states go bankrupt?

Jan 25, 2011 17:49 UTC

As they used to say in the Soviet Union, “It’s no coincidence.” At least, I suspect is isn’t. Yesterday, House Republican Majority Leader Eric Cantor came  out strongly against the idea of changing the federal bankruptcy code to let states declare bankruptcy, an idea being pushed by some Republicans, including Newt Gingrich:

“I don’t think that that is necessary because state governments have at their disposal the requisite tools to address their fiscal ills,” Cantor said. ”They’ve got the ability to enter into new negotiations if there are any collective bargaining agreements in place. They’ve got the ability to adjust levels of spending as well as revenues at the state level.”

Yes, but filing for bankruptcy would allow states to restructure government union contracts. Even the threat of doing so could make negotiations easier. That’s arguably how it worked for U.S. automakers. Despite incremental concessions over the years due to the vague threat of bankruptcy, only the reality of an actual bankruptcy, instigated by Washington, achieved sweeping change — whether at General Motors and Chrysler, which filed, or Ford, which avoided doing so. States don’t have that ability right now.

But let’s speculate a bit, let’s try and connect a few dots:

1. In 2010 election cycle,  Wall Street campaign contributions shifted to Republicans from Democrats. For instance, Goldman Sachs, via its PAC and employees, allocated 59 percent of political contributions to Republicans in 2010 against just 26 percent in 2008.

2.  Wall Street does not like the idea of states being given the power to file for bankruptcy. Such a move might spook markets, or spook them even more:

The municipal bond market, which has recently been rocked by fears of possible defaults, could suffer another blow, driving up borrowing costs further, if the legislation gained traction. The idea is “clearly not beneficial to an already fragile municipal market,” said Chris Mauro, municipal strategist for RBC Capital Markets, in a statement.

It might hurt their holdings of state bonds. Overall, banks own some quarter-trillion bucks worth of state and local debt.

3. Also, some Wall Street firms make a lot of money off the public pension system and don’t want to get on the wrong political side of the issue. Take the Blackstone Group, a private equity firm.  More than a third of its investors are public pensions. Here is the text of  a press release it put out last week:

Blackstone’s view on public employee pensions is clear and unambiguous: We believe a pension is a promise. Working men and women should not have to worry about their retirement security after years of service to their communities. We oppose scapegoating public employees by blaming them for the structural budget deficits that cities and states face. We at Blackstone are committed to helping public employees retire with confidence in the strength and reliability of their pensions.

4. Billionaire Blackstone CEO Steve Schwarzman is a big Republican moneyman who famously likened Democratic efforts to impose higher taxes on private equity firms to Adolf Hitler’s invasion of Poland. “It’s a war. It’s like when Hitler invaded Poland in 1939.”

5. Many Republicans would love to cement their rekindled financial relationship with Wall Street heading into 2012 when they have a good chance of retaking the Senate.

Now there is a reasonable argument against giving state’s this new power. But the anti-bankruptcy GOPers have yet to supply it. Perhaps other forces are at play. If not, more explanation is needed.


For those of you citing the Contracts clause and arguing that this would be unconstitutional:

“No state shall . . . pass any law . . . impairing the obligation of contracts.”

This would be a federal law–as bankruptcy courts are arms of the federal judiciary. When you hear about “Chapter 7 bankruptcies,” for example, we are talking about Chapter 7 of Title 11 of the United States Code. The Contracts Clause does not restrict the ability of the federal government to interfere with existing contracts.

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More on states going bankrupt

Jan 21, 2011 18:48 UTC

Lots of buzz about this NYTimes story that says Washington policymakers (Republicans, really) are “working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.” (My blog post from six weeks ago that said the same thing is here.)

Government unions don’t like the idea, of course. Neither does Reuters’ Felix Salmon, always a reliable guide to what the liberal blogosphere is thinking. He and others have several objections. A big one is this: States wouldn’t be able to borrow, being shut out from credit markets.

I supposed for a time that might be true, but only for a time.  Orange Country eventually returned to borrowing, as has Argentina. In the case of the OC, it took five years for their debt to return to investment grade. So their borrowing costs rose.  In the meantime, would states need some sort of bridge loan to from Uncle Sam to keep paying their day to day bills? Not necessarily. Tax revenue would continue to flow in. Budget cutting would commence in earnest. Assets, such as roads and bridges, could be sold or privatized. Would bankruptcy mean a radical reorganization of state government? Yes, that’s the whole point.

In his recent WSJ op-ed Prof. David Skeel, a bankruptcy expert and intellectual godfather of this idea, make a couple of great observations:

First, the governor and his state could immediately chop the fat out of its contracts with unionized public employees, as can be done in the case of municipal bankruptcies. In theory, the contracts could be renegotiated outside of bankruptcy, and many governors are doing their best, vowing to freeze wages and negotiate other adjustments. But the changes are usually small, for the simple reason that the unions can just say no. In bankruptcy, saying no isn’t an option. If the state were committed to cutting costs, and the unions balked, the state could ask the court to terminate the contracts.

Second, the state could reduce its bond debt, which is nearly impossible to restructure outside of bankruptcy. While some worry about the implications for bond markets, the alternative for the most highly indebted states—complete default—is far worse. Randall Kroszner, a former Federal Reserve governor now at the University of Chicago Booth School of Business, showed in a 2003 study that the price of corporate bonds went up during the New Deal when the Supreme Court upheld legislation that reduced payments to bondholders. The reduction increased the prospect that bondholders would get paid. The prospect of state bankruptcy could have a similar effect, and even if it didn’t a reasonable reduction in state bond debt is essential to restructuring their finances.

I am not sure a state bankruptcy would look exactly a municipal bankruptcy. The details are still being worked out. But I do know the status quo with government unions cannot hold. Also in the NYT this week was this story:

As San Francisco struggles under ballooning pension and health care costs, the city’s retirees will receive unexpected cost-of-living bonuses totaling $170 million. The city’s anticipated budget deficit for the coming year is $360 million. …

On Jan. 4, an actuarial firm reported that the $13.1 billion San Francisco Employees’ Retirement System now had an unfunded liability of $1.6 billion — triple its shortfall a year earlier. Gary A. Amelio, the system’s chief since January 2010, did not respond to questions.

In spite of the shortfall, Mr. Amelio and the system’s board quietly decreed in mid-December that “excess” earnings on investments in 2010 entitled retirees to an unexpected cost-of-living increase of as much as 3.5 percent this year. The special $170 million bonus is in excess of regular cost-of-living adjustments, or COLAs.

“The irony of issuing bonus payments to retirees at a time the pension fund is a billion dollars down is insane. It really is,” said Jeff Adachi, San Francisco’s public defender and the chief proponent of Proposition B, which he says would have saved the city $120 million this year. “It’s like a bankrupt corporation paying dividends to its shareholders.”

On the GOP, bankrupt states and government unions

Jan 21, 2011 12:58 UTC

The NYTimes finally picked up on a story I had six weeks ago:

Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers. … For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.

And from my post on Dec. 7:

Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy. This may be the biggest political battle in Washington, my Capitol Hill sources tell me, of 2011.

That’s why the most intriguing aspect of President Barack Obama’s tax deal with Republicans is what the compromise fails to include — a provision to continue the Build America Bonds. Republicans in the House of Representatives already want to stop state and local governments from issuing tax-exempt bonds unless they are more forthright about these future obligations.

But it’s about more than just openness. Some Republicans hope the shock of the newly revealed debt totals will grease the way towards explicitly permitting states to declare bankruptcy. Indeed, legislation  amending federal bankruptcy law is currently being prepared by congressional Republicans.

A few additional thoughts:

1) The NYT article raises the specter that states would be shut out of credit markets if allowed to declare bankruptcy, or if one should actually take that step if federal law is changed. That seems unlikely, although  some may have to pay higher interest rates. Municipalities and even countries repudiate debt and yet continue to borrow. And even investor apprehension would be balanced by states getting their finances in order, which should appeal to potential lenders.

2) Republicans aren’t afraid of bankruptcies — though not on the national level — believing they restore market discipline and reduce moral hazard. Lehman is a good example. While the common narrative is that its failure caused a market panic and financial crisis in 2008, many conservative GOPers think the real problem was that Bear Stearns was bailed out, distorting investor expectations. They also believe it was Hank Paulson’s rushed TARP proposal that sent markets reeling, a hypothesis  pushed by economist John “Taylor Rule” Taylor of Stanford.

3)  Republicans have seen the debt problems in places such as Greece and New Jersey and believe government unions undermine long-term fiscal soundness. They want to spread the Chris Christie’s battle against them nationwide. And of course it also doesn’t hurt that unions are a key Democrat constituency. But Rs think it is possible to pit public and private unions against each other by making the case that plumbers and construction workers are paying higher taxes to support cushy benefits and jobs security for teachers and bureaucrats.

4) Don’t be surprised to next hear some Republicans question whether state and local bonds should remain tax exempt, arguing it only encourages fiscal profligacy.


All levels of government in the USA have more money than the rhetoric from both sides of the isle would have us believe; no theory here folks, just hard facts. Read on:

Dear Reader, please consider what Walter Burien is doing over at http://www.cafr1.com .He traded in derivatives for 30 years, has a gift for comprehending the big numbers in government financial statements, and is educating people about the fact that collective “government” now literally owns controlling interests in all the Fortune 500 companies and more through thousands of investment accounts held at the municipal, county, state and federal levels.

The proof is revealed in the “Comprehensive Annual Financial Reports” in the public domain. Thus when government bails out various corporate entities, taxpayers are unknowingly simply rescuing government investment portfolios. Naturally, no one explains this to the public; they only get the usual half-truths, lies and obfuscation from New York and Washington D.C.. The profits from these government investments are not shared with the very taxpayers whose money was used to create them.

Fascism, American style.

According to Walter, “taxes” account for a mere third of the money collective government takes in; the rest is obscene levels of profit from investments, carefully not talked about in the mainstream media. All the talk of “budget deficits” does not take into account the “profits from investment” revealed only in the CAFRs that every level of government issues as required by law, and are in the public domain for anyone to look at.

States “going broke” is only partly true; yes, they are usually spending more than their budget funds. However, the profits outlined above are carefully not mentioned to the public. The purpose? To scare the public into putting up with their present tax burden, and to prepare for more because, after all, “the government is going broke and needs our money”.

It is identical to me pulling my empty pocket inside-out and saying to you “See? I’m broke! Please give me money!” while every other pocket is stuffed full with one hundred dollar bills.

Walter Burien explains what I’ve stated here in a new 1 hour 14 minute online documentary he created called “The Only Game In Town”. A 48-hour pass costs $3.00 available here:


I watched it twice. Walter ends his video proposing a smart simple way to address the issue of taxes: create “Tax Retirement Funds” (“TRFs”) that are financed by a small percentage of the profit that every level of government is already making.

Example: Wisconsin’s Real Financial Situation taking into account the above facts:

http://realitybloger.wordpress.com/2011/ 03/01/wisconsins-real-financial-situatio n-explained/

May truth and compassion prevail….

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Illinois, a kleptocracy in action

Jan 14, 2011 18:58 UTC

What should America do about its troubled economy? Sometimes the real world provides the best laboratory for political and economic experiments. Democratic capitalism vs. totalitarian communism? One quick look at East Germany and West Germany in the 1980s or North Korea and South Korea today provides easy analysis of which is the preferable way to create and organize a peaceful and prosperous society.

Now we have Illinois vs. Indiana. The Prairie State has the worst debt rating of any state in the union and heading into 2011 faced a funding shortfall equal to 40 percent of its total budget. Only Nevada, hit particularly hard by the housing depression, is as nearly bad off, according to the Center on Budget and Policy Priorities

Yet directly east of Illinois is the Hoosier State with a AAA credit rating. Indiana faces a 2011 shortfall of just 9 percent and expects to balance its budget even though the economic downturn has struck just as hard as in Illinois. Under Governor Mitch Daniels, a noted budget hawk who may run for the Republican 2012 presidential nomination, Indiana has continually pared back spending. It now has the fewest public employees per capita of any state. And it spends half as much per citizen as Illinois.

But faced with a fiscal crisis, Illinois decided this week to raise taxes by $7 billion a year, jacking up the individual rate to 5 percent from 3 percent and the corporate rate to 7 percent from 4.8 percent. That the state didn’t instead cut spending dramatically is not really surprising. One-party kleptocracies — and that pretty much is what Illinois is — always want more taxpayer money, not less.

Yet it is unlikely the state will raise anywhere near that $7 billion now that it chose to undermine its competitiveness. This, from the nonpartisan Tax Foundation:

Our 2011 State Business Tax Climate Index ranked Illinois 23rd in the country, middle-of-the-pack compared with its immediate neighbors. Illinois’s low, one-rate individual income tax offers the advantages of simplicity, stability, and a competitive rate relative to other states, outweighing more negative elements of the state’s tax system.

If this legislation enacted on January 12, 2011 had been in place on July 1, 2010 (the snapshot date for the 2011 State Business Tax Climate Index), Illinois would have ranked 36th instead of 23rd. This is a fall of thirteen places, past South Carolina, Georgia, Pennsylvania, Tennessee, Alabama, Nebraska, Oklahoma, Maine, Massachusetts, New Mexico, Arizona, and Kansas.

On the individual income tax sub-index, Illinois would have ranked 14th instead of 9th, a drop of five places. On the corporate income tax sub-index, Illinois would have ranked 45th instead of 27th, a drop of 18 places.

Three  lessons here:

1. Neither states nor countries exist in isolation. Just as it’s foolish for Illinois to act as if what Indiana and Wisconsin are doing fiscally is irrelevant, so to must the U.S. take into account that is has, for instance,  a marginal and effective corporate tax rate far above that of the average advanced economy. The Obama White House may call for a cut. If he doesn’t, the congressional GOP should.

2. As the Indiana experience shows, the earlier you get started on budget cutting the better. Even though Uncle Sam has been running trillion-dollar deficits in recent years, the bond market hasn’t seemed too worried about the accumulation of all that debt. This has given President Barack Obama and Congress a window to make fiscal fixes that are reasonable rather than radical.

But the window could easily, and even quickly, close someday. If it does, the Federal Reserve chairman and the Treasury Secretary may be forced to trudge up to Capitol Hill and beg for action to reassure markets, such as a big tax hike (like a VAT). This is exactly the scenario some GOP spending hawks fear.

3. States should realize that Washington is not coming to their rescue, unless making it possible for them to declare bankruptcy counts as a “rescue.”


We hear so much about the evil corporations. Who has caused the financial crises in these states: Corporations?
Union-Politician collaboration?

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What is tax-crazy Illinois thinking?

Jan 11, 2011 17:58 UTC

The news just gets worse and worse from my home state (via The Tax Foundation):

llinois’ legislature is currently considering an alternative to the initial tax increase proposed last week. Instead of pushing for a 75% increase in the personal income tax and a 49% increase corporate income tax, this proposal would raise the individual income tax rate to 5% and the corporate rate 9.5%. While this proposal is more modest than the first, but it still hurts the competitiveness of Illinois when it comes to maintaining and attracting new business.

If this passes, Illinois will have the third highest corporate income tax in the country behind only Minnesota and Pennsylvania. The corporate income tax has been shown to be among most damaging tax in terms of economic growth.

The individual income tax is often times ignored as a factor in business decisions. This is unfortunate because a large amount of business income is actually filed through the individual income tax. In raising the rate to 5%, Illinois would have the one of the highest flat individual income tax in the country.

In solving their budget problems, Illinois needs to do something that it has not done in a long time and that is look to the future. The governor and the legislature need to look past the next day, week and month and consider the long term effect of their policy decisions.


‘Friday, December 31, 2010
New pension law could force municipalities to raise property taxes 60% While most emphasis has been on Speaker Madigan’s pension reform law setting up for later retirements and less cushy pensions for new firemen and law enforcement hires, little attention has been focused on the shift in pension fund pay=in burden that local city councils argue will now suddenly fall on their already cash-strapped budgets. Chicago’s Mayor Daley blasted the reform bill Quinn signed on Thursday, predicting it will cause Chicago to hike its property taxes up to 60%.

ABC Chicago News covered the topic’

http://illinoisreview.typepad.com/illino isreview/2010/12/new-pension-law-could-f orce-municipalities-to-raise-property-ta xes-60-mayor-says.html

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