A mayor who was in touch with reality might ponder enormous municipal debt and a downgrade to junk might be worth taking seriously and then try to come up with a plan to save his city from bankruptcy. But not Mayor Rahm Emmanuel of Chicago. No way. Instead, he set his Reality Denial Shield to maximum power and is not letting bothersome facts get in the way blaming everything except himself (and decades of mismanagement and blatant corruption) for Chicago’s increasingly perilous financial predicament.
Emmanuel, who has a well-deserved reputation for being a nasty loudmouth, said “While Chicago’s financial crisis is very real and at our doorsteps, today’s irresponsible decision by Moody’s to downgrade the city’s credit by two steps goes far beyond that reality.” Yes, Mr. Mayor, it’s all Moody’s fault for stating the obvious. Surely the best way to solve the problem is to get pointlessly combative while pretending the problem isn’t rapidly worsening. Any relation between Emmanuel and a 14-year-old boy having a fit because his parents just cancelled his World of Warcraft subscription are of course completely coincidental.
What made the mayor so cranky? The Illinois Supreme Court just ruled Illinois’ pension plan, perhaps the most insolvent in the country, was unconstitutional because it illegally attempted to cut existing pensions. This dumps hugely more debt on the state and Chicago and caused Moody’s to downgrade Chicago bond debt. The downgrade in turn means bondholders can immediately ask for $2.2 billion in accelerated payments. Ouch.
Emanuel does not have a backup plan. I do.
On May 8, and in regards to the Illinois Supreme Court ruling, I stated “Today’s ruling more than ever shows the need to pass a bankruptcy law.”
And the state as a whole needs a constitutional amendment to allow pension cuts even if that only affects decisions going forward.
Apparently Moody’s agrees.
Pension cuts are ugly. Current law in Illinois and California forbids them. Both states have so much public pension liability that they cannot possibly pay it. That’s the reality. Something will have to give. And soon.
But you can bet politicians like Emmanuel already have sweet special pension deals for themselves, so why should they care what happens to schoolteachers facing retirement? Banksters made plenty underwriting these junky bond deals too. Everyone profited except the public.