Exhibit A - Chicago: Chicago’s 2012 pension shortfall jumps nearly 90%, to $36 billion
Pension costs are already unraveling the state’s finances. Now it’s the city of Chicago’s turn... The city’s out-of-control pension liabilities and “accelerating budget pressures associated with those liabilities” has resulted in another credit downgrade by Moody’s Investors Service... The national credit rating agency downgraded the city’s nearly $8 billion in general obligation bonds to A3 from Aa3. This is a triple-notch downgrade...
The rating agency has long critiqued pension funds’ use of overly ambitious investment return targets that allow funds to understate their true pension shortfalls... Based on the new Moody’s methodology, which uses more conservative assumptions, Chicago’s 2012 pension shortfall jumps nearly 90%, to $36 billion...
However, Chicago’s burgeoning liability is not the city’s only problem. The yearly bill to pay for those pensions is set to spike 2.5 times to $1.2 billion in 2015 from $467 million in 2014...
Pensions are threatening to do to Chicago what has happened to Detroit. Which reminds me.
Exhibit B - Detroit: The largest municipal bankruptcy in US history
The Motor City faces $20 billion of long-term liabilities. The Wall Street Journal's Matt Dillon says those holding onto $11 billion in unsecured debt are basically staring into the abyss, facing the prospect of getting next to nothing from the city's obligations... The pension funds want to block Orr's attempt to drastically reduce the amount of benefits owed to current and former city workers.
Apropos of nothing, the last time Detroit had a Republican Mayor was 51 years ago.
In short, letting Democrats run a government is like giving a 17-year old boy a fifth of Jim Beam and the keys to the Camaro.
Hat tip: BadBlue News.