Showing posts with label bankrupcty. Show all posts
Showing posts with label bankrupcty. Show all posts

Thursday, January 23, 2025

January, 2025, Part 7, Political Class Insanity: Chicago Takes A Step Closer To Bankruptcy, Aid To Ukraine Is Getting Stolen, and We Do Not Trust Congress or The Media

 Every month we devote posts to just general political class insanity that is running rampant through the country. The members of the American political class continue to show that they are incapable of efficiently operating any level of government in this country.


Even their best efforts are almost always ineffective at resolving any problem facing Americans. They spend a great amount of time not trying to improve the lives of their citizens but continually ensuring their reelection and enriching themselves, their families, and their friends in the process, all at taxpayer expense.


1)We have often discussed the reality that pretty soon a major U.S. city or an entire state government will go bankrupt. The mismanagement and  minimal budget skills of the politicians running these cities and states has resulted in a serious out migration of residents and businesses to other locales that have lower tax burdens, business friendly regulations, lower crime rates, and a better quality of life.


This out migration causes the tax base to shrink which reduces the tax steam and since most opticians never cut spending or make government more efficient, they have to raise tax and cut services.  This drives more residents and businesses away and the financial death spiral is underway.


Our top state candidates to go bankrupt include New York, New Jersey, Illinois, and California with other states in trouble but in not nearly as bad financial shape as the top candidates. Our top cities to go bankrupt include New York City, Chicago, Los Angeles, San Francisco, and maybe Portland and Seattle.


The leaders in this race to bankruptcy court vary over time as financial crises arise. However, given what is going down in Chicago, we think that city has taken the lead in the race of financial insolvency:


  • Chicago has very high taxes to begin with.

  • It also has seen a large out migration of residents and businesses as a result of high taxation and rampant crime.

  • But things recently got much worse as a major Wall Street ratings agency, S&P,  downgraded the city’s credit while at the same time pointing the finger of guilt at the current mayor, Brandon Johnson, and the city council.

  • A lower credit rating means that Chicago will have to pay higher interest rates on any municipal bonds the city issues which raises the cost of serving that bond and increases the expenses of the city.

  • According to S&P, the city politicians created a budget spending plan for 2025 that created “a sizable structural budgetary imbalance” that will only make the city’s financial situation worse. 

  • The city’s credit rating was lowered to BBB which means that the city has an “adequate capacity to meet financial  commitments” but is vulnerable to “adverse economic conditions.”

  • The BBB rating is only two steps above junk bond rating.

  • According to S&P’s Scott Nees: “The downgrade reflects our view that the 2025 budget leaves intact a sizable budgetary imbalance that we expect will make balancing the budget in 2026 and outyears more challenging.”

  • The city politicians were almost not able to close a $982.4 budget deficit for 2025 but left it in danger of not being able to have a viable budget in 2026 and beyond, i.e. they did not make the necessary spending cuts that were necessary to cope with a shrinking tax base.

  • Specifically: “The city’s practical options for raising new revenue appear less certain, as does the willingness of city leadership to cut spending, creating a level of uncertainty around its financial trajectory that is more appropriately reflected in the lower rating.” 

  • The mayor, not surprisingly, criticized the downgrade, claiming that the city has “fundamental economic strength.”


But the city still has many underfunded pension and other obligations, residents and businesses continue to flee the city, crime is still rampant, and now the world knows that Wall Street is not happy with the financial outlook of the city government. Yes, it looks like the city of Chicago is now in a financial death spiral and is now our top city candidate to go bankrupt first.

2)Speaking of corruption, let’s go halfway around the world to Ukraine:

  • As most people know, the Ukranians have been fighting the invading Russian army now for almost four years.

  • Also, as most people know, Joe Biden had no plan, no strategy and even  worse, made no effort to end the conflict.

  • Insead he just kept writing checks using American taxpayer money and sending it overseas with the intent to help the Ukranians save their country from the invaders.

  • The cost of his inability to negotiate and lack of energy to do so has probably cost the American taxpayer about $200 billion so far, the amount of  money Biden sent to the Ukrainians that was supposed to be used to beat the Russians.

  • This is wasted money that could have been a great help to helping millions of Americans that are homeless, hungry, need medical care, and relief from many natural disasters.

  • But it gets worse, according to ex-Polish deputy minister Piotr Kulpa.

  • Kulpa claims that up to half of the funds that reached the Ukrainian capital were stolen by Ukrainian officials.

  • This is not out of the realm of possibility since the country has a long history of alleged corruption within the government.

  • Specifically: “But they will also find something else: that a huge portion of the funds was stolen in Ukraine. From 30% to 50%, regardless of the nature of the aid.”

  • He also said that U.S. foreign programs are a way to “write off large sums of money that finance shady systems under the Democratic Party’s control,”

  • Also, he claims that the public figure of aid that was supposedly sent to the Ukranians was nowhere near what was actually delivered and used for the purpose of beating the Russians.

  • A lot of the money was siphoned off to pay the sky high salaries and bonuses of senior Ukrainian government politicians and officials.

Given that Federal government programs like the covid relief programs,  Social Security, Medicare, and just about every other government function is rife with fraud, criminal activity and stupidity, this assertion by the Polish official should not surprise us, just another day to rip off the American taxpayer, or as Mr. Kulpa says: “It’s a spit in the face of every Ukrainian. To every European and American taxpayer. This system is criminal from start to finish.”

Follow up note: A recent report from the Pentagon Inspector General, Robert Storch, said existing Ukrainian corruption “continues to complicate Ukraine’s efforts to achieve its EU and NATO aspirations.”

3)So political class incompetence is alive and well in Chicago and D.C., which should not surprise us when we look at the most recent Gallup trustworthy survey:

  • On a regular basis, Gallup polls Americans on how they judge the honesty and ethical standards of various professions.

  • The least trusted professions recently turned out to be lobbyists, members of Congress, and TV reporters.

  • More than half  of those surveyed said these professions have low or very low ethics.

  • Only 13% of respondents had a high opinion of TV reporters who ranked higher than Congressional  members and lobbyists, which means less than 13% of those polled had a high opinion of them.

  • Only 8% said they had a high opinion of Congress and only 4% had a high opinion of lobbyists.

  • And why Congress is rated very low, the mainstream media/TV reporters are on a very bad trend since in 1972 Gallup found that the media was rated highly by 69% and today that 69% has slid to 31%.

So Americans do  not trust their members in Congress or the media TV reporters that cover them, leaving us in deep trouble from a democracy perspective: politicians stink at their jobs and we do not trust mainstream media types to tell us about their failures and corruption. Dangerous times.

Just another day of insanity: Chicago takes the lead in the bankruptcy race, another government program that wastes billions of taxpayer wealth, and no one merits a bit of our trust.

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If you agree that we need to deseat every member of Congress for their lack of success and accomplishment, then please consider going to the following petition link to help the cause:


https://www.change.org/p/deseat-congress-reset-freedom



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Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:

Tuesday, May 14, 2024

May, 2024, By The Numbers: Chicago Is Now The Leading Candidate For Bankruptcy

 On a periodic basis we do some posts that fall under the theme of “by the numbers.” Rather than trust what the American politician tells us about reality, we like to examine the real numbers and the real reality in the world to understand what is actually going on. Relying on politicians, and their cohorts in the media, to tell us what is reality is always a sucker bet. They have their own agendas and goals, usually centering around their needs and self-enrichment. So we need to look at the reality of the numbers to determine what is really going on.

Previous analyses of “by the numbers” can be accessed by entering the phrase in the search box above. We look at the numbers to truly find out how good, not likely, or bad, most likely, the American political class is doing in managing our tax dollars, protecting our freedoms, and resolving major issues that affect all of us.


1)We have often made the case that a state government or a large city government will soon go bankrupt. Our top states that are likely to soon go bankrupt include:


  • California

  • Illinois

  • New York

  • New Jersey


Our top city candidates to go bankrupt include:


  • San Francisco

  • Los Angeles

  • New York City

  • Chicago


The bankruptcy scenario is likely to unfold as follows:


  • The state or city politicians continually raise taxes on residents and businesses in order to fund their out of control government spending.

  • This causes residents and businesses to move to other areas of the country where they get to keep their hard earned wealth.

  • This out migration to other locations reduces the tax base which reduces the government tax revenue stream.

  • Rather than get more efficient and/or reduce government spending to match the lower tax revenue stream, the politicians raise taxes even more to make up for the tax revenue shortfall.

  • This drives more residents and businesses out of the state or city, further reducing the tax revenue stream and the financial death spiral is underway.


In fact the financial spiral may already be underway in the government entities listed above. California is looking at a tax revenue shortfall in  the next fiscal year in the tens of billions of dollars. Its unfunded future financial liabilities are quickly approaching a trillion dollars which gets more and more difficult to fund since residents and businesses are quickly leaving the state.


New York  City and San Francisco have been especially hard hit with businesses and highly paid residents leaving their cities. On  top  of this out-migration crisis, these cities have always bragged about being “sanctuary cities” for illegal immigrants.  This has resulted in tens of thousands of illegal immigrants coming to their cities, putting additional strain on already dicey financial  conditions.


But given the dire statistics laid out in a recent Wall Street Journal article by Judge, Glock, it appears that Chicago is now the clear leader when it comes to the race to bankruptcy court. Consider some of the statistical and financial realities he documents in his writing:


  • Chicago's debt obligation load is about $49 billion which comes out to an individual debt load of about $43,000 for each city taxpayer.

  • This does not include the $42,000 debt load per resident that the state of  Illinois is faced with.

  • Thus, a taxpayer in Chicago is looking at an individual debt load of about $85,000 that city and state politicians have incurred for each taxpayer in the city and state.

  • It is by far the worst combined tax liability of any city in the country.

  • And it is not  likely the tax burden in the city is currently real low so that some of  this debt could be paid off by raising taxes since average family living in the  city currently sees about 12% of their earnings go to city and state taxes and that is before they pay Federal  income taxes, Social Security taxes,  and Medicare taxes.

  • The city property tax burden on businesses at 4% is the highest in the  country.

  • All of this has driven companies out of the city with the city’s business space vacancy rate sitting at over 25%.

  • Big companies, e.g.  Boeing,  and many other businesses have left the city which has driven up that office vacancy rate.

  • The population of the city and surrounding areas have  fewer residents than what they had 15 years ago as the tax base shrinks.

  • Generally, over 40% of the city’s budget is annually spent on inflexible fixed costs such as city employee pensions and city bond interest costs, costs that cannot be trimmed to any great degree.

  • For comparison, the second place city when it comes to fixed pensions and interest costs at the city level is Dallas  at 31%, 25% lower than what Chicago has to pay.

  • The city is facing a $34 billion bill for future pension liabilities and a $2 billion bill for retiree health care benefits liabilities but has only saved about 25% of the amount needed to pay the pension liabilities and  has put aside nothing for future retiree healthcare benefits.

  • Its  pension debt liabilities are higher than any other American city and actually higher than the pension liabilities  for many state governments.

  • But Chicago residents and businesses are also on the hook for other government debt liabilities including the liabilities of Chicago School  District,  Chicago Park District, Cook  County, the Forest Reserve District, and the Metropolitan Water Reclamation District, all of which increase the debt burden for just the city government by another 50%.

  • Budget wise for the formal city government, the mayor projects a tax shortfall of $538 million in  the current fiscal year and possibly a $1 billion shortfall in fiscal  2025.

  • Not covered in the  article is the  reality that the Chicago teachers union is  clamoring for billions of dollars more in support of their agendas.

  • Also not covered is the continuing need to feed, clothe, and provide medical  services to the tens of thousands of illegal immigrants roosting in this sanctuary city.


Sounds like a financial death spiral to me: high taxes drive out residents and businesses reducing the tax base which causes tax rates to  rise to pay for pensions, interest payments, and other city services which drives more residents and  businesses out of the city which further reduces the tax base without reducing the fixed costs of pension and bond interest payments, and the death spiral is in full motion.


Mr Glock quite elegantly summed up our death spiral  concept in his final paragraph: “Chicago could keep paying off its bondholders and  retirees by bleeding public services, hiking taxes and driving out still more residents but it would become a shell of its former self.” Sounds like a financial death spiral to me.


Thus, we may now have a clear leader in the race to bankruptcy court: the once great city of Chicago, a city whose politicians’ mishandling of its tax base and  economy are to be blamed for its soon to be fiscal demise.



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Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at: