Chicago may become the next Detroit. We can see this Big Bang unfolding everywhere around us at a very rapid pace. Moody’s Investor Services just cut Chicago’s bond rating from Baa2 to Ba1, while Standard & Poor’s lowered the city’s rating from A+ to A-. Fitch Ratings also cut Chicago’s ratings from A- to BBB+.
The cuts are clearly in response to the Illinois Supreme Court decision, which ruled a 2013 pension reform law unconstitutional as it threatened the pensions of state and public workers. The state’s constitution says that pension benefits for current workers, “shall not be diminished or impaired.”
Chicago is really screwed now, and government workers will now consume the bulk of taxes in pension payments. Detroit collapsed when more than 50% of the current budget went to pay for pensions. The city has six pension plans, which in 2013 were only 40% funded and had a combined unfunded liability of $30 billion.
This is the problem that occurs when politicians, who are exempt from the law, run government. Any corporate mogul would have been in prison for this is outright fraud. But Chicago is the model for most other cities and states, as well as those even in Germany. Welcome to Big Bang – it is everywhere.
