Essential Economics for Politicians

Illinois Might Be Doomed to Financial Collapse

Tax Payers Are Escaping

Well, the same thing is happening in Illinois.

That state is a fiscal disaster. Taxes already are high, government spending already is excessive, and promises of lavish future benefits for government bureaucrats have created a mountain of unfunded liabilities. To make matters worse, there’s a never-ending trickle of taxpayers fleeing to other states, thus making the long-run outlook even worse.

A column in today’s Wall Street Journal discusses this unfolding disaster.

…what about the state’s fiscal apocalypse, which is not only happening right now but has plunged Illinois into a bona fide financial disaster? …the state has amassed $11 billion in unpaid bills—predicted to climb to more than $27 billion by the end of 2019. Illinois is facing the worst pension crisis of any U.S. state, with unfunded obligations totaling $130 billion, according to the state’s Commission on Government Forecasting and Accountability. That amounts to about $10,000 in debt for each resident. …Illinois also had the lowest credit rating among the 50 states as of October, when Moody’s Investors Service downgraded it again…

Given all this, it’s no surprise that people are leaving. In 2016 Illinois lost more residents than any other state—for the third consecutive year. A total of 37,508 people fled, leaving the state’s population at its lowest level in nearly a decade.”

 
Bruddah IZ said:
Illinois Might Be Doomed to Financial Collapse

Tax Payers Are Escaping

Well, the same thing is happening in Illinois.

That state is a fiscal disaster. Taxes already are high, government spending already is excessive, and promises of lavish future benefits for government bureaucrats have created a mountain of unfunded liabilities. To make matters worse, there’s a never-ending trickle of taxpayers fleeing to other states, thus making the long-run outlook even worse.

A column in today’s Wall Street Journal discusses this unfolding disaster.

…what about the state’s fiscal apocalypse, which is not only happening right now but has plunged Illinois into a bona fide financial disaster? …the state has amassed $11 billion in unpaid bills—predicted to climb to more than $27 billion by the end of 2019. Illinois is facing the worst pension crisis of any U.S. state, with unfunded obligations totaling $130 billion, according to the state’s Commission on Government Forecasting and Accountability. That amounts to about $10,000 in debt for each resident. …Illinois also had the lowest credit rating among the 50 states as of October, when Moody’s Investors Service downgraded it again…

Given all this, it’s no surprise that people are leaving. In 2016 Illinois lost more residents than any other state—for the third consecutive year. A total of 37,508 people fled, leaving the state’s population at its lowest level in nearly a decade.”
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Perhaps Mr. Obama should go home to Illinois and team up with Rahm Emanuel & straighten out this fiscal mess...
 
Without Discipline Democracy is Threatened

The U.S. financial regulatory system may look like the product of a maniacal mob, but it was made fragile by political design. Politicians aren’t necessarily irrational, but they face incentives to favor constituents (and patrons), and they avoid taxpayer accountability by raising money through opaque means, like issuing debt and/or providing implicit or explicit debt guarantees. Banks, and more recently the Fed, buy this debt or it is sold to foreign governments in return for exports. Undisciplined, government intervention erodes market discipline and feeds on itself
 
Obamacare and Dodd-Frank Have the Same Fatal Flaw

New Law, Same Problem

Obamacare took a similar view of the role of government subsidies. The ACA promised to maintain or improve health care while making coverage universal. Past political attempts to do this had always failed due to the expense and “moral hazard” of people taking greater health and/or financial risks. The ACA ignored or glossed over these concerns, mandating participation at multiples of a competitive market premium to generate sufficient cross subsidies and expensive coverage not paid for by the beneficiaries by fixing prices across all risk classes.

Authors of the law simultaneously avoided the major source of increasing costs by deferring reform of medical malpractice torts, saying it was politically unpalatable. Knowing in advance that premiums would skyrocket after enactment of the law, the law’s proponents incorporated a bailout scheme into the ACA. The big health insurers became essentially “too big to fail” or dropped out of the system. Most of the smaller nonprofit insurers failed.

To be clear, this is not “free” national health insurance, which would obviously lead to huge taxpayer expense for what would be a lower-quality product. But the alternative of crony capitalism is worse than budgeted subsidies because it massively undermines market competition and freedom of choice while imposing greater costs on the public.

The solutions for health insurance and financial services are the same: either bite the bullet and nationalize, or restore competitive markets. Democrats tried to get the former for health insurance, but failed. Meanwhile, commercial banks were temporarily “nationalized” — forced to issue shares to the government during the crisis.

https://fee.org/articles/obamacare-and-dodd-frank-have-the-same-fatal-flaw/
 
nononono said:
Ocare is on the ropes and the POTUS has the repeal back on the books.....
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It has to be a full repeal. Cut off the money supply, seperate health care from health insurance, seperate health insurance from employment and the cost that Wez and others claim to be concerned with will go down
 
After Studying Basic Economics, Mayor Vetoes Minimum Wage Increase

https://fee.org/articles/after-studying-basic-economics-mayor-vetoes-minimum-wage-increase/

Pugh isn’t the first politician to stand up and question the economic logic behind raising the minimum wage.

In fact, last year as he was signing California’s new minimum wage law into effect, which incrementally raises the minimum wage to $15 by the year 2020, California Governor Jerry Brown said:

“Economically, minimum wages may not make sense. But morally, socially, and politically they make every sense because it binds the community together to make sure parents can take care of their kids.”

However, even though Brown openly admitted that raising the minimum wage “may not make economic sense” he proceeded to sign the bill anyway, rather than face public scrutiny for making an economically sound choice.

Just this morning, the Baltimore City Council convened to discuss the Mayor’s actions but failed to get the needed signatures to override her veto.

As it stands currently, Baltimore is safe from the wage crusaders, but this will be an ongoing battle as the utopian rhetoric of higher wages clashes with the economic realities of actually putting those policies into action.
 
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