Those who have been reading this blog for a while know that I have been writing about Illinois’ budget problems, and Illinois’ refusal to pay its bills on any kind of a timely basis, for a long time. (My first post on this issue was in May of 2006, and I only started this blog in April of 2006.)
Well, Illinois has now reached the peak (or nadir, depending on whether you are standing on your head or not). Even though the rating agencies still have Illinois’s credit rating as no worse than or even a little better than California’s, the bond market has decided we are riskier than California. The Chicago Tribune had an editorial on this subject Sunday. Josh Barro’s article, which was referred to in the Tribune, and which I had seen earlier in the week at RealClearMarkets.com, can be found here.
The Tribune notes that the "Sovereign Risk Monitor" put out by CMA, a London-based credit information company, ranks Illinois’ risk of defaulting above California’s, though below Iraq’s, slightly. Mr. Barro reports that Illinois’ credit default swap spread is higher than California’s – and Iceland’s, for pity sakes.
(I didn’t comment on Mr. Barro’s article earlier because I worry about getting a little tedious, always writing about Illinois’s budget mess – and I worry that my reader(s) may be getting tired of reading about it. Also, I have been concerned about the other disaster currently going on in Illinois, the Cubs’ season.)
But Illinois’s problems are not just local news any more. The first article in the United States news section of last week’s Economist was about the budget problems at the state level in the United States. And very the first state mentioned in that article was – Illinois. Here is what The Economist told the world about us: "The state of Illinois has a rather crude way of coping with its ballooning budget deficit. It stops paying bills."*
As Josh Barro emphasizes in his article, Illinois’ problem is not an inability to pay; it is an unwillingness to pay. We won’t cut spending, and we won’t raise taxes. We want it all – and we don’t want to pay for it.
I don’t know if this unwillingness to pay is a problem of Illinois’ citizens. It certainly is a problem of Illinois’ politicians. But it is a problem we can’t wait on any longer. We need to face up to the fact that we have overspent for the last eight years or more. The party is over and now we have to pay the bills. We have to cut spending or raise taxes or both. I realize this is not a good time to do either of those, but we should have thought of that before. We have to pay our bills and spend no more than we collect in taxes. If our politicians can’t or won’t do that, we need new politicians.
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* "Can pay, won’t pay," The Economist, June 19, 2010.
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