The View from Right Field

Illinois and Stein’s Law

Herbert Stein, economist and Chairman of the Council of Economic Advisors under Presidents Nixon and Ford, is probably best known by many people today as the father of Ben Stein (of “Ferris Buehler's Day Off” and “Win Ben Stein’s Money” fame).  But Herb Stein is also known for “Stein’s Law”: “If something cannot go on forever, it will stop.”

Which is actually a lead-in to Illinois’s budget and unfunded pension liability mess.  Unless you believe that Illinois’s unfunded pension debt will never be a problem, because there will always be enough money in the fund to make current pension payments,¹ you would say that the present situation cannot go on forever; i.e., Illinois cannot continue to not properly fund its pension obligations.  But looking at the people we have in Springfield, you would despair of that ever happening.

The Effect of “Exit” and “Voice” on Financial Irresponsibility and Corruption in Illinois

“Exit” and “voice” are the two main ways that people can react to problems they have with business or government – or pretty much anything.  With “exit,” you just leave.  If you don’t like one cell phone company, you go to another.  If a food store doesn’t have the products you want or if the fruits and vegetables aren’t fresh enough, you go someplace else.

When it comes to government, the same theory applies, though it isn’t quite as easy.  Still if things are bad enough, you leave.  As Tim Harford noted in FT Weekend,¹ “[a] citizen of the US can move to a different state; a citizen of the EU can move to a different country.”  Venezuela is the current champion in this category.  Literally millions of people have left Venezuela because conditions are so bad there.

Is There Any Program Illinois Politicians Can’t Find a Way to Corrupt?

Sixteen years ago the City of Chicago began installing red-light cameras.  The idea of red-light cameras is simple and sounds good: make sure cars stop before turning right on a red light.  But Chicago being Chicago, and Illinois being Illinois., once red-lights cameras arrived so did corruption involving red-light cameras. 

In 2016, a Chicago city worker and the CEO of a red-light camera company were convicted of participating in a kickback scheme involving the awarding of Chicago’s red-light camera contract.¹  Now, the Chicago Tribune reports that, according to testimony in a court case, SafeSpeed, a company with a number of red-light camera contracts in the Chicago suburbs, paid the police chief of Justice, Illinois (I know, “Justice, Illinois” is a contradiction in terms) a fee of 1% of the revenues it collected from other cities that the police chief was able to convince to sign a contract with SafeSpeed. 

Illinois Politics: The Gift That Keeps on Giving

As you may know, Chicago’s teachers’ strike ended last week.  (The teachers were only doing it for the children, of course.)  One of their demands was an elected school board.  (The mayor presently appoints the board.)  The union wants a 21-person elected board; all the better, I suppose, to ensure that the union will be able to help elect a majority of the board.  Which would mean that during the next contract negotiation, the teachers’ union would be on both sides of the table, negotiating with itself.  Which should make the negotiation easier – and increase business for one-way U-Haul rentals out of town.

Michael Madigan, Speaker-for-Life¹  of the Illinois House (sort of like Xi Jinping in China), has said he would support legislation creating an elected school board in Chicago.  However, given that the feds and the FBI seem to be investigating Springfield, as well as the Chicago City Council (wow, they must be busy), the possible problem for such legislation is whether Speaker Madigan will have a quorum by the time the legislative session starts in January.  On Friday, State Rep. Luis Arroyo, an assistant majority leader in Speaker Madigan’s House of Representatives, resigned after being charged with bribery last week.

General Electric and Illinois

General Electric has had problems over the last few years.  Management mistakes, etc., have been so bad that last year GE cut its quarterly dividend to one cent a share.  Then, earlier this month, Larry Culp, GE’s new CEO announced that, in an effort to cut debt and reduce liabilities, GE would freeze all of its remaining defined benefit pension plans.  The plans had already been closed to new participants in 2012, but now the participants would no longer accrue new benefits under the plan. 

According to the Wall Street Journal article on GE’s action, as of 2017, only sixteen Fortune 500 companies provided traditional defined-benefit plans to new hires, and 42% of Fortune 500 companies with defined benefit plans, whether open or closed, had frozen them in some way.

Bidens in Ukraine – and Grifting in Illinois

In an article Peggy Noonan wrote last weekend about the President Trump/Ukraine story, she made a comment that seemed relevant to Illinois:

“In the end, in purely practical political terms, the one person who will be hurt by this story will be Joe Biden.  Every telling of this story necessitates pointing out that Mr. Biden’s son Hunter had cozy financial relationships with other countries, including Ukraine.  It’s real swamp stuff.  It looks bad, say the former vice president’s friends.  No, it is bad.

I Am So Tired of @realDonaldTrump

In the middle of his snit yesterday over trade and tariffs with China, President Trump tweeted, in part:

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.” (Here and here)

I just don’t know what to say.  Maybe Xi Jinping and Kim Jung Un, people President Trump calls his friends, can order their companies to do this.  But, President Trump, you can’t do this.  We are a free country, and you can’t order people or companies around like some Communist dictator.  And saying things like this is stupid. 

Helping People Takes More Than Just Raising Taxes and Spending Money

Taxes are going up in Illinois tomorrow.  The gas tax is going up 18 cents a gallon, and there are probably other taxes going up, too.  Also, there will eventually be new taxes on things like marijuana and sports gambling.¹  I understand why taxes have to go up.  Illinois has spent more than it has raised in taxes for so long that the time has come to start paying up.  I am not sure, however, that enough of the tax increases is going toward the unpaid bills and funding the pension promises the legislators have been making for years.  Actually, I am sure.  Enough isn’t going for these things.  But that is not what I want to talk (spelled “r-a-n-t”) about today.  I want to talk about how the Illinois spends its money.

One of the problems with the politicians we have in Illinois is they seem to think that, once they have passed the programs and appropriated the money, their job is done.  They think that all they have to do is spend money and problems will be solved.  Which is just so far from being true.

Warren Buffet Says Don’t Invest in States Like Illinois

Warren Buffet is one of the Democrats’ favorite billionaires.  Mr. Buffet was a big fan of Barack Obama.  When President Obama was in office, Mr. Buffet argued that taxes on the wealthy were too low and complained that he paid a lower tax rate than his secretary.

I wonder, however, if Illinois’s new Democratic governor, a billionaire himself, feels quite so friendly to Mr. Buffet these days.  According to an editorial in The Wall Street Journal today:

“In a Feb. 25 interview on CNBC, Mr. Buffett warned investors to avoid states with large unfunded pension liabilities. He said he couldn’t be sure how such states would try to bring in more revenue – whether by raising corporate taxes, personal income taxes, or a combination. But he had no doubt the taxes are coming.

Guns, Laws, and Aurora, Illinois

I have written before about guns and gun control (see here, here, and here).  I don’t need to repeat what I said in those posts.  I just wanted to comment on Illinois Governor J.B. Pritzker’s vow, after the shootings in Aurora, Illinois, to tighten Illinois’s gun laws.  The only problem with the Governor’s promise is that Illinois’s laws already prohibited the alleged shooter from buying or owning a gun.  The problem in the Aurora shootings wasn’t that we didn’t have the right laws; it was that we weren’t enforcing the laws we had.

In my post on Friday about Governor Pritzker’s proposed budget, I said that it’s not how much government spends, it’s how much government accomplishes.  In this case, it’s much the same.  It’s not what laws government passes that counts.  It’s how many laws of those laws government actually enforces.