Friday, March 6, 2015

The Last Thing Chicago Needs is an Activist Pro-Labor Mayor

Let me first say that I am no fan of Rahm Emanuel -- the current Mayor of the City of Chicago.  I consider him too abrasive and too much of a bully to be an effective negotiator in a city that currently needs a skilled one to save it from insolvency. Its this brashness that probably resulted in his being the first Mayor of that city to face a runoff in his bid for reelection; with his opponent being a pro-labor and labor activist by the name of Jesus "Chuy" Garcia.  Some are already saying that Rahm may lose the runoff, but, the last thing Chicago needs is a pro-labor Mayor because it is labor and its rich pensions that are killing the city financially.

To understand this, you need to look at this chart put together by Crain's Chicago Business:

So, essentially, the City of Chicago does not have enough money ($29 billion) to cover continued pension payouts for the top 5 groups of union workers that already have or will have retired in the future.  But also understand that there is an additional $3 billion in other unfunded pensions; bringing the total to $32 billion dollars in commitments that the City just doesn't have.  In fact, that $32 billion is nearly 4-1/2 times the $7.3 billion dollars the City plans to take in and spend in 2015.   And, that 2015 budget already fails to include $550 million in unfunded pension liabilities due by the end of the year.  So, somewhere, over the next few months, the City (Rahm; assuming he is still the mayor) must find an additional 7.5% increase in revenues (taxes) or, some combination of reduced pension commitments, tax increases, and reduced spending, in order to meet that year-end pension shortfall or default on it.

But, rather than solely raising taxes, which would have greatly ticked off the voters, Rahm has opted to do a "combination" of things to try and avoid the city defaulting on its commitments and, potentially, following Detroit into bankruptcy.  Besides raising property taxes, Emmanuel has greatly put himself at odds with the unions -- primarily the Teacher's Union -- by closing 50 non-performing city schools and by trying to negotiate concessions in wage increases and a reduction in pension commitments and increases in pension contributions. 

So, as a result of his effort to try and save the city, he now finds himself struggling for his political life because the voters seem to think there is some magic bullet out there that will solve the pension liability problem without raising taxes or by cutting services and pension benefits.  Thus, by letting the fox guard the hen house, the voters may just put "Chuy" in charge of the city's labor pension problems.  As such, I see no way that the City could survive.  While  "Chuy" says he will hold the line on taxes while maintaining city services and, at the same time, honor union pension commitments, you just can't have everything and still avoid future bankruptcy.  If he does get elected, it will be on the basis of promises he can't keep.  So, my guess is that -- being a labor guy who won't reduce pension commitments and city services -- he will just raise taxes to solve the City's problems.  That, in turn, will most likely force people and businesses to leave Chicago; resulting in even less tax revenues, and even bigger pension problems in the future.  That's exactly how Detroit got itself into bankruptcy.


Rahm could actually lose:

Emanuel's pension fix costly, but pain is likely to double:

Chicago Teachers Union: Rahm Is Finished:

Jesus "Chuy" Garcia - Chicago Tribune Election Center:

How Detroit went bankrupt, how it got out and where the city goes from here:

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