The crash, when it comes, will be the more alarming and less comprehended

From Who will bail out Chicago? by Mary Pat Campbell.  The subheading is Neither Illinois nor the U.S. federal government are in a great shape.

She lays out just how deep a financial hole Chicago is in and why Illinois no succor can be expected from the state.  The financial ill-discipline rotting Chicago is coursing through Illinois as well.  And the feds?

Here is the thing: while Fitch is only the most recent credit rating agency to downgrade the U.S. credit rating for its own credibility reasons, [S&P having gotten there back in 2011], the federal government does not rain bailout money on pension funds randomly.

Back in 2021, the multiemployer pension bailout passed but that was specifically due to Central States Teamsters about to wipe out the PBGC multiemployer pensions program (by 2025 - which had no connection to the pandemic, by the way.) Some kind of bailout was going to pass.

A decade ago, no federal bailout at all occurred for public pensions getting cut in Detroit’s municipal bankruptcy.

Now, the federal government, after having rained down a bunch of cash during the pandemic indiscriminately, and now seeing a demographic disaster approaching [that we have seen approaching for decades] has to deal with: Medicare, Social Security, Medicaid [as many nursing home residents are on Medicaid - not to mention those on dialysis, to mention other conditions], etc.

You think they have spare change for Chicago?

Unfunded pensions, private sector, city and state, were much discussed from 2004 up until circa 2011.  

They were a real issue which was, often reluctantly, at least present in the public discourse.  My sense then was that the MSM dropped the issue during the Obama presidency because it was 1) complicated, 2) intractable, and 3) it was a distraction from the ringing call to remake America and the world.  

But as Walter Russell Mead once said:

Wars against arithmetic don’t end well.

Governance is about math, choices, promises made and kept or not.  

The structural financial ills of profligate states and cities have been known for many decades.  We have known they needed to be dealt with and have known how to deal with them.  And chosen not to deal with them because meeting obligations constrains vote hungry politicians from serving up the gaudy baubles of give-away policies.  

But the piper is piping.

Campbell's piece is a reminder that the unsolved problem does not go away.  It simply festers and gets worse.  

Many years ago, I was asked to turn-around a financially troubled business unit by the new CEO of the company.  I went in to do the first reconnaissance of the financial books and discovered a host of problems, among the leading problems being a balance sheet of outstanding collectibles that had not probability of being collected.  A parlous financial situation.

I foreshadowed to the CEO that there were problems which would need bold and unpleasant action.  His response was:

Bad news doesn't improve with time.

Indeed. 

But reading Campbell, it makes me think that there are at least three major trends coming together which herald hard urban times ahead.

Urban cities have always been blue and they are getting bluer.  Not just in terms of partisan politics but in terms of hard left Woke, Social Justice, Critical Race Theory, luxury policies which make no improvement in anybodies lives other than the insider grifters and advocacy groups.

Urban pensions and finances have long been rickety and are getting more rickety at a time with high real interest rates.

There is an increasing disconnect between responsible and financially stable residents and the policies of urban politicians.  In Albert Hirschman's construct of Voice, Exit, and Loyalty, urban residents are seeing the consequence of having no voice, experience the consequences which reduce loyalty and then choose to exit.  Growth is in suburbs and exurbs, not in Blue Policy urban centers.  

More expensive and non-productive policies, demographic departures, and foundering finances - The mainstream media may not want to talk about maths and underfunded pensions and the nuisance of delivering routine services demanded by residents but that does not make any of those things go away.

It just means that the crash, when it comes, will be the more alarming and less comprehended.