Friday, May 15, 2015
A pocket guide to financial disaster
Personal experience is overrated. People fancy their closeness to a situation gives them the last word: "Look buddy, it happened to me, I know." When it can just as easily blind them. "I hate Mexicans because I went to Mexico in 1967 and got food poisoning . . ."
Okay, thank you for your valuable insight.
So let me start by sharing my bias, and you can decide whether it provides clarity or confusion. In 2009 when Jim Tyree wanted to buy the Sun-Times, the deal offered was the union would surrender seniority, take a 15 percent pay cut and lose our pensions. The choice was that or the newspaper would fold.
We didn't snap at the deal. In fact, the union rejected it on the first vote. I was the only one, in my recollection, to speak in favor of the deal, and here is what I remember saying, "I'm a Jew and we survive. The purpose of the union is to protect our jobs at the newspaper, but if there's no paper and no jobs, then it really doesn't matter if the union is sound or not." We took the deal, and while I'm sorry to have to work like a hamster on a wheel until the day I die, I've never for a moment regretted taking it. Six extra years at a big-city paper is something.
So now the come-to-Jesus moment for Chicago's pension fiasco looms. The Supreme Court spiked the fix that our political geniuses spent a year cobbling together because it's illegal. Moody's immediately downgraded Chicago's bond rating to junk status. Which means that massive borrowing, the only thing keeping the city afloat, just got even more expensive. And it's going to cost even more to borrow money, assuming Chicago can find folks reckless enough to lend to it to us.
What to do? I heard one expert say that digging out of the pension hole will take a 40 percent property tax hike. No, said another, make that 49 percent.
Let's review, for those who haven't been paying attention. (This problem is not only a tribute to the short-sighted cowardice of politicians, but to the electorate's genius for ignoring gathering disaster.) Politicians gave out pensions — I won't debate whether they're "fat" pensions, let's just call them "pensions" — to government workers, basically promising money the city didn't have and — whoops! — was never going to have. Knowing their own tendency to filch stuff, our leaders built into the law that the pensions, once established, could not be reduced. And the retired folks who receive them, former teachers and electricians and such, worked their various jobs for years, expecting those pensions. It was a promise.
But you can't give money you don't have. Since it's against the law to cut pensions, Chicago has been cutting everything else. The constitution doesn't demand it provide mental health services or give aid to people with disabilities. No need to pay traffic aides — I didn't see a one downtown at 5 p.m. Wednesday and many Loop intersections were gridlocked, a metaphor for our times.
These cuts degrade life in the city. That's going to grow worse, as everything gets tossed over the side in order to keep ballooning pensions from capsizing the ship. At some point Chicago will hollow out and become an enormous pension plan that also puts out fires.
There is no facile solution, just a series of bad choices. A clear-cut sacrifice, like the Chicago Newspaper Guild made, isn't even possible. Retirees can't vote to cut their pensions to save the city and wouldn't if they could. Taxes could be raised, though the common wisdom is that jacking up property taxes or increasing taxes on corporations would cause Chicago residents and companies to flee faster than they already are, leaving those who remain clawing at an ever smaller pie.
I believe this is referred to as the "death spiral."
There is no easy solution that doesn't involve going back in time, and the necessary time-travel technology is not in place. Me, I think the city declares bankruptcy and puts the pensioners in line for their dimes on the dollar with all its other creditors. That's bleak. So here, let's end on a light note:
Anybody wish that Chuy Garcia was on the fifth floor of City Hall? Busily forming his exploratory committee and trying to figure out which wire to cut before this problem sends Chicago up in a mushroom cloud of insolvency? I didn't think so.