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Ralf Seiffe writes of the need for the taxpayers of Illinois to enlist rock/activist Bono (pictured) to help with debt forgiveness in the Land of Lincoln as has on behalf of Third World countries.

Thursday, April 21, 2005

By Ralf Seiffe

OPINION - One of the lasting impressions from House Speaker Mike Madigan’s (D-Chicago) road shows on state finances is how precarious they are, no doubt the desired effect.

The meeting I attended managed to create a record showing that nearly every witness was in favor of a massive tax increase. This outcome is so counter-intuitive that one must conclude the architects of the pre-war Soviet show trials must have found work as impresarios for the Speaker.

The audience hand-out disclosed the odious facts about state debt, particularly the unfunded pension liabilities our legislators have accumulated over the years.

This debt is so large that the good citizens of Illinois will spend more than $240 billion over the next 40 years to pay off just 90% of these obligations. Just think, if your career starts today, you will spend your entire working life paying off the pensions of teachers and other public sector workers.

What these hand-outs didn’t reveal is the state’s retirement system is rigged so that these “public servants” will retire 10-15 years earlier than private sector employees.

During this advantage, they will likely collect more than the average, privately-funded retirement plan will pay in its entirety without even considering present values. If the public employee double dips in a new state job, it’s even more appalling.

One wonders if future taxpayers will put up with this. Will Illinois taxpayers, some now looking over their first tricycle, be content to put off those purchases in order to pay off debts to long dead teachers?

Apparently Illinois politicians have discovered this problem. They have proposed a massive tax increase to pay for these past financial sins and disguised their plan as a “tax swap”.

They tell us in exchange for sending more money to Springfield, they will send checks to local property tax authorities for our benefit.

This promise is not credible given the scale of debt they already owe. The promise of property tax relief will soon be forgotten as the teachers, professors and other retirees demand these new state revenues fund their retirement benefits and the state legislators cave into their masters from AFSME and the teachers’ unions.

Raising income taxes is a bad idea because Illinois is already a high tax state by any honest measure. In addition to specific, measurable taxes, we suffer another unmeasured, political burden of regulation, corruption and a systematic legal tyranny that makes government more expensive here.

The combination of taxes and the imperial attitude of politicians means that whatever the level of economic taxation, political equilibrium is just a few percentage points higher than the taxes collected. Taxpayers will never provide enough for the public sector because they will always seek and spend more than 100% of available resources.

This perfectly historical and predictable behavior means passing the tax increase will hydraulically increase the absolute level of overspending. Using tricks like chiseling doctors and hospitals, delaying payables, mandating tasks to inferior jurisdictions and continuing to promise future benefits without funding them, state debt will continue to mount.

If overspending is $300 when the average family’s tax burden is $3,000, then, by increasing the tax burden to $5,000, as the current proposals would do, politicians’ tolerance for overspending will plainly increase to $500. We simply dig a deeper hole, faster.

Profligate spending and delayed payments combined with the sort of accounting tricks the state uses normally signals an impending bankruptcy.

If this were a private company, the creditors would have forced reorganization long ago; contracts would have been voided and pensions adjusted to give the state some breathing room.

The rules for this are contained in Title 11, the federal Bankruptcy Code, but there is no chapter for reorganizing a state. We are caught by rising expectations in the public sector and no real hope of controlling spending.

What we need is Bono. The former leader of an Irish rock band has the glitterati and the left all excited about debt forgiveness. In the salons of Manhattan and Geneva, he’s advising banks to give up their claims on sovereign debtors for the good of those countries. His transformation into an international debt reduction advocate has given him the status of David Rockefeller, a genuine international banker and the notoriety of George Soros, a genuine currency and political manipulator.

Bono tells us that the people in the debtor countries should not suffer for the financial sins of their fathers and grandfathers.

That sounds like a good, humane idea and one worth applying in Illinois. Just think what good Bono could do persuading those left wing-teachers and professors who support debt forgiveness in the third world that the same prescription is good for them, here.

Applying the same logic to Illinois’ major creditors, its public employees, we could eliminate a significant portion of the state’s debt on the basis that these agreements were made long ago and the current population should not have to suffer from past bad management of the state’s finances.

Bono’s unlikely to appear and it’s just as doubtful that the public pensioners would take his common-sense advice anyway. Nevertheless, the State of Illinois has more debt owing to those folks than it can stand. Any increase in revenues will go to pay pensions, not for property tax relief.

Clever politicians like to say Illinois taxpayers have failed to properly fund education. This is as wrong as it is deceitful.

Illinois taxpayers have massively funded the teacher’s monopoly and their local and state enablers.

No, it’s not that we haven’t provided, it’s the stewards we’ve chosen haven’t performed.

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Ralf Seiffe advises business start-ups and product launches from Chicago, Illinois and is a political analyst and columnist for the Illinois Leader.