My Blog

Category: Business

  • Chicago’s Pension Time-Bomb

    While Emanuel can coast for two more years, the city in 2015 is required by law to set aside an additional $700 million a year for two of its four pension funds, all of which are woefully underfunded: That year’s budget will include a total of $1.2 billion for the retirement accounts of teachers, police, fire and municipal workers. Such a steep ramp-up threatens to gobble city resources for everything from parks to schools to transportation.

    via Chicago Tribune.

    The total budget for this year is $8.35 billion.  In two years the city has to find nearly another 10% more money… out of thin air.

    This is naturally in addition to the $86 billion (laughable that anyone still believes this number; it’s easily twice that) hole is the state pension funds.

    Get ready… something’s going to go BOOM pretty soon.

  • Businesses Expanding but Not Hiring

    A majority of owners of midsized businesses in the Chicago area plan to expand in the next three months, but only a third say they will hire more workers in that time, according to a new survey.  …

    The most recent poll … found that nearly 60 percent of surveyed businesses planned to expand in the next six months. …At the same time, just 30 percent plan to add staff in the next three months. In the spring survey, 42 percent said they planned to hire soon.

    via Crain’s Chicago Business.

    Businesses are terrified of the government.  So what do they do?  More as slowly as possible.  Hire as few as possible.  Be as conservative as possible.  Because the G is going to come and screw you up real bad at any minute.

    Business are terrified of Obamacare.  The costs associated with bringing on new people is dizzying.  Hire someone today and down the road you may just have to fire them because their health care costs are out of control.

    Running a business is hard.  Really hard.

    Any business that tells you that they”could use “help from the government” is so big that they are fully in bed with the government.  Much like GE, or GM.  Recall that GE paid no taxes on $14B in income in 2010.  The GM fiasco speaks for itself.

    The life blood of this country is in the small and medium sized businesses.  Right now these businesses are sick and we’re not nurturing them the way we should.  But they future is our future.

    This country is heading in the wrong direction.

  • $2M in Unemployment to Inmates

    More than 1,100 people have collected nearly $2 million in unemployment benefits while they were in county jails or state prisons, including $43,000 that went to a person in the Cook County Jail, a state agency said Tuesday.

    Now they may face state or federal criminal fraud charges as well as having to repay what they shouldn’t have taken in the first place, said Greg Rivara, spokesman for the Illinois Department of Employment Security.

    In Cook County alone, there were 296 inmates tied to $722,689 in wrongful payments. In Will County, 21 inmates collected $85,159. Lake County was another leader with 20 inmates collecting $84,533, the agency said.

    via Chicago Tribune.

    WT…?!  You couldn’t make this stuff up.

    #1. Where are the two wonder-twins of justice in this?  Nothing from Lisa Madigan or Anita Alvarez?  Why?  Where have they been?
    #2.  Who the hell is running this agency?  Jail and prison records are actually a matter of public record.  You’re telling me no one ever bothered to cross-check the payouts against another public record?

    #3.  It kinda makes you wonder how much fraud is really going on in the system.  After all, The Machine has their corrupt friends running all these agencies there is really no limit to how much might be missing.

    Certainly not last… This is just another fine example as to why any service run by the government is doomed to ultimately doomed to fail.  People are incentivized to cheat the system.  But government employees are also incentivized to get as many people as possible into the system so they can justify their jobs and get more jobs and thus become more politically powerful.  As such, no one is watching the money.
    The government that works the least is most often the government that works best.

  • Ald. Burke, Wrigley & Your Tax Dollars

    Ten years ago, Chicago’s most powerful alderman, Edward M. Burke, and the rest of the City Council signed off on a deal that promised $16 million in taxpayer subsidies to the Wm. Wrigley Jr. Co. to help it build a new corporate campus on Goose Island rather than move to the suburbs.

    Three years later, Burke’s law firm, retained by Wrigley, persuaded Cook County officials to lower the property assessments for two buildings the chewing gum giant had bought down the street from the new campus.

    Burke’s legal work helped Wrigley cut its property taxes by more than $412,000 between 2006 and 2008, records show.

    For that, the company says, it paid the alderman about $90,000 in legal fees.

    via Chicago Sun-Times.

    What the story fails to mention is that Wrigley also received millions in TIF money to build the hitherto unfinished building on Goose Island.

    The story is a good read (i.e. good read it) as it also talks about how Wrigley has been sold to Mars.  So now all the millions spent on top of the millions in lost revenue will likely never be recouped.

    Just embarrassing all around…. unless you’re The Machine.

  • Illinois Need to Cut COLAs

    The head of Illinois’ largest pension plan strongly suggested that cuts in cost-of-living benefits are inevitable for more than 360,000 teachers and retirees outside of Chicago.

    In an interview with Crain’s editors and reporters, Richard Ingram, executive director of the underfunded Illinois Teachers’ Retirement System, said state politicians will have few other options if they want to make meaningful progress on closing the gap between promised pension benefits and the available funding.

    via Crain’s Chicago Business.

    Well Duh!

    What’s missing from this article is any analysis as to how much longer the pensions can survive should the state cut or reduce the COLA.  Mark my words — cutting the COLA is NOT a FIX.  It is a band-aid at best.

  • Illinois – Worst Financial Shape Ever

    Bloomberg L.P., the big New York financial data firm, is holding its fall municipal-financing conference on Wednesday, and guess what the title is for the special panel on the Land of Lincoln?  Try Land of Entropy.  Yes, sports fans, the panel titled “Illinois Treading Water” is set for 1:45 p.m. and, according to a synopsis, not too much good will be said about our fine state.

    “California debt is beating Illinois bonds by the most in three months as investors choosing between the two lowest rated U.S. states reward efforts to bolster the finances of the nation’s biggest pension in California,” it says.  But though they passed a version of pension reform in California, nothing good has happened here.

    “Illinois lawmakers failed to advance any measures in a special session Aug. 17,” the synopsis says.  “Standard & Poor’s cut the state’s credit.”  And, at last check, “Illinois carried a backlog of about $8 billion in unpaid bills, not including pension obligations.

    “More: Illinois’ ratio of pension assets to liabilities is “the lowest among U.S. states.”  It concludes, “What is the outlook for significant defaults in the state? How can Illinois get its fiscal house in order?”

    via Crain’s Chicago Business.

    Rahm, Michael Madigan, Pat Quinn, John Cullerton, and the rest of The Machine will go down in history as fiddling while Illinois burned.

  • Jimmy John’s Leaving Illinois, Florida Bound

    Jimmy John Liautaud is moving part of the sandwich chain that bears his name to Florida next year, making good on a threat issued in 2011 after Illinois hiked its corporate tax rate.

    The founder of Jimmy John’s Gourmet Sandwiches said during a Sept. 18 panel discussion in Chicago that he will relocate the company’s licensing division to Florida, where he plans to move in early 2013. Mr. Liautaud said in January 2011 that he applied for residency in Florida out of anger when Gov. Pat Quinn raised the corporate tax rate to 5 percent from 3 percent.

    via Crain’s Chicago Business.

    Ya see!!  This is what happens when you raise taxes.  It’s called the Laffer Curve and it’s a real phenomenon.  Illinois is in the down portion of the curve where when you raise taxes you get less income.  Can someone explain that to Gov. Quinn, Michael Madigan, John Cullerton, Rahm, and the rest of The Machine?

    Raising taxes — especially on “the rich” — only shifts the actual tax burden further down into the middle class.

    What we need is a wholesale rewrite of the tax code.  But that’s a much, much longer post.

  • U.N. Wants New Global Taxes

    A 1 percent tax on billionaires around the world. A tax on all currency trading in the U.S. dollar, the euro, the Japanese yen and the British pound sterling. Another “tiny” tax on all financial transactions, including stock and bond trading, and trading in financial derivatives. New taxes on carbon emissions and on airline tickets. A royalty on all undersea mineral resources extracted more than 100 miles offshore of any nation’s territory.

    The United Nations is at it again: finding new and “innovative” ways to create global taxes that would transfer hundreds of billions, and even trillions, of dollars from the rich nations of the world — especially the U.S. — to poorer ones, in line with U.N.-directed economic, social and environmental development.

    via Fox News.

    The U.N. is proving itself to be a net negative.  I don’t agree much with the U.N. or Ted Turner but the latter made a great point once about how the U.N. gave Nikita Khrushchev the forum to bang his shoe and tell the world how the Soviet Union felt.  It doesn’t really matter whether Khrushchev actually banged his shoe or not.  The fact that he was able to stand up and speak his peace was perhaps enough to avoid another world war.

    The U.N. is good at that; a place to permit leaders to go and speak their peace.

    It sucks at absolutely everything else.

  • Huge Increase in Warrantless Electronic Surveillance

    Pen register and trap and trace devices now generally refer to the surveillance of information about—rather than the contents of—communications. Pen registers capture outgoing data, while trap and trace devices capture incoming data. This still includes the phone numbers of incoming and outgoing telephone calls and the time, date, and length of those calls. But the government now also uses this authority to intercept the “to” and “from” addresses of email messages, records about instant message conversations, non-content data associated with social networking identities, and at least some information about the websites that you visit (it isn’t entirely clear where the government draws the line between the content of a communication and information about a communication when it comes to the addresses of websites).

    via ACLU.

    For the record, I agree with the ACLU exactly one time.  This is it.

    Our government has taken to spying on its own citizens, that’s us, on an unprecedented level.  As more and more communications go electronic it’s easier and easier to intercept.  That it is done without a warrant is truly frightening.  If these communications are so important then the FBI should present evidence to a judge and get a warrant.

    Mind you, this is the same FBI that cannot find hundreds of guns from Fast and Furious.  This is the same presidential administration that refuses to turn over records regarding those guns or the Fast and Furious catastrophe.  The same administration that promised to the “the most open and transparent in history” and has proven to be just as closed and private as Dick Cheney and the Bush years.

    When it comes to spying on you but keeping gov. secrets Obama = Bush.

  • Aldermen Briefed on Pension Time-Bomb

    [Chicago’s] Chief Financial Officer Lois Scott reminded council members that absent significant changes to pension plans, the city will be forced to drastically cut services, raise taxes or do both to close a funding gap that could reach $700 million in just a few years, aldermen said.  …

    …  Lawmakers are looking to fix the state’s woefully underfunded pension system, but the city also needs changes from Springfield to repair its retirement funds.

    … Absent a city pension overhaul, the fund for retired city firefighters would become insolvent in nine years, according to a city report issued two years ago.  The police pension would go broke four years later.  Funds for city laborers and municipal workers would be broke by 2030via Chicago Tribune.

    These numbers are all wrong.  These pension claim they’re going to earn 8% on their money year after year.  That simply has not happened in a decade and they are tens-of-millions of dollars behind where they claimed they would be be even two years ago.

    Kudos to my friend Anthony Curran who suggested we start a Pension Death Watch.  I think it’s a great idea.