Guest Post by Patrick J. Buchanan
If Gov. Bruce Rauner and his legislature in Springfield do not put a budget together by Friday, the Land of Lincoln will be the first state in the Union to see its debt plunge into junk-bond status.
Illinois has $14.5 billion in overdue bills, $130 billion in unfunded pension obligations, and no budget. “We can’t manage our money,” says Rauner. “We’re like a banana republic.”
Speaking of banana republics, Puerto Rico, which owes $74 billion to creditors who hold its tax-exempt bonds, and $40 billion in unfunded pension liabilities, has already entered bankruptcy proceedings.
The island’s imaginative 38-year-old governor, Ricardo Rossello, however, has a solution. Call Uncle Sam. On June 11, Rossello held a plebiscite, with a 23 percent turnout, that voted 97 percent to make Puerto Rico our 51st state.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
“(T)he federal government will no longer be able to ignore the voice of the majority of the American citizens in Puerto Rico,” said Rossello. Washington cannot “demand democracy in other parts of the world, and not respond to the legitimate right to self-determination that was exercised today in the American territory of Puerto Rico.”
Had the governor been talking about the island’s right to become free and independent, he would have had a point. But statehood inside the USA is something Uncle Sam decides.
Rossello calls to mind Count Mountjoy of Grand Fenwick, who, in “The Mouse that Roared,” plotted to rescue his bankrupt duchy by declaring war on the U.S., sailing to America to surrender, and then demanding the foreign aid America bestows on defeated enemies.
Yet Puerto Rico’s defaults on its debts may soon be our problem. Many bond funds in which Americans have invested their savings and retirement money are full of Puerto Rican bonds.
According to The New York Times, the U.S. Virgin Islands, the Northern Marianas and Guam are in the same boat. With 100,000 people, the Virgin Islands owe $6.5 billion to pensioners and creditors.
Then there is Connecticut, a state that has long ranked in the top tier in per capita income and wealth.
Connecticut, too, appears wobbly. Rising pension benefits, the cost of servicing the state debt and falling tax revenue due to fleeing residents and companies like Aetna and General Electric, have dropped Connecticut to near the national bottom in growth prospects.
“The state’s population is falling: Its net domestic out-migration was nearly 30,000 from 2015 to 2016. In 2016, it lost slightly more than 8,000 people, leaving its population at 3.6 million,” reports Fox News: “(R)ecent national moving company surveys (show) more people leaving Connecticut than moving in. In 2016, the state also saw a population decline for the third consecutive year.”
As its example of a welfare state going belly up, the EU offers us Greece. And questions arise from all of these examples. Is this an inexorable trend? Has the old New Deal formula of “tax and tax, spend and spend, and elect and elect” finally run its course?
Across the West, social welfare states are threatened by falling revenues, taxpayer flight, rising debt as a share of GDP, sinking bond ratings and proliferating defaults.
Record high social welfare spending is among the reasons that Western nations skimp on defense. Even the Americans, who spent 9 percent of GDP on defense under President Kennedy and 6 percent under President Reagan, are now well below that, though U.S. security commitments are as great as they were in the Cold War.
Among NATO nations, the U.S. is among the least socialist, with less than 40 percent of GDP consumed by government at all levels. France, with 57 percent of GDP siphoned off, is at the opposite pole.
Yet even here in America we no longer grow at 4 percent a year, or even 3 percent. We seem to be nearing a point of government consumption beyond the capacity of the private sector to provide the necessary funds.
Some Democrats are discovering there are limits to how much the government can consume of the nation’s wealth without adversely affecting their own fortunes. And in the Obamacare debate this week, Republicans are running head-on into the reality that clawing back social welfare benefits already voted may be political suicide.
Has democratic socialism passed its apogee?
Native-born populations in the West are aging, shrinking and dying, not reproducing themselves. The cost of pensions and health care for the elderly is inexorably going up. Immigration into the West, almost entirely from the Third World, is bringing in peoples who, on balance, take more in social welfare than they pay in taxes.
Deficits and national debts as a share of GDP are rising. Almost nowhere does one see the old robust growth rates returning. And the infrastructure of the West — roads, bridges, tunnels, ports, airports, subways, train tracks — continues to crumble for lack of investment.
The days of interstate highway systems and moon shots seem to be behind us. Are Puerto Rico and Illinois the harbingers of what is to come?
Illinois’ income tax rate is only 3.75%. They could easily raise that a bit and manage their debt. Underfunded pensions are another matter. Those are promises that can’t be kept, won’t be kept and shouldn’t be kept. They should legislate that pension funds meet statistically valid tests for sustainability, with payouts curtailed as needed. Puerto Rico and the US Virgin Islands should repudiate their debts entirely.
Yes, great, Iska – promise the lenders they will get prime preference, then fuck them when things go south in favor of govt employees and welfare.
Why should the lenders take the haircut? The consumers of the debt get off scot free, again. Sounds like GM all over again.
Well, the debt created by our banking system is fraudulent debt anyway and should be repudiated.
Hard money loans aren’t fraudulent, but governments don’t borrow that kind of money.
Why shouldn’t the lenders take the haircut? If you lend $1,000 to a derelict sleeping under a bridge, that’s on you, even if you write up some contract saying you have prime preference. It’s Puerto fucking Rico! You lend to Puerto Rico, don’t expect your money back.
Iska – because the fucking borrowers promised that the lenders would have seniority over other creditors, that is why. That is how risk is evaluated. Changing that is bullshit.
Fuck our betters. Let these assholes starve.
I resent your use of the term “betters.” They most certainly are NOT our “betters.” They have simply lacked the moral principles that kept most of us honest. That is definitely NOT the definition of someone who is better than another. Fuck these people for sure though, and everyone who is parasitically living off the hard work of the net taxpayers.
I grew up in Allentown Pa. I can tell you that eastern PA and NY has been invaded by Puerto Ricans.
These people are lower than the Mexicans. They are really lazy and don’t want to work, and breed like rabbits.
I say it’s too expensive to change our flag. If they want to be a state – then we drop Illinois or California.
I am a ruthless Capitalist at heart, but the lenders went beyond reasonable lending standards and became enablers of bad habits and decisions. The fallout in all these places has to be agonizing for all parties involved, so much so that the mere mention of the matter will cause future generations to recoil in horror. If there is not real, lasting pain in resulting crash, more politicians will just up the the ante to get their piece of the pie and then disappear, leaving all of us to hold the flaming bag of dog excrement.
A very unhappy ending is our last chance to save the Republic for future chastened generations.
Exactly. Being an investor, in the truest sense, means that you are ruthless about avoiding risk. The first rule of investing, don’t lose money – Warren Buffet. These “investors” SHOULD lose their money, that is true capitalism. The crony system that has been grown over the last 50 or so years, culminating in the 2009 to big to fail doctrine is the problem. Let the bankruptcies begin, and the forest fire will clear all of the dead trees and brush, and allow for new growth from within.
Fear of failure and bankruptcy is (used to be) the check and balance to runaway useless speculation, and fraud.
Never lend to a country where everyone takes a nap in the middle work day.
Here is a rather grim explanation from The Automatic Earth.
The primitive 1972 computer model projections of where we would be today and in 2030 are eerily accurate. Compare that to the garbage our more sophisticated economic models of today spew out.
“… actual industrial output per capita begins to fall precipitously, from about 2015, while pollution from the industrial activity continues to grow. The reduction of inputs produced per capita. Similarly, services (e.g., health and education) are not maintained due to insufficient capital and inputs.
Diminishing per capita supply of services and food cause a rise in the death rate from about 2020 (and somewhat lower rise in the birth rate, due to reduced birth control options). The global population therefore falls, at about half a billion per decade, starting at about 2030. Following the collapse, the output of the World3 model for the standard run (figure 1 to figure 3) shows that average living standards for the aggregate population (material wealth, food and services per capita) resemble those of the early 20th century.”
great link Unit472.
It provides some insight about our lifestyles, that we tend to forget or ignore.
It seems there is no plan for sustaining the current status quo.
it dovetails into some familiar think tanks:
Just what we need, two more bought and paid for senators…
Good grief, places like Connecticut should not even be a ‘State’ with equal representation (in Senators) as that of other States…….come on, a population of 3.6 million is no more than a typical metropolitan area, not a State.
The models are garbage if Global Cooling and even one Big Natural Disaster happens.