At What Point…

I have small businesses in two counties here in flyover country. In one county the death rate from covid is .0000035 – thirty five ten thousandths of one percent. In the other, *much harder hit*, .000020 – twenty thousandths of one percent. And this is taking the death tallies at face value, as if the people died FROM covid, vs. they died WITH covid.

In Illinois, Gov. Pritzker is talking about curfew, temp taking, and a number of other ridiculous lock-downy things.

Eventually, they have to let everyone get back to work, or there won’t be any “work” left.

I’m wondering at what point will the citizenry call “bs” on this and just do whatever they want.

Sure, there are hot spots and sure, there are problems, but if we didn’t know about covid in these places mentioned above there would be no panic whatsoever as these aren’t even rounding errors. And the economy is trashed? It’s far more dangerous to drive your car to the store than, well, going inside the store.

To make it all worse, I can’t have a birthday party for my daughter, but it’s ok for the State of Wisconsin to have an election, and for the mayor of Chicago to go get her hair done.

The Federal Takeover of State Debt is About to Begin…

Often people focus on the “loud” items and miss the subtle, important events that really change the world. On the positive side, the 401(k) plan has that obscure name because a financial expert basically “invented” it out of a line in the tax code which enabled tax-deferred savings. And Jack Bogle of Vanguard did the same thing with “passive” investing, which reduced fees and for practical purposes has taken over the investing world (along with ETFs).

One very subtle item that is about to occur is the nationalization of state debt (and likely debts of individual cities) by the federal government. At the highest level, states and cities have made promises (mainly pensions) to their employees that are un-payable without raising taxes to extortionate rates. Detroit cracked first but since it was a city and there was some state framework they were able to use bankruptcy, but many more are to follow, including Puerto Rico (right now) and soon thereafter likely the City of Chicago or its teachers’ pensions as well as the state of Illinois.

A very similar event occurred in Europe when the ECB basically put the debts of Greece and Portugal onto the backs of taxpayers in Germany and Holland. The ECB had a moment (several moments, actually) when they could have fundamentally changed how Greece ran their economy, shutting down statist laws and heavy governmental interference in the economy to open up competition and growth, but they blinked and instead just “wired them money in exchange for promises”. The Greeks, of course, haven’t kept their promises, and why should they, given that the ECB continually blinks when the showdown occurs.

The reason that these states and territories like Puerto Rico are in dire straits is because they

1. Spend more money than they make every year,
2. Rely on borrowing to pay for operating expenses,
3. Have giant, unfunded liabilities on top of this that can never be repaid (pensions, medical bills, etc…).

This situation is enabled by a governing class that views funds as an opportunity to redistribute wealth to favored constituents and relies on “fairness” as a bedrock of their planning. The apex of this sort of planning can be seen in crony capitalist states like Brazil, where large enterprises like the National Oil Company (partially on the stock market, partially owned by the state) are used to fund politicians and social programs and are systematically diverted away from their core mission (to make money) until the enterprises are bled almost totally dry. Then, ironically, the state has to bail out the very companies that were supposed to provide for the socialistic wealth in the first place.

The CORE issue is – if you give these sorts of entities money (bailout) without a “root and branch” cleaning of the issues – you will just get more of the same, indefinitely, as their individually painful debts become part of the larger national (or pan-European) debt, which continues the little game of overspending and wasting money on favored political groups for a little longer (maybe a couple years, maybe longer).

The slippery slope – the trigger – is occurring right now in Puerto Rico. That entire economy is corrupt and ridden with subsidies from electricity to taxes to everything else. For Puerto Rico to thrive, it would need to break down barriers to private enterprise, reduce taxes, levies and bureaucracy, and find some way to bring logical industry into their jurisdiction. However, the more likely course is as follows:

1. Point out the current individuals suffering from a lack of funding (the poor, kids in school, the elderly),
2. Note that the debt which was once owned by individuals was bought up by hedge funds for a fraction of its original value – these funds are in a position to fight (legally and politically) for repayment and although they may be termed “vultures” or something else, they really are the last man standing for individuals who lack the means to fight legally for their rights,
3. Use the political system to “promise” reforms that will never be carried out (because why would you if you can use funds to enable the current system to thrive),
4. Talk about the retirees, and “promises” made to them over the years that cannot be paid, and how they can’t go back to the work force and earn more money so that they have to be made whole,
5. Use political or class warfare to point out the groups that run Washington don’t look like the groups that are broke and make it a fairness issue or tied to some century plus grievance.

It is very likely that these tactics will “work” and that the debts of Puerto Rico will be backstopped by the US government. While this technically isn’t a “bailout”, it absolutely is, because Puerto Rico can’t borrow one dollar on their own anymore (who would lend money to someone who says they won’t pay you back?), and we know that without major reform (which won’t happen) Puerto Rico will just continue to bleed money indefinitely (and fall back on fairness arguments and the above listed tactics to ensure that this keeps happening).

Then soon after this subtle bailout (and likely before Puerto Rico fails AGAIN, which will happen again as it will with Detroit), entities of Illinois or the state itself will drive straight through this loophole and federalize their debt, too. The state and entities will make lavish promises about change that will never occur, because this is the lifeblood of the Democratic Party (patronage workers and the public sector) and all of the clout / featherbedding / etc… will continue on indefinitely, without any of the sorts of laws that enable competition.

Watch the headlines… see this occur… it will be seismic in its long-term nature, because it will fundamentally change the nature of the US government, since the debts of the states and cities will become everyone’s debt and we don’t have any “real” tools to govern their behavior or fix the long-term promises that destroy competitiveness and economic growth.

This is the real story, it is happening under our noses, and instead of paying attention we are following these idiotic presidential campaigns of pure vapor.

Cross posted at LITGM

My Pathetic Vote in Illinois Is Now the Hottest Ticket in Town

Due to the fact that I live in Illinois which has been carved into districts to ensure Democratic majorities, my vote is mostly useless or a protest vote at best. I wrote about gerrymandering here and the fact that perhaps I live in the most ruthlessly gerrymandered district in the nation (and that is no small feat), the fifth Illinois house district, with our current representative, Ken Dunkin.

Recently I have been receiving a series of mailings for Ken Dunkin’s re-election, which is hotly contested. Currently in Illinois, the Democrats technically have a super-majority, meaning that they can unilaterally issue a budget (more or less) and raise taxes. However, not every Democrat “falls into line” with Mike Madigan, the speaker of the Illinois house, who is the true leader of the Democratic party in Illinois. Rauner is looking for Democrats who might listen to his message of reform or for some reason or another be amenable to working constructively with him (don’t want to speculate too long on why this might be, but you can probably jump to your own conclusion). Dunkin refused to show up for a vote that Madigan thought was crucial in September and conspiracy theories have him aligned with Rauner.

Per this article from the Chicago Tribune:

More than $2 million, an unprecedented sum for a legislative primary contest, could be spent between Dunkin, who has allied himself with Rauner against Madigan, and Stratton, who is backed by organized labor.

This is a ridiculous amount of money to spend on a primary race for a house seat for the Illinois legislature. Given the Democratic machines’ hold on this part of the city, it is accepted as a “given” that the Democratic candidate will win so all of the efforts go into the primary.

Thus my vote is now a precious commodity. Seemingly every day I get a giant, colorful, nearly insane flyer in the mail with the two candidates attacking each other. Here is a flyer stating that Ken Dunkin was convicted of abusing women and is unfit for office.

Read more

The other state without a budget

The Wall Street Journal has an excellent article (behind paywall) by Andrew Staub on the budget stalemate in Pennsylvania. While the overall fiscal situation is less dire than Illinois (lottery winners are still being paid), the personalities less dramatic and the politics more genteel, the problems both states are confronting are ones the Federal government is ignoring courtesy of the Federal Reserve and central bankers world wide who tolerate the expansion of American debt.

One interesting aspect of the situation Staub passes over is the split in the Republican party. While the Republicans hold a majority in both houses, they are really composed of two factions, liberal leaning Rockefeller Republicans from the eastern side of the state and more conservative members from the west. They are not so far apart that they could be described as RINOs and Tea Partiers, but their inability to consistently act in concert has weakened their numerical majority in the past. However, they recently united to pass a sure to be vetoed paycheck protection bill that had foundered under the previous Republican governor because of resistance from the easterners. This is an indication that, at least in opposition to a Democrat governor the Westerners are starting to prevail.

On the other hand, Governor Wolf sent a tax increase bill to the House, forcing Democrat members to vote on it and the Republicans were happy to accommodate him. 73 Democrats walked the plank for their leader and 9 refused, creating division in the usually solid Democrat ranks. It will be interesting to see the electoral consequences for them.

But there is insufficient power on either side to prevail in the budget impasse. Until the schools start closing, probably after Christmas, there is little pressure on either side to move.

In addition to all this, Kathleen Kane, the Commonwealth’s attorney general has lost her law license as a result of her actions in disclosing sealed information from an investigation into pornographic emails circulating among, allegedly, PA Supreme Court staff and personnel in the AG’s department. She then accused a member of the court of sending and receiving racial, misogynistic pornography. She is under investigation for releasing the materials and the Supreme Court has suspended her license to practice law. The post of AG is frequently a stepping stone to the governorship in PA and the Democrats have lost an attractive potential candidate and leader.

Pennsylvania has been a solid Democrat state in presidential elections. But with the party torn apart, the deceased in Philadelphia may not be able to turn out in sufficient numbers next November to assure the result, if the Republicans can provide an acceptable alternative to HRM. But then PA always finds a way to leave the Republican candidate standing alone at the altar.