No surprises here that Moody’s downgraded Chicago’s credit rating to junk bond status. There’s no way it can continue on like this without increasing taxes and cutting services. What I’m seeing here in Newport, RI for example isn’t encouraging and will play out nationwide in perpetuity. Our water bill, for example, is up double digits in percentage terms from last year and real estate taxes are astronomical. I’m not crying woe is me. It’s simply criminal that politicians did not make sure these promises were matched. (Check out more bad news for Rhode Island here).
Cities and states cannot operate like this forever. What’s more is the liabilities are much, much higher than you and I are reading because the assumed rate of return is kept artificially high. The market will not bail out the states. The last few years’ returns are with borrowed money from the Federal Reserve. The party will come to a halt. If there were any sensible fiduciaries guiding the states/cities being realistic would have to be the first place to look. Like that will ever happen.
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