Saturday, January 26, 2013

Illinois continues its slide into the pit of debt

While Ohio and other states were cutting spending two years ago to deal with their budget deficits, Illinois enacted a massive tax hike, a tax hike so significant that it drove hordes of businesses and residents from the state.

Today, we received more reports of the result of that disastrous decision to raise taxes -- coupled with a continued unwillingness to deal with its spending, especially over-spending on overly-generous state pensions.  The state creit rating was downgraded to the worst in the nation.

Read it here.  That downgrade in the near-term will cost Illinois high interest rates for capital projects. 

But this move is potentially more ominous than that.  Like the sub-prime lending crisis, one situation of insolvency leads to another and another, ultimately rippling through the financial system with devastating consequences.  The politicians and voters are not -- once again -- seeing the canary in the coal mine.

There will be a steep price to pay for all this debt.  And the worst is yet to come. 

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