QUOTE OF THE DAY
The Economist: Illinois lawmakers fail to tackle the state’s pension crisis
OF ALL the states, Illinois seems the most blatant example of state finances gone awry. Its ballooning pension system is to blame. The state’s unfunded pension liabilities are close to $100 billion, and the governor, Pat Quinn, a Democrat, has warned that this figure is now growing by $17m a day. A special report by the state’s Commission on Government Forecasting and Accountability in November put the pension funding ratio (assets to liabilities) at 39%.
The governor has been trying for most of the past year to focus legislators’ attention on the problem. Democrats control the Capitol in Springfield. Despite a number of legislative efforts and a public-relations push featuring Squeezy the Pension Python (see overleaf), the General Assembly closed without a deal on January 8th.
Chicago Tribune: Illinois credit rating sinks to worst in nation
Illinois fell to the bottom of all 50 states in the rankings of a major credit ratings agency Friday following the failure of Gov. Pat Quinn and lawmakers to fix the state’s hemorrhaging pension system during this month’s lame-duck session.
Standard & Poor’s Ratings Service downgraded Illinois in what is the latest fallout over the $96.8 billion debt to five state pension systems. The New York rating firm’s ranking signaled taxpayers may pay tens of millions of dollars more in interest when the state borrows money for roads and other projects.
That’s the same rating as California, but California has a positive outlook. Illinois’ fragile overall financial status netted it a negative outlook, putting it behind California overall. The ratings came out now because Illinois plans to issue $500 million in bonds within days.
CNN: NYC Soda Ban Said To Threaten Minority Businesses
New York City's attempt to keep people from fattening up on sugary soft drinks, by banning some of them, would disproportionately hurt small, minority-owned businesses, according to the NAACP and the Hispanic Federation.
The two groups have filed a joint brief supporting a lawsuit by the American Beverage Association in which they say New York's unelected Board of Health overstepped its power in approving the ban the sale of sugary drinks bigger than 16 ounces in certain city venues.
Due to take effect in March, the ban is meant to combat obesity and encourage residents to live healthier lifestyles, according to the New York Mayor Michael Bloomberg's office. But many have decried the ban as a sign of the growing "nanny-state" and an unfair intrusion on personal freedom.
Sun-Times: Pension reform shouldn’t include contract guarantee
Illinois’ fiscal future rests in large part on how Springfield deals with the enormous unfunded liabilities of its public employee pension systems. These now approach $100 billion (really tens of billions more if the right discount rate were used).
Gov. Pat Quinn is right: Without reform, “Squeezy” the pension python will swallow up additional billions in the years to come, crowding out essential state services and programs.
Time: How the Payroll-Tax Hike Can Destroy Your Savings Plan
If you have a job, by now you almost certainly have felt a tax hike that didn’t get a lot of attention during the fiscal-cliff debate: the two-percentage-point increase in the payroll tax.
This tax applies to everyone, not just the wealthy, and it promises to make saving for retirement — or any big ticket — especially challenging. The payroll tax, which funds Social Security and Medicare, is now 6.2% on wages up to $113,700. The tax rate had been at that level until two years ago, when it was cut to 4.2% in an effort to revive the economy.
About 160 million workers pay this tax, and this year’s increase will cost the average worker about $700, according to the Tax Policy Center in Washington. A family with household income of $50,000 will pay about $1,000 in additional tax. This is real money for millions of families.
CNET: The strange resurrection of Net neutrality
At this week's State of the Net conference, an annual event of the bipartisan Congressional Internet Caucus, members of Congress, staffers, and technology policy junkies gathered once again to explore the government's Internet-related priorities for the new year.
A few themes emerged, including possible legislation over cybersecurity, a rewrite of the 1996 Communications Act, reforming federal electronic-surveillance laws, and the continuing threat of both national governments and the United Nations trying to wrest control of Internet governance from engineering-driven groups.
The general consensus, however, was that for at least the next several months, the fiscal cliff, debt ceilings, and budget sequestrations were likely to keep Washington fully occupied, leaving little time for legislators to tinker, for better or worse, with the Internet.
One topic that could get renewed Congressional attention, however, is Net neutrality. In a case pending for nearly two years at the U.S. Court of Appeals for the D.C. Circuit, Verizon and MetroPCS are challenging the legality of the Federal Communications Commission's 2010 "Open Internet" order, more commonly known as the Net neutrality rules, which prohibits ISPs from blocking lawful Web content. Should the FCC lose its case, the fight could return to Congress.
WSJ: We are a nation of takers
In President Obama's second inaugural address, he not only outlined an ambitious agenda for his second term but also seemed intent on shutting down debate about the social-welfare state and its impact on American life.
"The commitments we make to each other—through Medicare, and Medicaid, and Social Security—these things do not sap our initiative; they strengthen us," Mr. Obama said. "They do not make us a nation of takers; they free us to take the risks that make this country great." In other words, the president is tired of listening to critics of America's entitlement programs, and as far as he is concerned, the discussion is now over.
It is not over—and won't be anytime soon, because the country's social-welfare spending is generating severe and mounting hazards for the nation. These hazards are not only fiscal but moral.
A growing body of empirical evidence points to increasing dependency on state largess. The evidence documents as well a number of perverse and disturbing changes that this entitlement state is imposing on society.
CARTOON OF THE DAY