Illinois Is Broke

by John Tillman Illinois is broke but if you are a regular visitor to our site you already knew that.  But you may not know just how broke our state is and that one of the root causes of the problem (there are many) is unsustainable public employee pensions.  The Civic Committee of the Commercial Club of...

by John Tillman

Illinois is broke but if you are a regular visitor to our site you already knew that.  But you may not know just how broke our state is and that one of the root causes of the problem (there are many) is unsustainable public employee pensions.  The Civic Committee of the Commercial Club of Chicago has put together a terrific analysis of the problem on their microsite, www.illinoisisbroke.com.

The call to action from the Civic Committee is to “do something.”  Great idea.  Among the things they want all of us to do is to tell our friends and families about just how bad the problem is and to engage candidates and elected officials to fix it.  Agreed—see my recent blog post on just that topic and how average citizens are changing the world for the better.

Of course, the reason it has yet to be fixed is because while the solutions are quite simple and clear, the political will is very, very difficult to muster.

Further, how to fix it is quite clear to me and perhaps you, but others may differ.  The bottom line: there are four strategies to fix our out of control deficit.  You can cut spending, you can increase taxes, you can borrow and you can do a combination platter.

At least that is how the choices are typically presented.  This is an error.   The second item should be that you can “increase revenues.”

Government revenues can be increased in two ways, one beneficial and the other detrimental.  Raising taxes and fees is detrimental and to do that in Illinois will push us further down the Economic Death Spiral we are already in.   Policymakers like it because it is a tangible calculation: we raise rates from 3% to 4% and apply that rate to projected income and it equals $2.8 billion in new revenue. Done—simple, clear.

The beneficial way to do it is to adopt our Illinois Turnaround Plan.  The vision of the plan is to set a state goal making Illinois # 1 in job creation and to do it with household incomes rising.  Household incomes are currently falling and Illinois ranks 48th out of the 50 states in job creation.

If Illinois moves up the ranks in job creation and gets household incomes rising, tax and fee revenue will rise in a beneficial way—with more people working and paying taxes.  It’s a simple formula, it is nonpartisan and it will take our broken state of Illinois and turn it around and put it back on the path to prosperity.

But while it is a simple formula, it is not a simple economic calculation and thus it is harder to predict.  Leadership is not just about pointing out the problem, it is pointing out the solutions.  The Civic Committee has done a great job on both counts.  We add to their fine work this simple idea: we do need more revenues, but let’s do it by making Illinois # 1 in job creation with household incomes rising.  If we set that as a goal, revenues will rise—and quickly.  To learn more about why this is true,read this from Art Laffer and Steve Moore.

Finally, let’s keep in our hearts the human cost or benefit of the two choices in raising revenues.  One will take more money from working Illinoisans and put it into a state government that has yet to show it can cut spending.  This will hurt job creation even more.  The other choice will put more and more of our 752,000 out of work friends and neighbors back to work and bring happiness into their homes once again.

So, yes, let’s do something. Let’s get busy and pursue happiness.