Illinois Comptroller Susana Mendoza was ordered to make a ‘substantial’ dent in a $2 billion backlog of bills owed to Medicaid providers. The courts ruled that according to the State Constitution, it cannot reduce the pension payments to state employees. What is happening in Illinois is indicative of how governments are imploding and why I am warning get out of all State and Muni-debt before it is too late. Since State and local governments cannot ‘print’ (create) money, they are forced to borrow and raise taxes. Consequently, they have hit the ceiling in tax resistance. What is happening is people are gradually migrating because there is absolutely no hope for states like Illinois. The only way out will have to be bankruptcy and a default on all the pension promises.
A federal judge has now intervened ordering the Comptroller to now prioritize who it pays. This is turning into the clash of titans – the epic battle between medical expenses that constantly rise regardless of the business cycle and state employees demanding pensions. Caught in the middle are the average middle class American who is being exploited from both sides. The judge now ordered the state to pay up towards Medicaid to keep doctors and hospitals from cutting off care for the low-income families that rely on the program.
This post was published at Armstrong Economics on Jun 10, 2017.
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