An #Illinois default: “It’s a safe bet that everyone will share in the pain—taxpayers, bondholders, and public pensioners alike”

WEEKLY STANDARD
Will Illinois Need a Federal Bailout?
by Ike Brannon
June 27, 2017

If the federal government were to intervene in an Illinois budget crisis, it’s likely that its bondholders will take a hit, but it is also likely that its rigid state pension protections and prohibition of progressive taxation would be on the table as well—both of which the state constitution expressly protects. Such a scenario may not be too far away: The next recession-cum-stock market correction will cause the state’s tax revenues—as well as its pension fund value—to fall precipitously, the latter probably to a point where no achievable rate of return on the remaining pension funds could achieve solvency. Such a development could make it impossible for the state to borrow money at any rate, and the federal government would be forced to intervene. READ MORE

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