What Do I Think Might Happen?

 I was asked by a few people that read my post from last week on what happens to Chicago.  Here's my answer.  First, again, this isn't about politics it's about money.  I write about investments and anything politically discussed here is only related to how it impacts the financial world.

First what I hope happens is that places like Chicago, Cook County and the State of Illinois use this crisis as a way to restructure their finances in a better place so that more money can be freed up to invest in poorer neighborhoods, job opportunities, infrastructure and failing schools.  I think for all three entities you are going to have to find a way to deal with the massive debt overhang all three have accrued.  The only way I see that happening is if there's some combination of a change to pension obligations, new borrowing and unfortunately some new taxes to fix the debt.  Oh, and I'm sure the Illinois political class is hoping that Mr. Biden rides in, if elected, and showers some free Federal money their way as well.

What I think might happen is that if there's a Federal bailout it won't be anywhere near what we would need.  Politicians will be unwilling to force cuts to governmental pensions {until these face bankruptcy} they'll at some point be forced out of the debt markets and that will leave raising taxes as the only possibility.  There is a proposal on this November's ballet to change the Illinois constitution to a graduated system instead of a flat tax.  The State is selling that by saying it will only impact the rich.  It won't be too long before that tax increase goes downstream to the middle class.  The excuse to raise taxes on them will be that any tax increase for them will be temporary {it won't be} and the current financial crisis gives the State no alternative.

What I think might happen is especially in Chicago and Cook County leaders will promise reform and point to a few cosmetic changes as progress.  This will not appease anybody so the unrest and crime will continue.  

What I think might happen is that people that can leave are increasingly likely to do so.  I think northern Indiana may be a destination for some.  Others may flee the state for other parts of the country.  Younger people who maybe don't have the option to leave or want to leave this area may at least flee the city and Cook County.  Their reasoning will likely be that having one instead of three bankrupt governments trying to tax them is the best of a bad scenario.  Elmhurst in Dupage County is right next door to Cook County.  You can be downtown from there in maybe 30 minutes if traffic is light.  St. Charles, is a lovely old river town on the Fox river.  It is about 40 miles outside of the city.  Not a bad place to live, particularly if you used to live in the city and now can telecommute.  All you need today to figure out where the tax burden is less, where there are good schools, cheap housing and lower crime is the internet.  Look for  places like Harvard, Huntly and Antioch to rapidly grow up north in the coming years as well.

What I think might happen is that we see a slow downward spiral where the current situation forces families to rethink their lives at least in the city and in suburban Cook County.   The people that leave will be the ones that pay the bills and I don't know where the replacement revenue will come over the years.  As such there's a high probability of a bad situation in Chicago becoming much worse in the coming years.

I hope I'm wrong but that's how I see it.