Illinois Recession Forecast

By Sean Stillmaker in News on Feb 20, 2011 8:30PM

The period of extending and pretending is finally coming to a close. The stimulus money has run out, government departments are being consolidated and the programs for the poor are first in line to be cut. Our legislators have been delaying the day of reckoning and it’s no surprise that it begins after the elections.

They tell you the unemployment rate dropped (good news), but you don’t read it’s due to so many people leaving the work force. People on unemployment for an extended period hasn’t changed, part-timers looking for full hasn’t changed, and Dec. marked the 19th month of a 9.4% unemployment rate -- the longest sustained period since the Great Depression.

Gov. Quinn proposed his $52.7 billion budget. Heads were turned with his desire to cut $1 billion. The problem is, it’s not enough. Illinois spends twice as much than we collect in taxes. Illinois is tied for first with the highest sales tax (9.75%), we just bumped the personal income tax to 5% (previously 3%), and raised the corporate tax to 7% (previously 4.8%).

This is just the beginning. Taxes and tickets -- that’s the only way the government knows how to make money. They think having more casinos is a solution, but Illinois casino revenue has been dropping.

Stimulus money runs out in June. Reality is setting in that the states have to start controlling their spending. Illinois owes over $840 million to universities, $6 billion to social service providers and has an $85.57 billion hole in our pension fund - the most under financed state pension system.

Illinois is already at a projected $15 billion budget gap. When you take the pension debacle into consideration we're over $100 billion in debt. Baby boomer public employees just started retiring. It's a good thing Illinois just raised retirement age to 67 (previously 62), it's also the highest in the nation.

While you keep your heads buried in the sand you may start to notice a problem with the rising costs of food, gas and clothing. Food prices rose to .5% in January, the biggest climb in two years. Global food prices rose 29% this past year, just 3% behind its all-time peak in 2008. Cheap oil is forever gone. Cotton has doubled in price over the year, hitting all-time highs. Clothing prices are expected to jump 10% this spring. All of this is a good recipe for rising inflation.