What comes after the welfare state collapses?

07 Jun

WelfareState1ZeroHedge published an article entitled, “Now The Pain Begins: S&P, Moodys Cut Illinois To Near Junk, Lowest Ever Rating For A U.S. State.” The article dealt with Illinois’ growing financial problems.


Today, in the span of a few hours, two credit-rating agencies (first S&P, then Moody’s) downgraded Illinois bonds to BB+ and Baa3, respectively—both just one notch above junk, the lowest rating ever given to a U.S. state. Both agencies cited Illinois’ long-running political stalemate over a state budget as showing no signs of ending.

S&P warned that Illinois is at risk of soon losing its investment-grade status, an unprecedented step for a state that would only deepen the government’s strain. Bypassing its traditional 90-day review, S&P said Illinois will likely be downgraded around July 1, when the new fiscal year begins, if leaders haven’t agreed on a budget that starts addressing the state’s chronic deficits.

The problem seems serious. S&P is giving Illinois only 30 days to rectify its fiscal problems rather than the usual 90 days.

S&P analyst Petek’s ire was prompted by Illinois’ inability to pass a budget for the past two years amid a clash between the Democrat-run legislature and Republican Governor Bruce Rauner. The ongoing confrontation has left the fifth most-populous US state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois’s standing in the bond market, where investors have demanded higher premiums for the risk of owning its debt, Bloomberg reported.”

Illinois’ population is 12.6 million.

Divide Illinois’ total reported debt ($14.5 billion) by the state population (12.6 million) and the result is a state per capita debt of $1,150. That means each Illinoisan’s fair share of the state debt is about $1,150. That’s about $4,600 for a family of four.

That doesn’t sound like an insurmountable burden. If that debt could be paid over the next five years, it would cost each Illinoisan $230/year or about 63 cents per day. A family of four would have to pay an extra $920/year.

That debt doesn’t sound so terrible to me. Yes, that sum of extra taxes paid to state government would be annoying–or even oppressive for individuals and families living hand-to-mouth.

Still, that debt doesn’t seem large enough to precipitate some sort of state-wide, fiscal calamity.  Perhaps, Illinois is crying “wolf!,” when there’s only some puppies on the loose that aren’t house-trained.

Even so, let’s assume Illinois’ financial problems really are as serious as some suppose.  If a per capita debt of just $1,150 is enough to throw the state of Illinois into chaos, what can we infer about the U.S. National Debt?

I.e., what’s our $20 trillion National Debt average out to, if it’s equally divided among 320 million Americans?

Let’s do the math. Divide the National Debt ($20 trillion) by the American population (320 million) and the quotient averages out to $62,500 per capita! (And that assumes the National Debt really is only about $20 trillion. Some credible source claim that, including unfunded liabilities, the National Debt is actually over $200 trillion.)

Illinois appears to be cratering over a state debt of $1,150 per capita. Everyone is getting excited.

But nobody seems much concerned about a National Debt that averages $62,500/person. Are you beginning to see my point?

More math: Let’s divide the per capita U.S. National Debt ($62,500) by the Illinois per capita debt ($1,150). Result? 54. On a per capita basis, the U.S. National Debt is 54 times higher than the per capita debt for Illinois.

If Illinois really is in deep financial do-do due to a per capita debt of $1,150, can there be much doubt that the U.S. National Debt (54 times higher on a per capita basis) and the U.S. economy are headed for insolvency and bankruptcy?

Plus, could it be that the financial debacle in America’s 5th most-populous state turns out to be the “Black Swan” that triggers a national financial collapse?

And, what, pray tell, should a legitimate bond-rating be for U.S. bonds if the Illinois bonds are rated nearly “junk” and the U.S. per capita National Debt is (proportionally) 54 times higher?

If Illinois is really cratering, do you really want to buy U.S. bonds as a “safe haven”?

The bond-rating downgrades came a day after Illinois’s Democratic legislature blew the deadline for approving a compromise budget by a simple majority.  Now, it gets even more difficult as it will take a higher threshold, or threefifths majority vote in each legislative chamber, to pass anything.  That effectively guarantees that one month from today Illinois will be America’s first ever Junkrated state.”

The Illinois legislature couldn’t come up with just a 51% vote to approve a compromise budget. Now they’ll have to come up with a 60% vote. Apparently, Illinois has a death wish.

60% will be harder than 51%.  But, they could do it.  Once they’re desperate enough, they will do it because they must do it. But how much trauma will be inflicted on the people of Illinois before their state legislature finally votes to do what must be done?

Q: What must be done?

A: Raise taxes and/or cut benefits and/or repudiate the debt.

By June 30, the state will owe an estimated $800 million in interest and fees on the unpaid bills that have been piling up, according to estimates from Comptroller Susana Mendoza, a Democrat. She warned of “dire” consequences for residents if a budget isn’t reached by the start of fiscal year 2018 on July 1, including the shuttering of more social service providers and layoffs at public universities.

Illinois, like other states, has no ability to resort to bankruptcy to escape from its debts.

We’re going to start to see some real pain now,” Senate President John Cullerton told reporters in Springfield on Wednesday. “We’re going to start to see downgrades. We don’t have any funding for schools. We don’t have any funding for a bunch of social programs. We don’t have a budget.”

The collectivists’ welfare state is collapsing under the weight of debt incurred by exorbitant political promises.  People who currently expect to receive their welfare entitlements, government subsidies and pensions, will be furious when they can’t get their promised fiscal “fix”.  They will scream.  They will march.  They’ll break windows. They’ll riot.  They will set fires. Neighborhoods and even cities could burn.  People who are actually productive, live within their means and don’t depend on welfare, subsidies and pensions, will demand more “law and order”.

Does this imply that today’s overly-indebted welfare state will necessarily lay the foundation for tomorrow’s police state?


Welfare states generate huge, unpayable debt.  Unpayable debt precipitates police states.



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12 responses to “What comes after the welfare state collapses?

  1. Oliver Medaris

    June 7, 2017 at 6:23 PM

    Arvut might be our only hope. Love your neighbor as you love yourself.

  2. drew

    June 7, 2017 at 8:48 PM

    Great article. We know that only around 45-50% of the population actually pays serious taxes (take out children, government fed parasites, unemployed but not retired, retired people, etc.). Those numbers will more than double. The unfunded liabilities at the federal level are close to 240 trillion. Don’t forget to add the 1.2 quadrillion we are on the hook for concerning derivatives (even though not all of them will go bad). The actual debt each real taxpayer is liable for is closer to 4-5 million per person. No one in their right mind will give up everything they’ve worked for to pay for other’s excesses. There will be war.

  3. palani

    June 8, 2017 at 6:23 AM

    While the national debt might be $62.500 per capita the federal debt remains at $1 per man, woman and child. This $346,681,016 account has remained unchanged since 1878. The nation was formed under the 14th amendment solely while the federation has more established constitutional provisions that don’t apply to the nation.

    The $62,500 per capita can not be questioned but this provision does not apply to the federal debt. Question to your hearts content. My opinion is that the national debt is out of control strictly for the reason that questioning is not permitted.

    What comes after? I expect it is the right to question debt.

    • wholy1

      June 8, 2017 at 7:35 AM

      What would One/We do without “palani’s” erudite observations! Thx again.

    • drew

      June 8, 2017 at 9:30 PM

      Good points brought out in your comment. One problem I see is that the majority of the population in the republic are legally obligated to the national debt through adhesion contracts. A very low % of the population are actually sovereigns and not subject to the national debt.

      • kenneth johnson

        June 9, 2017 at 1:04 AM

        Drew, where did you get that information from? The internet? I don’t mean to be rude, but really, your comments are silly.

      • wholy1

        June 9, 2017 at 9:33 AM

        Very insightful/educated understanding – eventual [equity court-ordered] xfer of recorded asset purchases made with FRNs – [NOT]Federal[NO]Reserve [DEBT] Notes.

      • drew

        June 9, 2017 at 9:01 PM

        Kenneth Johnson – please indicate what information you are referring to and I will try to address your concerns.

  4. wholy1

    June 8, 2017 at 7:55 AM

    Good research/composition from Al as usual. Surprised he didn’t include the recent Dallas Public Pension Fund “debacle” which is a significant harbinger also. Difficult to have much sympathy for “SUPPOSEDLY-pensioned” gov agent/public “servants” contributing little if NUTH’N / NADA / ZILCH to real PRODUCTIVE enterprise. Ironic that the very government “mother” to which they “contributed” a serious portion of their life “labor” eventually “pull the financial rug out” at the least beneficial time. Such is the “CONDITION” of every government “PERSON” who CHOOSES to contract with/rely on criminal, parasitic gov agents and bankster/financial fraudsters.

  5. MPK

    June 8, 2017 at 7:19 PM

    What can you say for the stupidity, for the acts of evil, greed and terrorism from government, banks, and now from Muslim lunatics and the out right corruption of those in power. Don’t remove the problems just manage them instead. Pure insanity by those in power everywhere. A manager just manages’ and a leader’ leads. Only shows we have to many mangers as leaders, and no true leader to get the job done RIGHT, or do we just send in more clowns and jesters to be Kings, or do we keep playing BYE BYE Miss American PIE. MPK

  6. szybka pożyczka

    July 1, 2017 at 3:09 AM

    whoah this blog is great i love reading your articles. Keep up the good work! You know, a lot of people are searching around for this information, you could help them greatly.

  7. Lyndon

    July 27, 2017 at 10:12 AM

    To whom is the State or Federal debt owed? ……….crickets.
    Let the man or woman to whom the debt is owed come forth and verify the alleged debt?…… …….crickets.
    Let the man or woman who may be the debtor of this debt come forth to acknowledge compensation is due?……………crickets.
    What man or woman will come forth to verify that some benefit was given in exchange of this alleged debt? ……………crickets.

    None of this daily debt talk has any truth in the real world. The whole debt is an illusion. No man or woman owes anything to the world’s banking cartel. If there was a debt it would be the other way around: the number makers, the banksters, would owe the non-payable debt to every man and woman alive in exchange for the enormous benefits the banksters have been receiving from their racket. The banksters have had the privilege of creating money -and getting “interest’ on it- since the racket began. But, of course, their debt is as noncollectable as the debt the puppets everywhere say is due by the “State”, the “Country”, the “Nation” etc.

    Haven’t you ever wondered why no man or woman EVER stands up in front of ANY media or court and CLAIMS that State or National debt is due to them???


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