Two years ago Chicago Mayor Rahm Emanuel said Chicago had a pension problem because “nobody had the leadership to be honest” about the math. Now he’s considering a proposal to borrow money to bet on stocks in the hope of offsetting rising pension costs with investment gains. The borrowing would bear interest and require a pledge of city revenues.
Chicago residents would come out ahead only if the bet performs better than the costs of issuing and servicing the borrowing and any services foregone because of the revenue pledge. Wall Street and lenders would come out ahead in all events, Wall Street from fees, lenders from secured payments.
So, what are the chances of the bet working out for Chicago residents? Stocks are up nearly 400 percent since 2009. The current economic expansion has already lasted nine years, nearly double the duration of the average economic expansion since the end of WWII.
Let’s see your math, Mr. Mayor.