There’s a price tag attached to the unprecedented federal money lavished on states under the pretext of COVID relief, which is over $9 trillion and growing. It’s in addition to higher federal taxes that will be needed to pay for it. It’s inflation, which is finally getting the attention it deserves.
Illinois’ share of that federal funding – including all money sent to the state, local governments and the private sector – is a stunning $180 billion, according to the bipartisan Committee for a Responsible Federal Budget. People may not yet understand the connection between inflation and the cash being poured on their state and local governments, but they do know that inflation is now a major problem. A recent Pew Research poll found that inflation was Americans’ “No. 1 economic concern,” with nearly two-thirds saying they were “very concerned about rising prices for food and consumer goods.”
One group that’s been conspicuously silent about the issue are Illinois politicians. That’s because they are among the biggest beneficiaries of the federal government’s printing press. They love the billions of dollars flooding into Illinois – which paper over deficits and help inflate away the nation’s highest pension shortfalls.
Illinois politicians, past and present, are getting bailed out for their decades of failure, never mind that the scourge of price increases hurts ordinary Illinoisans.
Some inflation apologists in Washington brush off inflation as “transitory,” meaning they think the pace of inflation may diminish. That’s highly debatable, to put it mildly, but it also misses the more important point about harm already done to residents at the lower and middle end of the economic ladder. For sure, many Illinoisans are benefiting from stimulus checks and other benefits being pumped out in the short term, but in the long term inflation will be just another big tax on residents.
The harm being done is clear for all to see. Housing costs are up about 20 percent in the last year. Used car prices are up by almost 25 percent. Car rental costs are up 43 percent. Beef and other meat prices are up to 18 percent higher. And gas prices are up 50 percent. Those increases are for prices across the country, but you can bet Illinois’ increases are in the same range.
Overall, U.S. Labor Department numbers show that prices have risen 6.5 percent on an annualized basis so far in 2021. And core inflation rates have hit their highest level in 30 years.
Illinoisans are among the least able to afford inflation
State and local governments have gotten trillions in federal stimulus money, a vast majority of which turned out to be entirely unnecessary after states’ rainy day funds and support from the CARES Act were taken into account.
For Illinois politicians, it’s been manna from heaven. Gov. J.B. Pritzker, Chicago Mayor Lori Lightfoot and Cook County President Toni Preckwinkle are spreading the stimulus funds across the entire state. The federal government is effectively funding their reelection campaigns as they massively expand spending programs and create new ones.
But the reality is the federal money is not free money. Everyone will eventually end up paying for today’s printing and spending spree through some combination of inflation, higher taxes and future cuts in services.
New spending by Pritzker, Lightfoot and Preckwinkle will only make things worse. There’s a severe shortage of workers, yet Lightfoot and Preckwinkle are pushing for their own form of Basic Guaranteed Income programs. Handing out that money to people for doing nothing will only further disincentivize going back to work.
While the impacts of inflation hit everyone across the country, Illinois in particular can’t afford to pile yet another cost onto the burdens its residents already face.
Illinois home values have already lost ground to inflation over the past 15 years with the 6th-worst home appreciation rate in the country. Property tax rates are consistently the first- or second-highest in the country. And most cities and counties are shrinking as a result of their depressed economies and worsening finances. Eighty-seven of the state’s 102 counties shrunk in the last decennial census count, worsening economic opportunities.
If nothing changes, the problems in Illinois and across the nation will worsen.
Regardless, the spending train continues. Biden wants a $2 trillion spending bill – which is really $4 trillion – passed. So does Pritzker. Which is why Biden came to Illinois so the governor could spend time praising all the additional federal dollars coming Illinois’ way.
Politics may yet sink the massive federal spending bill, but we hope the reality of inflation will play a role as well.