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Alexi Giannoulias's Hypocrisy on Debt

Not exactly an authority on good economics.

4:45 PM, Sep 28, 2010 • By DANIEL HALPER
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Alexi Giannoulias's Hypocrisy on Debt

Illinois Democratic Senate candidate Alexi Giannoulias doesn’t have many accomplishments he can run on. His family bank, where he worked as a vice president and a senior loan officer, was taken over by the FDIC in April, costing the government $394.3 million. The Bright Start College Savings Program, which Giannoulias oversees as Illinois’s state treasurer, lost $150 million in 2008 and investors were only able to recover half.  So Giannoulias has resorted to perhaps what he does best—attacking his Republican opponent Mark Kirk.

So recently Giannoulias tried to go on offense on the issue of deficits and the national debt. Specifically, Giannoulias hopes to tie his Republican opponent Kirk to the nation's current economic troubles.

While many believe the midterm elections for Congress will be a referendum on the Democrats—President Barack Obama, Speaker of the House Nancy Pelosi, and Senate Majority Leader Harry Reid—Giannoulias is trying to keep the focus on a series of Kirk tax cut and budget votes, which were supported by the prior Republican administration.

“It is a simple truth that under President George W. Bush, the national debt doubled," Giannoulias said in remarks prepared for his appearance before the Rotary Club of Chicago. "That's right. The entire debt run up from George Washington to Bill Clinton doubled in just eight years, and Congressman Kirk voted for every one of those debt-doubling budgets.”

Notice how Giannoulias somehow forgets to mention the 2009 and 2010 federal deficits, which clock in at $1.4 trillion (!) and $1.3 trillion (!), respectively, possibly because they were racked up by a Democratic Congress and a Democratic president. 

Giannoulias also neglects to mention that Kirk voted against the stimulus bill, while the Democratic Senate candidate has previously maintained:  “it should have been even bigger.” 

Also curiously absent from Giannoulias’s spiel is that he supports the trillion dollar health care bill; Kirk voted against it.

But wait, it gets better.

Whenever the governor of Illinois wants to borrow money short-term, he has to get the approval of Illinois’s treasurer and comptroller. That means, Alexi Giannoulias has personally approved short-term borrowing five times in his capacity as treasurer for a total amount of $5.75 billion.

Pat Quinn, the current governor, wanted to borrow another $500 million in late 2009. His plan was stymied when Dan Hynes, Illinois's comptroller, refused to sign off, citing Illinois’s record levels of debt.  Below is an excerpt of a letter that Hynes sent to Quinn explaining his opposition:

That is a historic amount of short term debt and the state will risk default if that money is not repaid by June 10, 2010. Any additional short-term borrowing such as you now propose would further strain a state budget that can barely accommodate the currently scheduled debt service and critical on-going payments our office must make, especially given the $900 million revenue failure you office has now projected.

The expected ‘federal and state revenues in excess of $600 milliion’ you refer to has already been incorporated in the existing cash managment plan. My office must prepare this month to reserve funds for the first installment of the $2.25 billion to be repaid beginning in March. Absent an additional revenue source dedicated to the repayment of any new notes, there is insufficient flexibility in the latter half of the year for additional debt service payments. In essence, the proceeds from the short-term borrowing you request would need to be set aside immediately in order to pay it back. For this reason alone, I would have problems supporting your plan as presented.

In contrast to Hynes's opposition to the borrowing plan, Giannoulias was inclined to support the additional borrowing. According to the Rich Miller with the Capitol Fax Blog:

Treasurer Giannoulias told reporters this afternoon that he is leaning in favor of supporting the plan. That would put Hynes out on a limb all by himself. Giannoulias apparently stressed that the federal Medicaid match would more than make up for interest and fees and that the money could be repaid.

Giannoulias's claim that the federal Medicaid match would help pay off the loans when they came due was doubted by the people at the Illinois comptroller's office.  Again, according to Miller: 

I just got off the phone with the comptroller’s office. They were pretty surprised to learn that the treasurer’s people think there’s enough liquidity to pay off these short-term loans, even with the Medicaid match.

Finally, it should be noted that Giannoulias has been the state treasurer of Illinois since 2007. Since he took office, Illinois’s budget deficit has more than quintupled, going from $2.328 billion in 2006 to over $13 billion currently.

Giannoulias supported the stimulus, and said it should have been bigger.  He supports Obamacare. He was a willing participant in sinking Illinois even further into debt. His preaching about fiscal responsibility is like Tim Geithner preaching about the importance of paying your taxes.

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