Part of me likes it when politicians have to face the consequences of their arrogance and psychopathic policies. But maybe I shouldn’t rejoice. The parasites got what they want — they’ve grown fat enough to weather an economic storm and re-attach themselves once a better host becomes available.
But despite the chorus of praise, it’s becoming evident that the city took a serious turn for the worse during the first decade of the new century. The gleaming towers, swank restaurants, and smart shops remain, but Chicago is experiencing a steep decline quite different from that of many other large cities. . . .
Begin with Chicago’s population decline during the 2000s, an exodus of more than 200,000 people that wiped out the previous decade’s gains. Of the 15 largest cities in the United States in 2010, Chicago was the only one that lost population; indeed, it suffered the second-highest total loss of any city, sandwiched between first-place Detroit and third-place, hurricane-wrecked New Orleans. While New York’s and L.A.’s populations clocked in at record highs in 2010, Chicago’s dropped to a level not seen since 1910. . . .
Chicago’s economy also performed poorly during the first decade of the century. That was a tough decade all over the United States, of course, but the Chicago region lost 7.1 percent of its jobs—the worst performance of any of the country’s ten largest metro areas. Chicago’s vaunted Loop, the second-largest central business district in the nation, did even worse, losing 18.6 percent of its private-sector jobs, according to the Chicago Loop Alliance. . . .
Maria Pappas estimates that within the city of Chicago, there’s a stunning $63,525 in total local government liabilities per household. Not all of this is city debt; the region’s byzantine political structure includes many layers of government, including hundreds of local taxing districts. But pensions for city workers alone are $12 billion underfunded. If benefits aren’t reduced, the city will have to increase its contributions to the pension fund by $710 million a year for the next 50 years, according to the Civic Federation. Chicago’s annual budget, too, has been structurally out of balance, running an annual deficit of about $650 million in recent years. . . .
As dire as Chicago’s finances are, those of Illinois are in even worse shape. The primary cause, once again, is pensions, which are underfunded to the tune of $83 billion. Retirees’ future health care is underfunded an additional $43 billion. There’s a lot of regular debt, too—about $44 billion of it. And Illinois, like Chicago, has run large deficits for some time. Despite raising the individual income tax 66 percent and the corporate tax 46 percent in 2011, the state is projected to end the current fiscal year with an accumulated deficit of $5.2 billion. While California has made headlines by issuing IOUs to companies to which it owes money, Illinois has taken an easier route: it just stopped paying its bills, at one point last year racking up 208,000 of them, totaling $4.5 billion. Some businesses have gone unpaid for nine months or even longer. Unsurprisingly, Illinois has the worst credit rating of any state. Unable to pay its bills, it is de facto bankrupt.
What accounts for Chicago’s miserable performance in the 2000s? The fiscal mess is the easiest part to account for: it is the result of poor leadership and powerful interest groups that benefit from the status quo. Public-union clout is literally written into the state constitution, which prohibits the diminution of state employees’ retirement benefits. Tales of abuse abound, such as the recent story of two lobbyists for a local teachers’ union who, though they had never held government jobs, obtained full government pensions by doing a single day of substitute teaching apiece. . . .
As City Journal senior editor Steven Malanga has written for RealClearMarkets, Illinois “essentially wanted to be a low-tax (or at least a moderate-tax) state with high services and rich employee pensions.” That’s an obviously unsustainable policy formula. The state has also employed a series of gimmicks to cover up persistent deficits—for example, using borrowed money to shore up its pension system and even to pay for current operations. At the city level, Mayor Richard M. Daley papered over deficits with such tricks as a now-infamous parking-meter lease. The city sold the right to parking revenues for 75 years to get $1.1 billion up front. Just two years into the deal, all but $180 million had been spent. . . .
ordinances affecting a specific council district—called a “ward” in Chicago—can’t be passed unless the city council member for that ward, its “alderman,” signs off. One downside of the system is that, as the Chicago Reader reported, over 95 percent of city council legislation is consumed by “ward housekeeping” tasks. More important is that it hands the 50 aldermen nearly dictatorial control over what happens in their wards, from zoning changes to sidewalk café permits. This dumps political risk onto the shoulders of every would-be entrepreneur, who knows that he must stay on the alderman’s good side to be in business. It’s also a recipe for sleaze: 31 aldermen have been convicted of corruption since 1970.
Red tape is another problem for small businesses. Outrages are legion. Scooter’s Frozen Custard was cited by the city for illegally providing outdoor chairs for customers—after being told by the local alderman that it didn’t need a permit. Logan Square Kitchen, a licensed and inspected shared-kitchen operation for upscale food entrepreneurs, has had to clear numerous regulatory hurdles: each of the companies using its kitchen space had to get and pay for a separate license and reinspection, for example, and after the city retroactively classified the kitchen as a banquet hall, its application for various other licenses was rejected until it provided parking spaces. An entrepreneur who wanted to open a children’s playroom to serve families visiting Northwestern Memorial Hospital was told that he needed to get a Public Place of Amusement license—which he couldn’t get, it turned out, because the proposed playroom was too close to a hospital!
And these are exactly the kind of hip, high-end businesses that the city claims to want. . . .
ordinances affecting a specific council district—called a “ward” in Chicago—can’t be passed unless the city council member for that ward, its “alderman,” signs off. One downside of the system is that, as the Chicago Reader reported, over 95 percent of city council legislation is consumed by “ward housekeeping” tasks. More important is that it hands the 50 aldermen nearly dictatorial control over what happens in their wards, from zoning changes to sidewalk café permits. This dumps political risk onto the shoulders of every would-be entrepreneur, who knows that he must stay on the alderman’s good side to be in business. It’s also a recipe for sleaze: 31 aldermen have been convicted of corruption since 1970.
Red tape is another problem for small businesses. Outrages are legion. Scooter’s Frozen Custard was cited by the city for illegally providing outdoor chairs for customers—after being told by the local alderman that it didn’t need a permit. Logan Square Kitchen, a licensed and inspected shared-kitchen operation for upscale food entrepreneurs, has had to clear numerous regulatory hurdles: each of the companies using its kitchen space had to get and pay for a separate license and reinspection, for example, and after the city retroactively classified the kitchen as a banquet hall, its application for various other licenses was rejected until it provided parking spaces. An entrepreneur who wanted to open a children’s playroom to serve families visiting Northwestern Memorial Hospital was told that he needed to get a Public Place of Amusement license—which he couldn’t get, it turned out, because the proposed playroom was too close to a hospital!
And these are exactly the kind of hip, high-end businesses that the city claims to want.
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