From City Journal, Spring 2024:
A fight broke out late one Saturday night, or, more accurately, early Sunday morning, at a bar on Chicago’s South Side. Someone called the police just after 4:30 am. But the police didn’t come. The fight soon moved outside; one man issued a threat, got into his car, and then plowed it into the crowd, just before five o’clock. Three people were killed. Still no police. An officer wasn’t dispatched until 5:20 and didn’t arrive until more than an hour after the original call.
Chicago faces a dire police shortage. (See “Can We Get Back to Tougher Policing?,”) Over half of high-priority 911 calls had no cops available to respond. One important reason is that the city is now allocating almost half of its budget to debt and pensions, leaving ever less for essential services, including public safety. The municipal government is acting more like a conduit channeling money from residents to check-collectors than a protector of its citizens’ rights and liberties.
Chicago has dominated America’s heartland since the late nineteenth century. As the City of the Big Shoulders, it has been a place whose self-reliance and drive allowed it to compete with coastal metros boasting more obvious advantages. Chicago’s landscape and weather may leave something to be desired, but the city’s combination of cosmopolitanism and localism, embodied in its diverse neighborhoods, has helped give it a distinctive American personality. Yet bad services, corrupt politics, and elevated crime have made life in Chicago increasingly unpleasant, all worsened by the city’s parlous finances.
An ever-mounting debt burden is the greatest threat to the city’s survival. As that problem worsens, more residents will question whether they want to stay in a windswept city paying down someone else’s pension—or decamp for places that don’t place such a millstone around their citizens’ necks.
According to the group Truth in Accounting, Chicago continues to live up to its moniker “Second City” in at least one respect: it has the second-worst debt load of any big city in America—about $43,000 per taxpayer, or almost $40 billion in total. The first is New York City, but Chicago residents also have to deal with Illinois’ debts, which total $42,000 per taxpayer, third worst in the nation. Thus, a family moving to Chicago suddenly becomes the inheritor of almost $85,000 in liabilities. By this metric, Chicago is no longer second but has by far the worst debt burden of any major city.
Chicago’s accumulating debt might be bearable if the city had low taxes and therefore room to raise them and pay down some of the liabilities. But taxes in the Windy City already rank among the nation’s harshest. According to a national study, Chicago’s combined city and state taxes would eat up over 12 percent of a U.S. median family income. The only large cities with higher proportionate taxes are Rust Belt towns with much smaller populations, such as Detroit and Newark. Chicago imposes the highest sales tax of any major city (10.25 percent) and punishing property taxes, too.
Chicago’s taxation is also brutal on businesses. A recent study of 53 cities found that Chicago’s tax on industrial properties was nearly double the average of other cities. Chicago’s commercial property-tax rate, at more than 4 percent per year, was by far the worst of any major city and more than twice the average.
High debt and taxes might be manageable if the city’s economic fundamentals were strong. They’re not. Chicago relied for years on commercial properties, especially downtown offices in the Loop, to power its economy and fund the city’s excesses. But those jobs are fleeing. Downtown Chicago’s office vacancy rate recently approached 24 percent, a record high. Boeing has moved its headquarters from the Loop to Northern Virginia. These white-collar firms will not pay the city’s higher taxes in the future; they won’t even pay their existing leases.
Making matters worse, Chicago’s population is shrinking. Chicago hit its peak population 70 years ago, and it has contracted further since the early 1990s, when many other big cities began to revive. At about 2.7 million people, it’s still, barely, America’s third-largest city, but it’s a quarter smaller than it was about a half-century ago. Even if Chicago gets its fiscal house in order, continued population loss means that every resident will be taking on ever more debt and taxes. The city can’t be saved by the area’s surrounding dynamism, either. Both the Chicagoland metropolitan region and the state of Illinois have fewer people than they did before the financial crisis 15 years ago.
If the beleaguered remaining Chicagoans were wealthy enough to help support the city’s debt and taxes, that might see Chicago through its troubles. Once again, no such luck. Despite a high cost of living relative to the rest of the nation, the city’s median household income lags the national average, and its poverty rate is about 50 percent higher. The city is also losing its most successful workers and business owners. Data from Allied Van Lines show that Chicago in 2021 saw the most outmigration of any U.S. metro area, and Illinois the most of any state. Government tax data show that those who left the state earned north of $100,000 on average, well above the level of those moving in. CBS Chicago interviewed a Chicago woman whose property taxes had almost doubled in the previous year, to over $7,100, and had gone up by more than 1,000 percent in 20 years, which made her wonder whether the city was actually trying to push homeowners out. The flight of Ken Griffin, the state’s richest man, and his hedge fund, Citadel, to Florida exemplifies the outmigration of well-off families and individuals who could otherwise help shoulder the debt and taxes.
Unprecedented debt and punishing tax rates, a declining business sector, and a shrinking, poorer population: it’s no recipe for long-term success. Unfortunately, newly elected Chicago mayor Brandon Johnson will aggravate all these problems. A former member of the Chicago Teachers Union, he has made it clear that he wants to expand spending. When asked about the dire state of Chicago’s schools, he said that he would evaluate them not by their outcomes but by how much money they spent—the more, the better. His transition team advocated for a “Green New Deal,” including, more specifically, a “Green New Deal for Schools” and a “Green New Deal for Water.” He wants to spend up to $160 million a year on permanent housing and services for the homeless. And he has promised to keep Chicago a “sanctuary city” for immigrants, even as 10,000 migrants sat in city shelters and the city spent well over $130 million providing for them in 2023 alone....
....MUCH MORE
And from the Atlantic Magazine, October 1930 issue:
