In all of the post mortem analysis of the Chicago mayoral run-off election that was conducted on Tuesday and which resulted in Mayor Rahm Emanuel being elected to a second term, I think there’s something missing. Here’s a typical example:
One reason Garcia lost is that he didn’t formulate plausible prescriptions for the problems he bemoaned. But that doesn’t invalidate his diagnosis. Even as growth resumes, cities are struggling to connect their low-income, preponderantly minority neighborhoods to their blossoming new opportunities. Until more of the kids reared on those gritty streets can benefit from the growth in downtown towers, the discontent that threatened Emanuel will continue to rumble.
What’s missing is that neither did Emanuel. Neither candidate presented a plausible plan by which the city could increase its revenues by 50% which is what it would take to fill the hole left by the $300 million budget shortfall to which we need to add the $600 million payment the state is now requiring the city make into its public employee pension fund.
I think there’s something basic being left out of the discussion. Cities, states, and even countries have carrying capacities beyond which attempts to increase revenues will not be effective and those carrying capacities will be different for each jurisdiction.
There’s a general confusion between raising rates and raising revenues. It might be possible to raise a tax rate (as the recent governor’s election demonstrated even that may be politically impossible) but that doesn’t necessarily mean you’ll raise more revenue or that having increased the tax rate you can just increase it again to derive more revenue the next time around.
Cities and states need to encourage new businesses, more businesses. Rahm Emanuel’s strategy of attracting big businesses with blandishments of tax relief is, as I called it yesterday a zero-sum game. The business leaves one jurisdiction for another. The original jurisdiction loses jobs and revenue while the new jurisdiction gains them. Ultimately, that’s a formula for disaster not salvation. It’s an IBGYBG strategy.
Chicago already has the highest sales tax in the country and would have among the highest property taxes if not for the absurd multiplier system. It doesn’t have the power to impose an income tax and there’s already a revolt against the increases in fees under Mayor Emanuel. What’s Chicago to do? I think the rules need to change.
Cities and states need to encourage new businesses, more businesses.
They need to encourage new businesses that their citizens can actually work for. Meaning several things.
One, don’t undercut your citizens by importing masses of employees from abroad.
Two, make an effort to encourage business creation that will create jobs your citizens can do. For example, those potential gangbangers in the hoods aren’t ever going to be able to do the white collar work done in the gleaming towers downtown, at least not in numbers enough that it will matter.
But no one in power thinks like this, for whatever reason. So you’re in, or your out, and most of us are out.
We’ve reached the point where states and municipalities cannot provide the needed financial resources without massive fiscal injecrions by the federal government. I don’t have a plan for Chicago, not being familiar with its problems beyond what Dave shares with us, but I do think as a matter of national policy block grants to the states on a population basis would be a potentially useful response. It won’t address our continuing decline in capacity for good governance, though. That’s a sign of cultural decline, decadence and government corruption for which I have no answer. When reasonable people of the left, right and center like we have here at Dave’s blog all agree on the problems it indicates that shared view is probably correct.