When you make your bed, you lie in it. People from Illinois and Chicago are finding that out right now. In the last election, Republicans swept Congressional and Senate elections. Seats that had been in Democratic hands went Republican.
However, at the local level, the governor and both houses of Illinois Congress stayed Democratic. Why?
The Democratic machine cares about national politics, but local politics are really near and dear to their heart. All they need from the Feds is enough money to keep the wheels greased. The meat of their money comes out of the local economy.
Down in Springfield, Illinois Democrats hastily pushed through the largest tax increase in state history, and Illinois still has a gigantic hole in the budget.
Today, the Chicago Inspector General put out a list of ideas to try and stave off the budget shortfall in the city of Chicago. I would characterize this as two things. One, politicians lead by fear. In Chicago, people know we have big problems but are unaware as to how we will solve them. By scaring the hell out of them with a bunch of distasteful ideas, politicians can water them down to what they really want. Two, they could be desperate and just throwing stuff at the wall to see what sticks.
I think it’s a little of both.
Politicians serve up these things to try and look like they are in the “middle”.
“The problem is so severe that to honestly and fully address the budget imbalance will almost certainly require difficult choices that reduce the services the city delivers, increase taxes and fees on city residents, or more likely a combination of both,” Ferguson indicated.
Democrats are really not in the middle. They want to raise fees and taxes and redistribute the proceeds to their pals. Mostly it’s unions, but it could be other businesses too.
Once they make the proclamation, they don’t have the cojones to take a position.
Ferguson makes clear that he does not endorse any particular combination of tax increases and cost cuts. Instead, he aims to spark debate as Emanuel enters the final weeks of drafting a budget plan that somehow must bridge a massive budget shortfall of nearly $636 million.
As if none of this is their fault.
Notice what any plan either Democratic body lacked? It’s called “economic growth”. Neither body cut political spending in any appreciable way either. There are just too many sacred cows that create political milk for the pols. They can’t bring themselves to gore those cows.
They also didn’t mention anything about reforming government pensions, or slashing government spending. Just small alterations in things like garbage collection to save money. For a progressive, that’s thinking out of the box.
Combine the budget battles in Springfield, and now Chicago and overlay them on a couple of economic events happening right now. The first is that CME Group pays 6% of all corporate taxes in the state and is the number one job creator in the city of Chicago. CME is seriously considering a move out of Illinois, and Chicago.
2000 of CME’s 2600 employees live in Illinois. That’s not the big part of it though. Every High Frequency Trading firm, every clearing firm, accounting firms, legal firms and banks have employees in the city and state. CME moves, they all are gone. A cavernous hole will be blown through the city of Chicago. Chicago will replace Cleveland as the “mistake on the lake”.
The second phenomena that is happening in Chicago is the development of a burgeoning entrepreneurial start up community. In 2007 I co-founded Hyde Park Angels. We have started up 13 companies that are based in Chicago. Other companies, like Groupon, are starting up here that we didn’t invest in. But the ecosystem is finally growing.
The city risks killing that start up ecosystem with it’s plan for higher taxes and fees.
The flight of individuals from the city and state will accelerate. Some businesses will be able to leave. Big corporations will be able to move their operations around, move their employees around to avoid a lot of the fees and taxes.
The wealthy will also be able to avoid a lot of the tax and fee increases. They will redesign their trusts and residency. They will restructure how they get their income. Most of them have enough wealth that the increases will not affect their lifestyle in any way.
The real losers will be the small business people that can’t move. They will simply close their businesses because of lack of demand.
Margaret Thatcher famously said, “…and Socialist governments traditionally do make a financial mess. They [socialists] always run out of other people’s money. It’s quite a characteristic of them.”
The Democratic Machine in Chicago and Illinois is about to find that out the hard way.
thanks for the link Monty of Ace.