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Chicago Stealing from Poor, Giving to Rich

Obama's Chief Of Staff Rahm Emanuel Addresses The Media At The Capitol

Chicago, like New York City, is becoming a microcosm of California, a two-tiered society where public policy props up and privileges the tastes of the rich while ignoring the needs of the poor. A new piece in City Journal explains that Mayor Rahm Emanuel’s ostensibly painful and difficult cuts to services like public safety and schools are actually more like a diversion of funds from blighted residents to wealthy ones. Hundreds of millions of dollars have been used to fund a bike share program, a “riverwalk”, a hiking trail, and (what else?) a sports arena, even as Chicago public education and law enforcement sectors are facing deep crises.

City Journal explains that Mayor Emanuel is relying on something called Tax Increment Financing (TIF) subsidies to fund upper-class projects at the expense of basic social services, in the hopes of luring in new wealthy residents and keeping the ones who are thinking about moving:

Chicago’s TIF program has long been criticized as a mayoral slush fund. Ostensibly a tool for redeveloping blighted neighborhoods, TIF enables any new tax dollars generated in a district—the so-called “increment”—to be fed back into a special fund that can only be spent in that district. This projected revenue stream can be used to back bonds to finance infrastructure and jump-start development. At least, that’s the theory. Many of Chicago’s most prosperous neighborhoods are located in TIF districts and have generated huge incremental revenues. The Central Loop TIF district took in nearly $1 billion over its lifetime. When the district was slated to expire due to a statutory sunset, the city created the giant LaSalle Central TIF—covering a booming part of the West Loop—to replace it. None of the taxes from new developments in these districts flows automatically to police, libraries, parks, or schools. The funds go into the city’s TIF account, and the mayor has discretion on how they’re spent. Some TIF funds have been used for construction of new schools, but more than half have been handed out as subsidies to private businesses. The true purpose of Chicago’s TIF districts—which now take in about $500 million per year—appears to be tending to high-end residents, businesses, and tourists, while insulating them from the poorer segments of the city.

Chicago is clearly afraid of sharing Detroit’s fate: losing wealthy residents and their sizable tax dollars. Mayor Emanuel is banking on the hope that keeping the rich folk happy will provide enough revenue over the long run to fund the social services that the less fortunate depend on. This is a big gamble: if the $100 million waterfront boardwalk and $54 million biking trail turn out to be boondoggles that do nothing for the one percent, the closure of dozens of public schools and thinning out of a police force during an internationally famous murder epidemic will be difficult to defend. Our guess is that Chicago will continue to hemorrhage the residents it has faster than it can attract high-income new ones.

But if it pays off, Chicago will approach something like Mayor Bloomberg’s New York. Under Bloomberg, New York thrived as the “Luxury City,” home to a small contingent of super rich, accompanied by a large, struggling servant class. It’s possible, if not always easy, for these two groups to coexist, but the high taxes, regulations, and high cost of living have driven the middle class out in droves. The cutting edge of blue urban policy, then, is catering to the rich at the expense of the middle class.

Cutting funds from schools, police, libraries, and parks while funding chic promenades and trendy nature walks to mollify the rich is not what many blue city voters think they’re voting for.

[Rahm Emanuel image courtesy of Getty Images]

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  • Pete

    Where are the high minded progressives of yesteryear?

    Has their decent into secularism robbed them of compassion and common sense?

    • Andrew Allison

      That’s a very good question. My immediate response is to suggest that they’ve sunk into idolatry, er ideology and lost sight of the greater good (witness today’s post about the environmental stupidity of opposing Keystone).

  • wigwag

    The rich pay the taxes that fund all the services that poor and middle class people enjoy. Bloomberg and Emanuel get this; whether Bill De Blasio, the man likely to be New York’s next Mayor gets it is another question. Funding the amenities that the rich desire is critical if there is to be any funding for police, fire, education, etc.

    Besides, the rich pay almost all the taxes; aren’t they entitled to get something from Government? Their kids go to expensive private schools, they have their own security guards and the surely don’t need Medicaid, without the amenities that Bloomberg and Emanuel are providing, the rich would get nothing in return for paying their taxes at all.

    There’s one thing faux populists on the left and the right have in common; they’re stupid. Like it or not, the one percent pays all the freight. Those in the 99 percent should be on their hands and knees thanking the one percent for all the services government provides them.

    I’m happy that Emanuel and Bloomberg are giving the wealthy a little bit of what they want. It’s the least we 99 percenters can do to say thank you for all of the great things the one percent provides to us.

    • Tom

      Of course, it would be nice if the 99 percent could stand on their own…
      oh wait…the system’s not set up for that. Never mind.

    • lukelea

      Is that really you, Wigwag?

      • wigwag

        Yes it is, Luke. Why do you ask?
        As someone who thinks that Government has a role to play in the economy but only a moderate role, I understand that the money to make Government work has to come from somewhere.
        I think that income redistribution is appropriate as long as its kept within reasonable bounds. By the way, most of the super rich feel this way to; you don’t notice multimillionaires and billionaires kvetching a lot about paying their taxes. What annoys them (and rightfully so) is when after paying most of the taxes all they ever get for it is grief and accusations of avarice.
        New York City’s greatest resource is not the Financial District, the Advertising Industry, the fashion industry or its tourist attractions. New York’s greatest resource is its billionaires and multimillionaires. More billionaires live in New York City than any city in the world. Only London and Tokyo have more resident multimillionaires.
        Do you ever wonder why so many billionaires and multimillionaires choose to live in New York City? They could easily save what seems like enormous amounts of money to the rest of us by moving a few miles North to Westchester County or Connecticut or a few miles to the West to New Jersey. They could save even more in taxes by leaving the Northeast entirely.
        Yet they don’t leave. In fact, about 50 of America’s billionaires chose to make New York City their residence. And its not just the liberal billionaires who chose to live in New York City. Rupert Murdoch, who owns many things including Fox News lives in Manhattan; so does the uber conservative Charles Koch.
        Remember, these billionaires could live anywhere yet they put up with the high taxes for two reasons. Most importantly, they love living in New York City and secondly, when your net worth is a number with nine zeroes next to it, paying millions of dollars in city taxes is just not that onerous.
        It’s also important to remember that not only do the rich pay most of the taxes, they also provide most of the charitable support to urban institutions that all New Yorkers avail themselves of.
        There’s not a hospital in New York not funded primarily by the rich (Charles Koch for example is on the Board of the Hospital for Special Surgery in New York; NYU’s Hospital is named after Home Depot billionaire, Ken Langone). The super rich also underwrite practically every cultural institution in New York City.
        By in large, the super wealthy are actually quite generous. What they object to is paying millions in taxes to New York City that they could easily escape by moving and underwriting virtually all of New York’s major charities while getting nothing but grief for it and being called greedy and stingy.
        Put yourself in their shoes; considering what they contribute to society, do you think they should be called all kinds of names?
        One other thing that billionaires contribute to the lifeblood of New York City is hundreds of multimillionaires, millionaires and folks who earn hundreds of thousands of dollars. People who work for billionaires tend to be paid very high salaries. These high salaried people also contribute disproportionately to New York City’s tax base.
        Like most New Yorkers, I’m a little tired of Mayor Bloomberg too. His style gets stale after a while and his proclivity to lecturing New Yorkers about lifestyle choices has gotten quite old.
        Despite this, I have to admit that he has been an extraordinarily good Mayor. He’s kept New York City’s uber rich residents happy at the same time that he’s used the tax money that they provide to make things better for poor and middle class New Yorkers. It’s quite a feat and he should be congratulated for it.
        I worry that his replacement won’t have the same skill; if he doesn’t, it could be a major problem.
        If you think government has a role to play, you have to love the wealthy; its their dollars that makes government work.
        Ignore that reality at your peril.

    • Andrew Allison


    • Kavanna

      Um, NYC no longer has a middle class, at least not in Manhattan. The outer boroughs have an upper and upper middle class, and a struggling working class. Everyone in between has fled. It’s a “blue” pattern and has been getting that way for a long time ….

      • wigwag

        There are fewer and fewer middle class people living in Manhattan; the Lower East Side has gentrified and so has Harlem. But there are plenty of “middle/middle class” families living in Queens, the Bronx, Staten Island and to a lesser extent Brooklyn.

        • Kavanna

          I suppose there’s still some middle class in the outer boroughs, from I see and know of friends and relatives. But it’s smaller and less robust than it once was.

  • qet

    NYC (and eventually Chicago?) sounds to me like Cowen’s America of the Future. Presumably the NYC rich are those who are adding value to the computers, who therefore can bear the taxation needed to maintain the large struggling servant class in a comfortable (according to 19th century, not 21st, standards), if dull, existence.

  • lukelea

    “Under Bloomberg, New York thrived as the “Luxury City,” home to a small contingent of super rich, accompanied by a large, struggling servant class.”

    That’s where our whole country is headed if we don’t revise our trade and immigration policies and enact new statutory limits on the length of the workweek.

    I’m assuming we’re not about to tax capital and subsidize labor to any meaningful extent.

    • Kavanna

      That’s the way the crony class wants it.

  • jeburke

    I hear WRM, and he has a point but he’s taking it too far. The development of attractive amenities of urban life is not just a matter of creating baubles for the “rich.” I suspect that the vast majority of people who use these amenities are not rich at all but a broadly representative sample of the people who live and work in or visit Chicago, including quite a few lower-income Chicago residents.

  • Kavanna

    It’s almost as if blue governance has degenerated … into caving in to
    pressure groups and payoffs to wealthy cronies … but, but … it’s about The People, right? … nah, couldn’t be … could it?

  • ChuckFinley

    It has been my suspicion for a while that socialism is really nostalgia for the stability and stasis of feudalism. This article lends credence to that view.

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