STUMP » Articles » Chicago Watch: I Warned Rahm, You Know » 3 March 2015, 14:04

Where Stu & MP spout off about everything.

Chicago Watch: I Warned Rahm, You Know  

by

3 March 2015, 14:04

Four years ago, Rahm Emanuel came close to being yanked from the Chicago mayoral election due to residency concerns.

At the time, I had blogged (elsewhere) that Rahm should hope he got booted. Last April, I asked if Rahm regretted not getting booted.

And the “regretting it”, I mean is he regretting being un-booted from the ballot back in 2011, and winning the mayoral election?

I’ve written many times before that Rahm should’ve taken the clue of Daley leaving. Daley leaving should have been a red flag to anybody coming after.

In August 2014, Rahm was signalling he knew he might lose the election this year:

I won’t mind losing my election. Those grapes were probably sour anyway.
….
Frankly, his saving grace is that who the hell wants the shit job of mayor of Chicago?
[WELL]
….
Thing is, none of the Democrats can just out and blame Daley.

Because what Daley did is what they would love to be able to do themselves. They would like to pretend the good times are still rolling, so that maybe, just maybe, they could set up their own slush funds — I’m sure that’s why union boss Karen Lewis is eyeing the spot. Karen Lewis didn’t get where she is because she was a naif.
….
I don’t think Rahm is really very smart, because if he were, he’d realize not being mayor when the inevitable bankruptcy is declared would be a good thing.

Karen Lewis, btw, didn’t run for mayor, but she had very credible health issues to point to (unlike Daley, whose medical issues just seem to conveniently prevent him from being involved in various court cases…some of which related to Daley leaving office in the first place.

Well, we have a couple things going on now.

The inevitable Chicago bankruptcy is one step closer:

CHICAGO (Reuters) – Chicago drew closer to a fiscal free fall on Friday with a rating downgrade from Moody’s Investors Service that could trigger the immediate termination of four interest-rate swap agreements, costing the city about $58 million and raising the prospect of more broken swaps contracts.

The downgrade to Baa2, just two steps above junk, and a warning the rating could fall further still, means the third-biggest U.S. city could face even higher costs in the future if banks choose to terminate other interest-rate hedges against fluctuations in interest rates. All told, Chicago holds swaps contracts covering $2.67 billion in debt, according to a disclosure late last year.

“This is an unfortunate wake-up call for anyone still asleep over the fiscal cliff facing the city of Chicago,” said Laurence Msall, president of the Chicago-based government finance watchdog, The Civic Federation.
Chicago’s finances are already sagging under an unfunded pension liability Moody’s has pegged at $32 billion and that is equal to eight times the city’s operating revenue. The city has a $300 million structural deficit in its $3.53 billion operating budget and is required by an Illinois law to boost the 2016 contribution to its police and fire pension funds by $550 million.

Let’s do a little figuring here.

$300 million is 8.5% of the $3.53 billion budget. That’s substantial. And that’s before the step up in “required” pension contributions.

That is a more substantial hole, percentage-wise, than the $900 million (out of $34 billion) that New Jersey got sued for shortchanging its pensions last year.

The NJ $900 million was only 3% of the total budget.

Second, the other guy in the run-off election has a pretty good chance of beating Rahm.

Ogden & Fry conducted two one-question polls for The Illinois Observer on Wednesday and Saturday. Emanuel had 42.7 percent support in the earlier poll of 1,058 likely voters one day after voters denied Emanuel a second term outright. Garcia had 38.7 percent support in that poll. The margin of error was +/- 3.07 percent.

In the Saturday poll of 979 likely voters, Emanuel had 42.9 percent support to Garcia’s 38.5 percent. The margin of error was +/- 3.2 percent.

Okay, Rahm still outpolled Garcia, but within the margin of error. This is not where an incumbent would like to be.

Third, some are seeing parallels between Garcia and other challengers in bankrupt gfovernments:

CHICAGO — With polls showing a close race in next month’s runoff mayoral election, Sen. Mark Kirk suggested on Monday that that the city could go the way of financially strapped Detroit if voters fail to re-elect Rahm Emanuel.

“The people who are running against Rahm don’t have the gravitas with the bond market. I would worry about the value of the Chicago debt if Rahm was not re-elected,” Kirk, R-Ill., told reporters at an event celebrating Casmir Pulaski, the Polish general who fought gallantly in the American Revolutionary War.

And here’s one comparing Garcia to the newly-elected leader of Greece:

Hillary Clinton beware. People thought Rahm Emanuel’s re-election as Chicago’s mayor was inevit­able. He spent vastly more than all opponents combined but still failed to pass the 50 per cent vote threshold. Now he faces a perilous run- off against Jesus “Chuy” García, a relative unknown who stands for the people against big money. Mr Garcia’s upset is urban America’s version of the Syriza insurrection in Greece. He has stormed the temple and is trashing the moneylenders. Branded Chicago’s “one per cent mayor”, Mr Emanuel now faces the spectre of defeat. Unfortunately for citizens of America’s second city, Mr Garcia offers no fix for their fiscal ills. Like Greece, Chicago lacks its own currency. Sooner or later it must pay its bills.

….
His refrain is heard from the Midwest to the Mediterranean. Keeping public sector unions happy is not the same as serving the people. There are firefighters in Chicago who retire young on near six-digit annual pensions until they die. It is little different to Greece or Italy. Every dollar spent on them is one less to train Chicago’s young, mostly non-white population for the workplace of the future — and one less on protecting their streets from gang violence. It is also one more in taxes for everyone else.

There is also the problem of getting the people to stay still to be taxed.

Here’s a comparison: number of people in Chicago, vs. number in NYC and LA

Chicago really used to be the Second City. Long ago. It got surpassed by Los Angeles in the 1980 census.

But let’s really dig in here – what were the percentage changes?

Note that thick black line — that’s the population growth rate for the whole United States between decadal censuses. It has always been positive (thus far).

Los Angeles was growing from a very small base population, so I cut them off the top of the scale – it’s relatively easy to triple in population in 10 years if you’re starting at 100,000 people.

But let’s check out NYC and Chicago: NYC’s growth was negative from 1950 to 1960, and from 1970 to 1980. However, it pretty much reversed that so that by 2000 it had surpassed its prior population peak in 1970.

Chicago has had a rougher time. It reached its peak in 1950. It decreased from 1950 until 1990, tread water between 1990 and 2000, and dipped again from 2000 to 2010. That does not portend well for a growing tax base. I highly doubt that it had been growing much between 2010 and 2015. (I could be wrong – I haven’t looked up current estimates)

Anyway, Rahm, you asked for this. Maybe you’ll get lucky this time, and lose your election. Chicago is likely going to go bankrupt in fact, even if Chicago can’t declare bankruptcy without Illinois state approval.

But the Illinois state government may just be in a mood to let Chicago sink.

And I doubt Obama will be able to get a federal bailout for his ole adopted hometown.

To be sure, Detroit was showing these kinds of cracks years before it officially went bankrupt. It takes a lot of time for the credit to run out….if nobody is watching.

But people are watching.

This will be very ugly, no matter who wins the mayoral race.

Compilation of Chicago posts.


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