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Applying the lessons learned from Third world Nations

2016/07/13

Chicago’s Collapse Has Begun

The city of Detroit, now famous as an economic disaster, began its decline when it lost jobs. This was accompanied by a loss of population, a rapid rise in poverty, increasing dependence upon federal entitlement programs and an unstoppable downward economic spiral.

Puerto Rico is now undergoing an economic collapse sparked not by population loss but by excessive government spending. Chicago is in the same situation. Government overspending and overtaxation comes first, population loss follows.

Chicago is technically bankrupt. Its expenditures have exceeded its receipts for about ten years. All big rust belt cities in the Midwest, East, and Northeast have been losing population since 1950. Detroit’s population has dropped from 1.85 million to 800,000.

Chicago was only able to delay its loss of population by becoming the first official sanctuary city in 1985. Since then the only part of its population that has increased is the Hispanic segment. But even adding the illegal immigrants and their children, today Chicago’s population has fallen to below where it was in 1920. And the number of white people living in the city has declined to below where it was in 1890. This decline is not just due to white flight: the city’s black population is also now less than it was in 1970, according to the Census Bureau.

Today 46% of Chicago’s public school students are Hispanic. While these Hispanic students have delayed the depopulation of the overtaxed city, Chicago is still showing clear, irrefutable evidence of population and economic decline.

In 2015, the Chicago area lost an estimated 6,263 residents, the greatest population loss of any metropolitan area in the U.S. But this fact is misleading since its promotion and financial support of illegal immigration, which began in 1985 with an Executive Sanctuary City Order issued by then Mayor Harold Washington, slowed down the city’s population losses.  However, illegal immigration just adds more teachers and other public union workers to the city, county, and state payrolls, and these increase property taxes.

Illinois Democrats, who have supermajorities in the State House and Senate, refuse to stop raising property taxes, bond debt, and fees on everything consumers buy. Residents can no longer afford their promises. Democrats’ stubbornness is proven by the fact that faced with a newly-elected Republican governor, who has proposed the novel idea of balancing the state budget, the Speaker of the House has, Obama style, refused to pass a budget. Illinois has now started its second year of operating without an official budget, just as Obama did for four years.

A study by New World Wealthy published in March 2016 found that Chicago had lost more millionaires, 3,000, than any other city in the U.S. The only cities that lost more were European. Rome lost 5,000 and Paris 7,000.

While the wealthiest, those who own businesses, are leaving, the only population growing is Hispanic, and they have a startlingly low education level. The areas of Chicago that are Hispanic are also the areas that have the highest number of households occupied by people with an eighth grade education or less. This does not bode well for the city’s future employment outlook.

However, while Chicago has been losing population since 1950, new measures of its population and prosperity prove that Chicago’s decline is accelerating. Chicago is part of Illinois and together their economic measures are the worst in the nation. Illinois lost 105,200 persons to outmigration last year, and has the lowest credit rating of all 50 states, some of the largest debt, and the highest unemployment rate of all 48 states. Only Alaska is its equal in unemployment.

Local media prefer, disingenuously, to blame Chicago’s population loss on crime. But the crime rate has always been high.

In 2014 SEC Commissioner Daniel Gallagher noted that the average household in Chicago owes the city and state $88,000 for their pension and bond debt, and much of the bond debt was created to paper over the huge demand for money imposed upon residents by public pensioners. The city’s pensions are only 50% funded and there is no remedy in sight.

Don’t be fooled. Democrats say the budget impasse is over “school funding” but those are code words for pension funding.

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These signs follow other measures of demographic and financial decline. The city has been issuing municipal bonds without restraint for ten years. In fact, of the ten largest cities in the U.S., Chicago is the only one that has no statutory limit on its ability to issue municipal bonds. The result is that Chicago’s bonds are now at junk bond status.

The once-almighty Chicago Democrat Machine is out of gas. The Machine was built up since 1932 by a series of Democratic mayors who made huge pension promises to city and county workers they cannot now keep.

No one should be surprised that the junk-bond status city of Chicago was the financial alma mater of President Obama, the first president of the U.S. to force the nation’s credit rating to be downgraded through overborrowing and overspending.

Chicago has tried to keep its dying city budget alive with skyrocketing taxes on cigarettes, gasoline, cable TV, phone bills, alcoholic beverages, city stickers, parking, and everything else the wonderful city fathers, who are self-proclaimed champions of the middle class, could think of. What added insult to injury was when the Cook County Board raised the county sales tax by one percent and announced that 90% of that raise would go only to the pensions of the patronage workers. So even visitors to the city have to support pensioners in Arizona or Florida.

Today the average Chicago public school teacher will retire with a pension of $73,000 a year. With a normal life expectancy each person will collect two million dollars of other people’s money. Of course, this pension money is well deserved: 40% of Chicago’s high school students don’t graduate.

The largest employer in Chicago is not U.S. Steel or Motorola but the federal government. And its federal bankruptcy court is hiring. Newspapers won’t report how many residents live only on federal entitlement money. That might make the city look bad. Residents already know the city’s economy is bad, very bad.

Patronage jobs are expensive and their pensions are far more expensive since they suck an economy dry. Since there is nothing restraining this debt and spending, residents of other Democrat-run cities should take notice before it’s too late for them.

But of course they won’t. History is full of cities and nations that refused to balance budgets, cut back on spending, and live within their means. Psychologically, people are more motivated to keep what they have than they were to work to obtain it in the first place. This predicts that Chicago, like other cities run by Democrats, will follow Detroit to economic disaster. It’s already on its way.

[Byline Michael Bargo, Jr.]

July 13, 2016
American Thinker

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