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Chicago’s Ransacking and Illinois’ Fiscal Blues

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Chicago’s Ransacking and Illinois’ Fiscal Blues

10 Blocks podcast August 19, 2020
Economy, finance, and budgets
Politics and law
Public safety

John O. McGinnis joins Brian Anderson to discuss the economic condition of Illinois, the main players in its infamous “machine” politics, the recent looting in Chicago that tore through the city’s Magnificent Mile, and more.

Audio Transcript

Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Joining me on today's show is a contributing editor to the magazine and a long time friend, John McGinnis. John is the George C. Dix Professor in Constitutional Law at Northwestern University, where he's taught since 2002. And he's the author most recently of Accelerating Democracy: Transforming Government Through Technology. Professor McGinnis has written two recent pieces for City Journal over the last month that have garnered a lot of attention. The first on the looming fiscal disaster in the State of Illinois and the second on the outbreak of looting and vandalism in Chicago's most important shopping district just over a week ago. John, thanks very much for joining us.

John McGinnis: Glad to be here, Brian.

Brian Anderson: First off, it's been a while since we've talked about Illinois, a great state here on the podcast. I know we have a lot of readers and listeners there, so I'm glad we could have this discussion. Illinois, you wrote in the first of those two pieces I mentioned is in awful economic shape, post-pandemic compared to its neighbors, Indiana, Wisconsin. It's really seemed like it's been heading though in the wrong direction for at least a decade with higher taxes, more extensive regulation. But before we get into some of those problems, maybe you could just give us an update on some of the politics in the state with Governor Pritzker, who is a Democrat in his second year in office after defeating Republican Bruce Rauner, how is he doing and what are some of the problems you see with the state?

John McGinnis: Well, Governor Pritzker to be fair, inherited a difficult situation, difficult for anyone to come in because there was a long time, there is still a long time speaker of the House who's controlled in many ways, Illinois politics for three or four decades.

Brian Anderson: This is Mike Madigan?

John McGinnis: Michael Madigan, and now he's under investigation for bribery, but he is really the source of a kind of machine politics in Springfield, which is the capital of Illinois. And he's very close to the public-sector unions of the state. And what's happened is that they have put an enormous amount of exactions on the state, both in terms of pensions and also actually in terms of a lack of discipline of their workers, which actually will set the stage for some of the problems we've had in Chicago. So he's really very much responsible, I think, more than any other single politician.

Pritzker's only been in office for a year and a half, but Pritzker has done nothing to change the direction of the state. He's made no substantial reforms on the greatest problem of pensions. Moreover if the state, as it is, is facing a huge financial hole because of pensions, the only possibility of success is to have very high economic growth rates in the state, as well as shedding some of the pension burdens and he's done nothing to improve the regulatory climate. Indeed, his one idea is to bring in a progressive tax, at the moment, the Illinois constitution requires a flat tax and that's been some constraint on income taxes, but the governor's main proposal in his entire term so far has been to put on the ballot a constitutional proposal to do away with that. And that's just going to increase taxes particularly on the most productive citizens. So while he's not responsible for the fiscal problems here, his policies have done nothing to arrest them. And indeed his signature proposal is likely to accelerate the losing of the most productive citizens in Illinois.

Brian Anderson: As City Journal we write an awful lot about some of them were unglamorous parts of state and local government, including what you just referenced, pension liabilities and unfunded pension liabilities. How grave is Illinois' problem in this regard?

John McGinnis: Well, it's one of the gravest in the United States. We really are funded only at around 35% of our obligations and the obligations, because we're a large state are a very large. And so it's around, depending on how you look at it, we're in third place, in terms of the unfunded liabilities, but because of our other problems, because we actually don't have a very good regulatory climate for businesses that makes it all the worse. So we actually have no worst bond ratings of any state in the nation. And that I think takes account of two things. One, our unfunded obligations, but on the other side our dim prospects for economic growth.

That's the one, two punch that puts Illinois in such a dreadful position and makes it imperative that we have some of the kind of reforms the neighboring states have undertaken, like Wisconsin and Indiana, but the governor shows no sign of doing anything like that. It's a particular problem of course, because when he raises taxes, those borders are very close to ours and some of the businesses, no doubt can easily move a few, 100 miles or less than that and take advantage of those states, which are on an upswing.

Brian Anderson: What would it take to reform the pension system there? There are state constitutional constraints, right?

John McGinnis: Well, there are state constitutional constraints and the Supreme Court here, now I think a very distinguished body, has ruled in a very difficult way for any reforms. And so that is a substantial obstacle. Of course, if the governor were to get behind some kind of compromise, you might be able to reform the constitution. After all there relatively, even now, there's not a majority of people who benefit from these pensions and you could have a structure in which people who are very close to retirement, still got essentially what they're promised, but then cost of living matters are adjusted for people who are farther away from retirement. And we move people to a 401(k) situation, the kinds of things that corporations do.

That kind of compromise, I think could be put on the table by a governor who was really willing to work for it. Maybe even then he might try to compromise that and have some tax increases, maybe even a progressive tax increase in combination with these things, but he's done nothing like that. He's not addressing the sources of the problem at all and just creating a structure in which is going to make it harder to grow. So in some sense, the prospects for the state are quite hopeless in the way that if you don't change either the pension obligations or the rate of economic growth, there's no way that the state is going to grow out of its economic hole. And the governor has done nothing on either front.

Brian Anderson: Moving on to Chicago, many Americans, including apparently the city's mayor woke up last Monday to find out that vandals had ransacked the Magnificent Mile, as it's called, looting stores, causing mayhem and violence in the downtown area. Can you talk a little bit about that chaos and what led up to it?

John McGinnis: Well, it's a really very significant and let me tie it into the previous discussion. Of course, one prerequisite for economic growth is a sense of security, and Chicago is the main driver of economic growth in Illinois. It's by far the biggest city, it's the biggest city in the Midwest. It's a central, in some sense the capital of the Midwest. So the looting took in the most, the place with the highest-end shopping districts, places where people thought they were safe beforehand, unlike some other parts of Chicago. And again, Chicago is the heart of economic growth of Illinois. The parts struck here are the economic growth of Chicago. So this is very relevant to our first discussion.

Sadly what happened here in my view was that again, we have a failure of political leadership on multiple levels. We have the attorney, essentially the state's attorney, which is essentially the district attorney for Cook County, to translate it into terms that others may understand has pursued a policy, which has given an impression to people of impunity for stealing. She's raised the threshold to being charged with a felony, for shoplifting to $1000. So up to $1000, you can be charged with just a misdemeanor, with, I think very little likelihood of being put in jail. And now, so that's a problem. That's been even a problem before this, but of course it gives a sense to people that the city isn't really going to crack down on stealing. It's at least a yellow light for looting.

The mayor has also contributed to this, for instance, there were attacks on some statutes of Christopher Columbus, really attacked by radical leftists who confronted police, trying to tear these statutes down. And I think all cities should be able to decide what their statute should be put up, but it's a disaster to take them down in the dead of night, is what the mayor ordered was it seems to be giving into mobs. And again, that gives us kind of a culture of impunity.

Then the governor also has not helped, he hasn't really spoken out sharply against looting and he made just dreadful mistakes. In a first round of looting we had. Again, to set the stage for this round of looting, there was a first round of looting, which the governor called half the national guard to protect the downtown after it had been looted, but didn't extend that to other parts of Chicago and the suburbs, which were alluded right afterwards. So it was a kind of Keystone Cops operation that again, doesn't give people who are criminals a sense that they're likely at risk if they continue to engage in their criminal activities.

So at every level of government we've had mistakes that sadly have incentivized the worst elements of our society. Because there's no doubt, this was not a protest. This was organized looting, people came in trucks to take things away. They had crowbars to pry open the doors and the barriers that faced them and the police were completely overmanned. And so this is a disaster for Chicago. It's a disaster for Chicago, not only of course for these merchants, who've lost money, but the sense of insecurity that people, as it were in the engine room of Chicago's economic growth, now feel.

Brian Anderson: You describe it as a culture of impunity and that's a striking phrase. You mentioned the police, the problem the city is having with violence, with shootings is pretty significant. And we're seeing that now here in New York as well with an enormous uptick in shootings and murders over the last several months. I wonder if you could talk a little bit about Chicago's sort of ongoing struggle with crime.

John McGinnis: Well, it's really quite an unfortunate. What has happened is that before this looting, which as I say, was organized, it was in some sense, the most wealthiest sections of town, the high crime districts, which are in the poorest section of town have become higher crime. And I think there are a whole variety of reasons for that. The police, I think, have been overstretched. I think they also don't feel... I think they're also very cautious because of fears of claims of police brutality. But more generally, I think this is like broken windows on steroids, as it were. Once you've seen a structure of looting where people are taking things and there don't seem to be many consequences because again, I didn't emphasize this in the first round of looting, the district attorney has been criticized even for the police, by not bringing sufficient charges against some of the people the police caught. And that gives incentives to people.

Broken windows, of course, the idea familiar to your listeners that's allowing small infractions and disorder to proliferate, encourages larger disorder and serious crime. Well, this was serious crime that seems to not get a response. It not only doesn't get as much of a response through the district attorney, but didn't get as much of a rhetorical response through the Mayor's office and the Governor's office who don't spend their time denouncing looters. The governor has spent much more energy saying insurers aren't paying people enough and fast enough for the amount that's been looted. That's been his primary focus rather than denouncing the looters, rather than giving some sense to the expressive voice of outrage of the community. And so again, the leaders have failed us in just a striking manner at every level of government.

Brian Anderson: Do you see any growing recognition on the part of voters that there is this breakdown in political leadership and that maybe Chicagoans and residents of Illinois need new leaders?

John McGinnis: I don't know. It's hard to know, I'm in a university, I think I would see that last of all, because university professors are both insulated and very confident of their views, even if they are shown to be not entirely correct. But I do think there's a kind of grim logic of urban politics. So particularly in left liberal cities like Chicago, most people vote actually, I think to express their view about themselves after all, that's what they have to live with. They live with their own psychodramas as it were. And so for most of the time, they want to express themselves as good people.

I think in Chicago, that means being electing progressive people, people of identity politics, our mayor happens to be a woman, black, I think also a lesbian. All of these things suggest kind of open-mindedness and that's the reason I think they vote. She also is a very, went Harvard Law School, he's sort of one of them, as it were. The district attorney promised to reform the justice system and not have so many people be put in jail, I think that makes people feel good as well. And so these are expressive reasons for voting and really it's only when there are bad consequences do people sort of rethink these things and maybe this is a problem with urban democracy. It's only in a crisis when the consequences harm people's property values, make them feel unsafe, that they'll rethink their voting patterns in terms of the consequences, rather than in expressing themselves as their idea of what makes them a good person, which is an open tolerant person, who's really very concerned about the less well-off, even though of course, some of these policies have even the worst effects on poor people, even themselves.

So I think there is that feedback loop that we may see, of course, your listeners particularly in New York were very familiar with that in the context of New York City. As you may remember when Ed Koch was defeated in the primary for mayor by David Dinkins a much more left liberal, he said, "The voters have spoken, they must be punished." And that's, I think a very wise remark. It shows that there's a kind of two-way street of electoral politics, right? We try to hold our leaders accountable, but ultimately voters need to be held accountable for their own votes and voters in some sense, because their vote isn't going to make a difference in any election, they vote irresponsibly unless there's a crisis. So that's the only silver lining that I see in Chicago that this may wake up the woke.

Brian Anderson: Well, thank you very much, John. Don't forget to check out John McGinnis' work at City Journal. His latest piece is called When Authority Vanishes and it's about Chicago. You can find it on our website, www.city-journal.org, and we'll link to it in the description. Make sure you follow City Journal on Twitter @cityjournal and on Instagram @cityjournal_mi. And as always, if you like what you've heard, give us a rating on iTunes. Thanks for listening. And thanks again very much, John McGinnis for joining us.

John McGinnis: I was delighted to be here.

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Photo by Scott Olson/Getty Images

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