PrintFebruary 5, 2011
Obama's Home State and City Falling Fast
A historic blizzard paralyzed Chicago this past week, as snowfall levels pushed upwards of two feet and more in the Windy City. That same storm also caused extensive damage and problems across nearly the entire State of Illinois, crippling much of the state, including Chicago. It was fitting, perhaps, as the Land of Lincoln and its largest city had already sustained an enormous amount of economic and financial damage before the storm, and political issues have transformed this once-proud state and city into a shell of what they once were. While the snow and ice will melt soon, the problems that Chicago and Illinois face seem to be increasing by the day.
There is plenty of grumbling among the business leaders and citizens of this midwestern state. It's no wonder, as Illinois recently enacted a 30% increase in the state corporate tax from 7.3% to 9.5% and a 66% jump in the income tax rate from 3% to 5%. Any way you slice it, those are massive increases during a time of less than stellar economic growth within the nation and the state. How those increases will play out remains to be seen, but Jimmy John's restaurant founder, Jimmy Liautuad, has already stated that he may move his corporation out of Illinois due to the tax changes.
Perhaps more will follow him, as a number of news stories from Illinois newspapers have indicated that some businesses are at least considering the idea of moving corporate headquarters or parts of their operations outside of Illinois. In fact, one trucking company owner, speaking of Illinois, said, "It is one of the worst states there is to do business." That's hardly a ringing endorsement for any business leaders who have contemplated moving to the Land of Lincoln.
With the increase in corporate taxes, which will naturally make it more difficult for businesses to compete with those from other states, along with the income tax hike, it stands to reason that we may see an exodus of both businesses and individuals from Illinois in 2011 and beyond. The loss of people and businesses would effectively reduce the amount of income that could flow into the state's coffers in the future. This is especially troubling when you consider the woeful -- and that is being kind -- financial condition of Illinois.
Illinois has a $15-billion budget deficit. To put that in perspective, the state has a population of just under 13 million, meaning that every man, woman, and child in Illinois has a burden of debt of about $1,150 payable to the state. Of course, that doesn't even include the price tag per person regarding the federal deficit.
To add to the financial lunacy, Illinois has unpaid bills of a mere $8 billion, which is evidenced by the myriad of schools throughout the state that display how much the state owes them on their marquee signs. Those are bleak figures, indeed.
And in Chicago, it's not much better, as the city has a host of socioeconomic and political difficulties. The city is well-known to have one of the worst public school systems in the country. A University of Chicago study in 2005 concluded that only 54% of incoming freshmen in the Chicago public school system actually graduated four years later. Incredibly, that was actually an improvement from prior years.
It's little wonder, as the Chicago public school system is riddled with corruption and a surplus of highly compensated retirees, which has resulted in the Chicago public school system having a massive $1-billion pension deficit.
The Windy City also has a violent crime problem. In 2009, Chicago's murder rate was three times that of New York City, and its rate of violent crime was about double that of New York City and Los Angeles.
One great constant in Chicago: a Democrat at the top of the house. Democrats have controlled the mayor's office since 1931. Richard Daley, the current mayor, has been in office since 1989.
Democrats have also largely run the state over the past several years. Since 2003, the notorious Rod Blagojevich and current Governor Pat Quinn have held the executive office -- Quinn, of course, being the chief cheerleader for the recently enacted corporate and personal income tax hikes.
But there is hope now in Chicago, as Obama's former Chief of Staff, Rahm Emanuel, seems poised to be the next mayor. Yet how can one not have confidence that Emanuel will turn Chicago around, as he is also a Democrat and a part of the Obama team that has orchestrated the current state of the nation?
Unfortunately, for those outside Chicago, they have the status quo to look forward to, as Governor Pat Quinn just won reelection after taking over for Blagojevich when the latter was ousted due to corruption. Now, why aren't businesses and individuals flocking to Chicago and Illinois?
Chad Stafko is a writer and political consultant living in the Midwest.
