Can Chicago Survive Brandon Johnson?

“…Chicago’s new mayor, Brandon Johnson, might drag his city into the urban doom loop. Inheriting a city already in crisis, Johnson plans to soak commuters, businesses, and the “ultra-rich” in taxes, has claimed that defunding the police is an “actual real political goal,” and promises to splurge on social spending. All this will make the Windy City’s situation more dire still.

In an urban doom loop, a city’s tax base flees, draining revenue and thus stressing already-underperforming core services. As conditions deteriorate, the cycle spins faster, pushing the city further into the fiscal and public safety abyss. Though Johnson backed away on the campaign trail from his most strident defund-the-police rhetoric, the city’s pension problems are already doing the trick…

…Chicago’s election highlights several aspects of our research, including ballooning expenditures, rising crime, and cratering commercial real-estate markets. Perhaps more than anywhere else, the Windy City exhibits the telltale signs of a negative spiral.

In the 2010s, Chicago saw a small population increase of around 2 percent, but the number of municipal employees fell by almost 5 percent, owing to the pension crowd-out effect, in which rising pension costs squeeze other city priorities. Chicago’s pension spending has nearly tripled in the past ten fiscal years, from around $15,700 per full-time employee to more than $45,000. Pension expenditures now total more than $1.5 billion—over 12 percent of the city’s total revenue. For every person Chicago employs, in other words, it is effectively paying $45,000 to a city employee who has already retired. And the problem will worsen in the years to come, with the city’s pension debts exceeding those of 45 states and the recent market downturn intensifying its funding shortfalls. As these costs rise, they limit the revenue available for needed services.

And Chicago can hardly afford to tighten its belt on public safety. From 2020 through 2022, more than 2,000 people were murdered within city limits. The 2021 figure of nearly 800 was roughly 60 percent higher than that of 2019—yet the Chicago Police Department recorded less than half the number of physical arrests in 2021 as it did in 2019. Crucial to understanding these numbers is that the police force has shrunk by 8 percent in less than half a decade…”