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Austerity in Chicago

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As European voters increasingly reject the austerity program [2], community leaders here are proposing alternatives to Mayor Emanuel’s agenda of spending cuts and privatization– an approach they say hurts working families and stifles economic recovery.

“We are saying there are ways of looking at budget- and policy-making other than just cut, cut, cut,” said Michael Bennett, a sociology professor at DePaul University, one of the coordinators of a group of local activists and scholars meeting this weekend to develop a local public policy agenda “that gives priority to social justice, balanced community development, and responsible fiscal management.”

The Chicago Equity and Fiscal Policy Initiative [3] will release working papers on the city budget, schools, community and the environment, and economic development and jobs, at a gathering with the theme Act Locally Chicago this Saturday, May 19, 10 a.m. to 1 p.m. at Erie Neighborhood House, 1347 W. Erie.

“We have to focus just as much on neighborhoods as we do on downtown,” Bennett said. “It has not been balanced.”

The working papers and policy recommendations are aimed at starting a conversation, he said. One of their goals is to maintain public services that are threatened by privatization. They’ll talk about reallocating existing resources more fairly, and about longer-term solutions to raise revenues more sustainably.


Their initiative reflects concerns that are widespread among community organizations.

“What’s happening under Mayor Emanuel is a microcosm of what’s happening around the world,” said Amisha Patel of the Grassroots Collaborative [4], a citywide coalition of labor and community organizations.

“Politicians are pushing austerity, saying the government has to cut spending, but it’s really devastating to the local economy and to people’s lives,” she said. “It’s the worst thing we can do in economically challenging times. For the economy to have a chance we have to invest in the public sector and public services.

“When you cut resources going to low-income families, you hurt the people who put money back into the economy most directly, she said. “And you end up paying through the back end: when you cut mental health services, it costs you more in hospitalizations, in incarceration.”

The city continues to “move resources out of the neighborhoods and into downtown,” she said, pointing to a $29-million city subsidy [5] for a new office building in the West Loop announced this week.


Emanuel has cut taxes on corporations (where profit levels are at record highs) while “focusing on revenue generation that saps working families – quadrupling water fees, installing speed cameras, higher fees and fines,” she said. “We’ve got to have revenue solutions that don’t hurt working families.”

Chicago’s fiscal crisis is compounded by several factors, said Ron Baiman of the Center for Tax and Budget Accountability [6]. Locked in political stalemate, the federal government is cutting domestic spending, and the state’s budget crisis is exacerbated by a constitutional provision mandating a flat-rate income tax. (On top of that, Illinois is one of the top states for corporate subsidies [7].)

The basic problem is that the tax burden is concentrated [8] on the people who have been hurt most badly in the recession, he said.

In addition, the majority of income earned in the city goes to people who pay taxes in the suburbs – an estimated 620,000 commuters [9] earn $30 billion a year. Emanuel is phasing out the corporate head tax, a modest per-employee charge for large companies, which was the only mechanism the city had for capturing some of that. Baiman said a city income tax would be the most efficient approach.

On top of that dynamic, city workforce reductions have hit black and Latino communities [10] hardest, while city subsidies to downtown developments have mostly created jobs for suburban residents [9].

Baiman points out that Chicago has the Chicago Mercantile Exchange, the Chicago Board of Trade, and the Chicago Options Exchange – and that a tiny financial transaction tax [11] could raise huge amounts of money for the city.

“The only real answer is taxing the wealthy and the financial sector,” he said.