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Violence prevention: Corporate charity or citizenship?

Last year, community groups called on Mayor Emanuel and the business community to match the fundraising they did for the NATO Summit to fund youth programs in the neighborhoods.

Now, under the glare of national publicity for Chicago’s ongoing epidemic of violence, Emanuel has decided to deploy his famous fundraising skills to gather $50 million in corporate donations for violence prevention programs over the next five years.

Certainly, every effort to bring resources to desperate communities is welcome.  (And it’s churlish to point out that these folks raised nearly $50 million for NATO in a few weeks.) But is charity a substitute for good citizenship?

The Grassroots Collaborative is pointing out that Emanuel’s choice to co-chair the campaign heads a company that is profiting from controversial interest rate swaps that cost the city and the schools tens of millions of dollars a year.

Jim Reynolds is CEO of Loop Capital, which according to GC, has made $100 million in five interest rate swap deals with the city and CPS since 2005.

Interest rate swaps — also called “toxic rate swaps” by critics — are one of the wonderfully innovative financial products developed in the run-up to the financial crash a few years ago.  They provide set interest rates to cover variable returns on public bond deals.

Cost Chicago $72 million a year

But since the crash, the Fed has kept interest rates near zero, while local governments are locked into interest rates of 3 to 6 percent.  That costs Chicago $72 million a year; CPS loses $35 million a year on the deals, according to GC. (CTU has protested this arrangement.)

While applauding their “charity work,” GC notes, “Chicago business leader must address their role in creating the lack of resources for youth and communities in the first place.  They must stop gouging taxpayers and renegotiate these toxic deals.”

“The solution doesn’t end with short-term donations,” notes GC.  It requires “renegotiating our local governments’ relationship with Wall Street, and getting our economy back on track.”

The toxic rate swaps are just the tip of the iceberg.  The millions of dollars of TIF subsidies going to the corporations that will be donating to the mayor’s fund should be considered too.

If Emanuel wants the business community to step up, he could reverse his phaseout of the head tax, which brought the city $40 million a year.  (It was called a “job killler,” but there’s no evidence for that — the $4 per employee per month amounted to about 25 cents an hour.  And it was one of the only revenue measures that captured a smidgeon of the estimated $30 billion earned in Chicago by residents of the suburbs each year.)

Corporate tax avoidance

Emanuel is expanding summer youth employment, though the number of jobs available will still be a fraction of what it was in previous decades.  He points out that federal funding has dropped precipitously, and the state has been unable to fund a summer youth jobs program established by the legislature.  Maybe the fact that half the state’s corporations don’t pay any income tax — and that Illinois leads the nation in a number of economically pointless business deductions — needs to be looked at.

Instead of paying the taxes they should, Emanuel’s corporate donors will most likely get a tax deduction.

There’s a steady shifting of public functions to the private sector taking place under Emanuel. Economic development is being outsourced to World Business Chicago, public finance to the Infrastructure Trust, public education to charter operators. Now the corporate sector has to step up to provide funding for youth services because the city can’t.

Behind the austerity agenda that Emanuel has enthusiastically embraced lies the contention that the city is broke, the state is broke.  But of course, the money is out there.  We’re in the middle of an economic recovery with soaring corporate profits and intractable unemployment. But with our regressive revenue system, we’re taxing the people at the bottom — the people who are losing ground — twice as heavily as those at the top.

It’s perfectly encapsulated in the story Ben Joravsky tells of the fireman who responds to Emanuel’s teasing about pension cuts by asking the mayor why he doesn’t support a financial transaction tax.   (In response, Emanuel sputters.)

Money for friends

The shift from the public sector, of course, involves a shift away from transparency and accountability.  When Emanuel was disbursing leftover NATO funds to neighborhood programs, trotting from press conference to press conference, “there wasn’t much transparency in how the programs were chosen,” said Eric Tellez of GC.  And it looked like a lot of the money was spent in ways that helped the mayor’s allies, including charter schools, he said.

The communities where Chicago’s young people are being shot down have been devastated by the loss of manufacturing jobs, devastated by foreclosures, devastated by “lock-em-up” policies that offer few avenues of hope for ex-offenders.  They’ve been devastated by racism and inequality.

As Salim Muwakkil says, what they need is nothing short of a Marshall Plan, the kind of massive investment program with which the U.S. revived Europe after World War II.

That’s hard to imagine in this day and age.  Politicians like Emanuel are products of the era of the “taxpayer revolt” and reflect all of its assumptions.

But there are signs that era is drawing to a close.  In California — which launched the era in 1978 with Proposition 13, capping sales taxes and requiring two-thirds legislative majorities to raise taxes — voters in November approved a measure hiking the sales tax and raising income taxes on the wealthy.  The alternative, quite simply, was fiscal disaster.  Tea Party-backed anti-tax measures went down to defeat in Florida and Michigan.

What Chicago and Illinois desperately need — what Chicago’s young people desperately need — is a turn back in the direction of fairness and broad-based, inclusive prosperity.

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Category: philanthropy, taxes, violence, youth

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