Reaganomics will bring our cities to ruin

Chicago and Colorado Springs have been praised as models -- but wrecking public infrastructure isn't the answer


David Sirota
April 25, 2011 8:01PM (UTC)

If America circa 2011 were a movie, there's little doubt it would fall into the "sci-fi/horror" genre. We've got a government that emulates Big Brother, wars that are prosecuted by Terminators, and leading politicians who seem fit for the cover of Fangoria magazine -- and that's just at the federal level. Down at the local level, deindustrialization and recession have left more and more cities looking like the set from "Twelve Monkeys." Even more troubling, the two archetypal models for supposed "success" in the future are Colorado Springs and Chicago, two enclaves that have been pioneering a sub-genre of policymaking we might call "Municipal Dystopia."

The Springs, as we call it here in the square state, has made national headlines as a Republican bastion with an unwavering commitment to the old tax-cuts-and-budget-cuts theory of growth. During the recession, that has resulted in both comparatively low property tax rates and in darkened street lights, cuts to police and firefighting forces, and an end to basic municipal services.

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The more Democratic Chicago, on the other hand, has gone in a slightly different -- but equally radical -- direction. Instead of offending its liberal voters by overtly terminating municipal services à la The Springs, Chicago has instead cloaked its Municipal Dystopia agenda in complex corporate transactions, raising short-term money by selling off huge chunks of public infrastructure to private investors, often at scandalously low prices. In the process, the city has become "the most aggressive city in the United States in the privatization of public infrastructure," according to the Illinois Public Interest Research Group -- and other cities like New York and Pittsburgh have been looking to follow its lead.

Such schemes as the Skyway privatization plan and the selling off of parking meters provided a relatively small amount of money up front to momentarily fill public budget shortfalls. But that cash came in exchange for guaranteeing huge future profits for private investors -- profits that will be financed by the ever-increasing fees those backers are already forcing Chicago residents to pay.

This has been the tale of twin cities hurtling down two lanes of the same Reagan-paved road -- perhaps until now.

A few weeks ago, the Springs hit the brakes, as anti-tax forces were decidedly crushed in municipal elections at the same time Democrat Richard Skorman swept into front-runner position in the city's May mayoral runoff. The stunning results appear to be a direct repudiation of the Springs' previous commitment to the Municipal Dystopia agenda, in part because one of the electoral casualties was Douglas Bruce, the well-known architect of Colorado's anti-tax ballot initiatives (and good thing he was defeated -- his tenure on the council would have been interrupted by his recent indictment).

By contrast, Chicago may be hitting the accelerator in the face of foreboding news.

The Medill News Service reports that the one-time money the city raised from privatization schemes is now running out, as the city is quickly "burning its way through millions of dollars [from the] deals, threatening to leave the long-term financial health in ashes." Meanwhile, a new lawsuit cites the city's own data in alleging that taxpayers were fleeced by a collaboration of politicians and corporate consultants who sold public infrastructure at deliberately below-market prices. Nonetheless, Chicago's incoming mayor, former investment banker Rahm Emanuel, is now loading up his new administration with privatizers.

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Specifically, Emanuel's top economic advisor will be private equity investor Mark Angelson (for more on the private equity industry and the looting of public infrastructure, see this report in Businessweek). And as the New York Times reported this weekend, Angelson will head an economic team chock-full of consultants who specialize in privatizing public infrastructure:

During the campaign, Mr. Emanuel advocated a go-slow approach to any future privatization deals, but there seems little doubt what sort of advice his economic advisers will be offering. Lois Scott, the chief financial officer, runs a consulting firm specializing in privatization deals that has put together more than $35 billion in bond sales over the years. The budget director, Alexandra Holt, is a Baker & McKenzie lawyer who worked for clients trying, unsuccessfully, to privatize Midway airport.

Chicago, of course, is still a few privatizing steps behind smaller towns like Maywood, Calif., and Sandy Springs, Ga. And its commitment to the Municipal Dystopia agenda hasn't yet delivered the same painful budgetary consequences that may now push the Springs off that course. But if the numbers from Chicago's past privatization deals predict the future, then it and other cities following the same path will indeed face those consequences -- the only question is whether, like the Springs, those cities must bear that pain before voters finally demand a true change of direction.


David Sirota

David Sirota is a senior writer for the International Business Times and the best-selling author of the books "Hostile Takeover," "The Uprising" and "Back to Our Future." E-mail him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

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