Aaron Renn and Rafael Mangual join City Journal editor Brian Anderson to discuss Chicago Mayor Rahm Emanuel’s legacy, the Windy City’s ongoing homicide epidemic, and its severely underfunded public pensions.

Chicago’s energetic leader shocked the political world this week when he announced that he would not seek a third term as mayor. Emanuel leaves behind a mixed record: he enjoyed some successes, but he largely failed to grapple with the city’s two biggest problems: finances and violent crime.

Aaron Renn is a senior fellow at the Manhattan Institute and a contributing editor of City Journal. Rafael Mangual is the deputy director for legal policy at the Manhattan Institute.

Audio Transcript

Brian Anderson: Welcome back to the 10 Blocks Podcast. This is your host Brian Anderson, the editor of City Journal. Joining me today on the show are two guests, first we have Aaron Renn, Aaron's a senior fellow at the Manhattan Institute and a contributing editor to City Journal, you can follow him on twitter @Urbanophile. Joining him is Rafael Mangual, he's the Deputy Director for legal policy at the Manhattan Institute and you can also follow him on Twitter it's @Rafa_Jdoc. We’re gathered here to talk about the second greatest city in the United States at least as it describes itself, Chicago. Mayor Rahm Emanuel surprised political world this week when he announced that he would not seek reelection for a third term. Emanuel who previously served under presidents Obama and Clinton on the federal level has faced tremendous challenges since coming into office in Chicago in 2011. There's been the serious spike in violent crime a failing school system and severely underfunded pensions just to name a few of the challenges he's been addressing, but what does this announcement mean for the city's future?  Luckily for us, these two guests have a lot of experience writing about and even living in the Windy City Aaron and Ralph thanks for joining us.

Aaron Renn: Thank you.

Rafael Mangual: Thanks for having me.

Brian Anderson: Aaron we'll start with you. What do you make of Emmanuel's decision and how is he leaving the city is it better or worse off?

Aaron Renn: He was elected originally in 2011, a very bleak time for the city. The entire country had essentially suffered a lost decade, Chicago was no exception the region had lost jobs, Mayor Daley who'd served something like six terms was deeply unpopular as he seemed to have lost his magic touch, the city was humiliated in a bid to try to host the 2016 Olympics, there was a debacle with a 75-year lease for the city's parking meter system and there was a sort of civic malaise in the air. Now, when Rahm is going to leave in 2019, the city is booming in many ways the loops in all time, the job high, there’s skyscrapers everywhere, highly educated people and tech companies have been pouring into the city and he's probably going to point to this and say look I brought this big turnaround.

Brian Anderson: And you can see it, the loop area looks beautiful it's actually very clean even compared with New York City these days.

Aaron Renn: Yes, so I would say that's going to be his claim I think there's some fairness to it. But what he really failed to do is address the two major problems that hang like a cloud over the city. One being the finances and the other one being crime. As you noted, he made a lot of attempts to find a way to avoid simply having to pay all these pensions he negotiated with the unions—

Brian Anderson: Lets step back a minute and describe what those fiscal or financial issues are pensions are certainly at the heart of it right?

Aaron Renn: Yes, the city's pensions are underfunded by some astronomical amount of money like 38 billion or something like that. The city has also has a tremendous amount of just plain, old, ordinary bonded debt. For many years the city hasn't even been paying its bonds off when they come due they simply refinance them and extend the payments in a system called ‘scoop and toss’. Then, they were even using bonds to pay what we're essentially operating expenses, which is what you're not supposed to do, you’re supposed to be using bonds for like building roads and schools and things like that. They're using bonds just to stay afloat just and to do things like pay legal settlements including hundreds of millions of dollars in settlements for police misconduct just being financed out of bonds. So, this has really been a bad situation. He didn't create that mess, it was largely created under his predecessor but it's really bedeviled him trying to get a handle on it.

Brian Anderson: The state has played a role here as well, right? By making it very difficult to reform pensions because I know mayor Emanuel had at least talked about the problem.

Aaron Renn: On pensions specifically the Illinois Supreme Court has basically ruled that you can't make any changes that will deal with this problem. Not even if you negotiate with the unions, it's got one of these systems where even future increases in your pensions that you will earn years from now can't be taken away from you. So they can't even like reduce future benefits in a lot of instances, except for brand-new employees. So it's a very difficult environment in which to operate, he did try to do some negotiations but ultimatel,y dissident union members sued and they were overturned. That was probably worth trying when you want to try to negotiate some give backs by everybody but in the meantime while he was doing a lot of this he wasn't putting in the money to start bringing in the funded ratios back up and so he really missed several years of opportunities to start addressing the problem.

Brian Anderson: So the city is in a real financial hole yes and—

Aaron Renn: —not just the city that's going to get worse it's not just that the city's in the hole, the school district has the same hole, Cook County has the same hole the state has the same hole so essentially every layer of government in Illinois is facing similar crises you know the state government is also politically dysfunctional in many ways so that creates a huge problem for the city it's not like the state could just bail them out for example because the state itself practically needs a bailout.

Brian Anderson: Now you've written in the past for City Journal that Chicago's ambitions to be a global city might be a little hubristic. Why do you think that and what do you think the best path forward is going to be for the city? And we'll get to crime in a minute with Ralph.

Aaron Renn: Well, in a sense Chicago is a global city it's if you look at it it's the city in the other states that most resembles New York physically with its big downtown full of all these skyscrapers and they have big financial exchanges like the Chicago Mercantile Exchange it's a center of high-frequency trading and and business services and other things so in a sense Chicago is the interior city that most resembles the coastal places like the Boston's DC's the San Francisco's in the kinds of profiles of their economy as a talent hub and a talent magnet etc. Chicago has never quite managed to post the kinds of impressive economic results that those other places have it really hasn't joined that the true coastal club, now in a sense that's good because for example, housing prices are much more cheap there so that's been good but they have— Chicago doesn't have an industry like finance in New York government in DC or tech in San Francisco, Bay Area that just generates oceans of cash for them. It's a very diversified economy which is very good for them in a lot of ways because that helps to preserve your wealth—When you just when you have all your eggs in one basket it needs to be a big basket, just ask Detroit. But ultimately you know and they never quite joined the coastal elite. They've outperformed a lot of the Midwest cities in a lot of ways in terms of becoming a destination for investment and people. But they have not quite been able to join the coastal levels and Rahm, I know that was his one of the ambitions for Chicago was to be seen in the same breath as the Singapore’s and the in that London's and the Paris's and the Toronto's and the New York's and the San Francisco's but it couldn't quite make it to that level.

Brian Anderson: Well certainly the crime situation has dominated headlines and Ralph you've been monitoring that for City Journal have written several pieces for us. it's been reported recently that violent crime is actually down for the year in in the city but this is after very substantial crime rises over the last few years where is the crime problem right now how bad was it during the spike and is it really getting better?

Rafael Mangual: Well it's getting better as you pointed out when you compare it to a really intense spike that Chicago started to experience and in 2016 and so you know when people ask the question of how bad crime is in Chicago at any point in time it's really important to kind of buck the trend of looking at crime at citywide levels and this is something that I think probably contributed significantly to Emmanuel's failure to adequately deal with the crime problem in that city I mean when you look at crime in a citywide level in a place like Chicago would you have to what gets lost is that Chicago is a very divided city I mean it really is a Tale of Two Cities and that jurisdiction insofar as there's a really densely populated area of the city that is extremely safe I mean Aaron and I both lived on the north side of Chicago and you know I never felt insecure walking late at night or anything like that but there's another part of the city, what I've called sub Chicago in a piece for City Journal last summer, that's also pretty heavily populated insofar as it would be a large city in and of itself with 1.1 million people but the crime picture there is very very different and so when you look at the overall crime rate or the overall homicide rate for example in a city like Chicago the homicide rate in the area that it encompasses the south and west sides is about double the citywide rate which means that whenever you talk about it at a citywide level you kind of underestimate exactly how dangerous things are in the bad neighborhoods.

Brian Anderson: Crime in these neighborhoods exploded as we mentioned a few years ago what in your view was behind that and what has been the policing response to it.

Rafael Mangual: I think a couple of things were behind it you know part of it was you know especially relating back to the Emanuel administration I mean he came into office at a time where Chicago was experiencing modern lows in in terms of their murder rate in 2010 homicides fell to their lowest level in Chicago since 1965 they fell again slightly in 2011 when a manual came into office and in 2014 there were only four hundred and seven murders which was even lower than that now they started an uptick in about 2012 and I think first thing that contributed to this was sort of the lack of urgency um in the mayor's office and at the high higher levels of the police force that I think resulted from this trend of looking at crime in a citywide level I mean in 2014 Emanuel didn't an interview with Politico specifically about crime in that city and he got kind of he took a sort of hard tone when he was asked to react to the characterization of Chicago as the murder capital and he said quote the narrative is that where the murder capital not close and you know what he was doing there was pointing to other smaller cities with higher per capita rates but again that ignores the fact that there are areas of Chicago which with that are much bigger than those smaller cities in and of themselves and have much higher rates so I think it was a combination of approaching crime from through that lens and then you know during the Emanuel administration there were a bunch of things that the city did both in terms of policing and incarceration that I think contributed to crime increases for example into the first quarter of 2016 the height of what Heather McDonald is called the Ferguson effect there were 80 percent fewer pedestrian stops done by the Chicago Police Department a lot of people think that this emboldened criminals and I'm one of them, and 2016 overall saw a significant drop in arrests and more importantly it also saw a significant drop in the number of illegal guns covered recovered compared to 2015 I think there were a hundred and eighteen fewer firearms confiscated in 2016 compared to the prior year so I don't think it's---

Brian Anderson: And didn't Emanuel describe the police as going fetal at one point?

Rafael Mangual: He most certainly did.  I think he was he was right to point that out but I think a lot of analysts who look at it will say that me and beyond that statement he didn't really do much to counteract that he didn't really do much to communicate a level of support for more intense police activity you know the other thing too is that there was a big push for Dakar serration in that city you know in September of 2017 the chief judge of the Cook County Court system put in an order to lower bail amounts basically responding to some stories out of New York that argued that pretrial detainee practices were unfair and unjust and this lead to a significant decrease in the Cook County jail population I mean it dropped to its lowest point in a decade you know right around that time and so you know what that meant is that you had a bunch of criminals who would otherwise have been behind bars roaming the streets and I think the sort of confluence of all those factors really contributed to a spike that has been essentially sustained I mean despite the fact that there was a slight drop-off in 2017 in this light drop-off this year I mean the drop-off is from one of the high points in history.

Brian Anderson: A very significant increase. Aaron, your assessment of long term scenario for Chicago you know what is there to look forward to?

Aaron Renn: Their number one thing to look forward to is tax increases and nobody is really sure why Emanuel didn't want to run again but he was floating this idea for a pension obligation bond that the city would borrow ten billion and put it into its pension plan and that's kind of a hokey move that's usually you see people doing that it's a sign of desperation and I think you may have been looking for a way to avoid this big ramp up and tax contributions to pensions it's coming by 2023 the city's contributions to its pensions are scheduled to nearly double almost like an additional billion dollars a year which is more than the budgets of most cities in the any country is going to be going just to pay off yesterday's mistakes there's no public benefit to any of these tax increases and it's like every tax increase it's not just its one-year I mean it's in perpetuity that run rate just keeps going so billions and billions of dollars going for that so it'll be interesting to see when the tax increases finally start hitting Chicago start hitting l annoy you know I believe that Democratic candidate for governor by big tax increases in income taxes when you start seeing that kind of taxes in Chicago in Illinois that are more familiar to people and say New Jersey then I think we'll really see what Chicago is made of in a sense of whether people are willing to pay that level of a premium in order to live there because there's going to be a lot more expensive in terms of your tax bill in the near future.

Brian Anderson: And Ralph's on the crime scene do you think the city's going to get that back under control in a satisfactory way.

Rafael Mangual: It really depends I mean you know I don't think that there's an optimistic picture to paint right now that would predict success on that front, yeah.

Brian Anderson: And of course there were high profile incidents which led to a lot of friction between you know minority neighborhoods and the police.

Rafael Mangual: That's right and you know look Chicago being a blue city has been dominated by the sort of left-wing narrative on crime and that has been a sort of anti-police narrative in large part which I think is going to continue to play a role in how cops approach their job you know one of the things that Aaron just pointed out which is also interesting is that you know as its financial situation gets worse it's going to start feeling the effects of not being able to do things like hire more police which I think the city really needs to do because—

Brian Anderson: If you’re just paying off old debts, that means a lot less money for services.

Rafael Mangual: Exactly, I mean one thing that that that I think could help at least stem the tide if not start to turn things around will be will depend on whether the crime that's currently heavily concentrated on the south and west sides starts to bleed into areas that are more commonly sort of used by the city's middle and upper classes I mean you saw that in New York, I don't think that played a small role in in changing the tune that the city took when it came to crime. And you know there have been a series of increases in carjacking’s in nicer neighborhoods sort of flash mobs in the shopping district so m you know I think we'll have to just wait and see but my hope is that things don't get to that point before the city starts to do the right thing and start to address crime in a more aggressive manner.

Brian Anderson: Thanks very much don't forget to check out Aaron Renn and Rafael Mangual’s work on our website www.City-Journal.org You can follow Aaron on Twitter @Urbanophille and Ralph as well @Rafa_Jdoc. We'd also love to hear your own comments about today's episode on Twitter at City Journal and lastly if you like our show and want to hear more, please leave ratings and reviews on iTunes thanks for listening and thanks gentlemen for joining us.

Aaron Renn: Thank you.

Rafael Mangual: Thanks.

Photo by Scott Olson/Getty Images

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