It became conventional political wisdom late in this most recent election that the failure of Republican candidates to connect with voters on fiscal issues was inextricably linked to the failure of Reaganomics. The imbalance of funds shunted to the wealthiest Americans had finally reached a critical point at which the whole theory became indefensible in the face of economic collapse.
Republicans wailed about the new socialism that would come with the election of Obama, but voters seemed to welcome the change. The old way of doing business was not working, a fact that had become so obvious as to be undeniable. And now Reaganomics is supposedly dead.
Or so the story goes.
However, looking at the local level, it seems as if the nearly three decades that Reaganomics has been allowed to survive, if not thrive, have been enough to allow the trickle-down theory to come to fruition. Unfortunately, it is debt — and not wealth –that has been trickling.
Reagan’s economic target was to drown government in a cocktail of lowered government spending, deregulation and reduced tax rates. However, in order to shrink government to bathtub size, the role of private business had to expand to fill basic needs, which was totally fine with Republicans.
But another consequence of Reaganomics, one that doesn’t jive so much with traditional Republican values, is the reduction of states’ powers. Local governments are beginning to see the real meaning of trickle-down economics: dwindling federal funds make it harder for states and cities to meet annual budget requirements. While the U.S. government can live on credit, many local budgets are required by law to be balanced. So the largest tax cuts to date were bound to trickle down to local governing structures, and now many governors and mayors are responding in an uncharacteristically Reaganistic fashion.
Take Obama’s home territory, for example. Chicago, under the firm grip of Democratic Mayor Richard M. Daley, is deeply committed to privatization. Not because it’s a popular idea, mind you, but because the city is desperate for funds.
Still, they don’t call it the Chicago school of economics for nothing.
After spending hundreds of millions on the reconstruction of the Chicago Skyway, a bridge linking the Dan Ryan Expressway to Indiana, the city sold a 99-year operating lease for a one-time cash infusion of $1.83 billion in 2005. Though this was the first privatization of an existing toll road in the country, there are indications it won’t be the last.
To be sure, it was not the last major privatization in the “City that Works.” Chicago’s Midway Airport is the last of five remaining in the FAA’s airline privatization program. In 2008, a 99-year lease of the airport was finalized to the tune of $2.5 billion.
It’s a pretty sweet deal for the consortium who bought the rights. Not only is Midway a pretty tight operation with room for expansion, but Daley promised the new owners free police and fire service. And, of course, by “free,” he means taxpayer-funded, to the tune of $225 million just for starters.
In December, another deal was finalized by Daley and the Chicago City Council to lease city parking meters for the next 75 years. As a result, downtown parking meter rates are expected to go as high as $6.50 an hour by 2013, making Chicago one of the most expensive places to park in in the country.
The 2008 lease agreements have been touted as ways to fill a $469 million hole in the city’s 2009 budget. They finally solved that problem, but just last week, Daley’s office announced an unwelcome fiscal surprise: 2008 revenues fell short of projections by $31 million.
This leaves Chicagoans bracing for next year. What makes these politicians think that by selling off government assets, they’ll magically have more revenue next year? With the foreclosure crisis and rampant unemployment, there’s little doubt that income and property taxes will be down even further next year.
Just to keep things in perspective, this rampant privatization is happening in one of the most solidly Democratic cities in the nation.
Chicago and other local governments are using Reaganomics to solve problems that were caused by the failure of that same fiscal policy. And Illinois seems to be just ahead of the curve; some reports say as many as 44 states are considering similar sell-offs to fill budget holes. After all, this is the country containing the only fully-privatized city on the planet.
Privatization hits citizens many times over. First, the whole thing operates much like a payday loan: In order for the government entity to get their cash right now, they take a lesser amount than what the asset will bring in the long term. Second, the private company is able to jack up prices as much as they like, making once-public assets eventually inaccessible to the average consumer. Furthermore, a private company is more beholden to its stockholders than society as a whole.
Now that these basic elements of Reaganomics (privatization, massive tax cuts, and lower government spending) have been normalized on the local level, supply-side economics may have finally won out. Not only are local governments divesting of their resources and furthering the hemorrhage of jobs, but also we’ll all pay more for it in the end.
A BUZZFLASH NEWS ANALYSIS