Meeting of the Minds

Last week, I attended a program at The University of Chicago entitled A Meeting of the Minds: Business and the Human which featured William Howell, Professor of American Politics and Raghuram Rajan, Professor of Finance at Chicago Booth.  The discussion was moderated by Bret Stephens of The New York Times.  The discussion topic was Democracy, Populism, and Capitalism:  Are They Compatible?

Howell began by defining populism in the negative.  He asserted that populism is not a commitment to standing up for “the little guy.”  Rather it stands in opposition to the political elites and the existing political order.  Populists push back against existing political institutions.  It expresses itself in claims of who “true Americans are” and a need to “return to our political heritage.”  Populists see political institutions as “the swamp.”  It arises out of political failure to deal with population movements, technological change and income inequality.  These things lead to harm and disaffection.

Rajan responded by addressing income inequality, that the returns to education and skills have increased.  It is hard for some people to get to the first step on the ladder.  Poor family structure, bad schools and bad work habits combine to put people behind.  Nobel Laureate James Heckman says that many people are doomed by the age of 5.  He also asserted that much of this is driven by technology, and that is nobody’s fault.  Governments have not remedied lost opportunities.  In Rajan’s view, Davos does nothing.  Rajan is warmer toward nationalism (as am I).  It has become a dirty word but can be synonymous with patriotism. 

Howell’s take on immigration was that in the main it is good for the country, but when government doesn’t control it, it let’s the populists step in.  It is not necessarily a good for all.

Rajan sees more upside to social media.  It is easier to get in touch and get together with people and we will use technology to deal with some of the bad sides.  He sees that it will strengthen relationships.

Both Brett Stephens and William Howell believed that social media was instrumental in getting Trump elected.  Stephens said that he got elected because he was good at Twitter.  Howell believed that Trump got a free pass from the media.  Rajan took a middle approach and said that there were things that Trump said that resonated with the electorate.

It was clear that both Stephens and Howell are more wary of populism.  Rajan was more positive.  In the final analysis, he said, the virtue of populists is that they raise the right questions.  They might not have the best answers, but they raise the right questions.   They are doing a service when they say that the elites have gotten too cozy with one another. 

Rajan said that under a populist president we are growing at 2.5% while not spectacular, is still pretty good and we are at 3.7% unemployment rate.  Despite all the angst, things are pretty good.

My own sympathies were with Rajan.  He is loathe to finger point, ever.  His book on the Great Recession, Fault Lines was the best of its kind.  In it, he blamed the system while others were blaming government, the banks or the borrowers.  His position was that people were acting rationally based on the financial system that was in place. Likewise, Rajan’s view is that the emergence of populism is rooted in economics and technological changes.  I agree.  It is easy for the Left to write off populists as xenophobic, nativist, Islamophobic, or whatever, but the fact that we are undergoing seismic shifts means that uncontrolled immigration, especially from either places that have cultures that may have compatibility issues with ours or peoples that may need extended periods of state support will meet with some opposition and resentment.

Brett Stephens did say that the most valued thing he did intellectually was to attend The University of Chicago, that his degree was the most difficult to get.  But I did leave part way through the Q & A session.   While attending a University of Chicago event is often illuminating, there is a downside.   University of Chicago grads are not bashful about having their ideas heard and unless they are tightly controlled, Q & A sessions can deteriorate into long winded pontifications from the audience, and those people tend to forget that we came to hear the ideas and insights of Rajan, Howell and Stephens and not theirs.

Justice Obstructed

The news last week was dominated by the stunning decision of prosecutor Kim Foxx to drop all 16 counts against Jussie Smollett, with shifting rationalizations.  First, she implausibly contended that her move was an “alternate prosecution” as Smollett agreed to forfeit his $10,000 bond and do community service.  Then she explained that this is the sentence he would have gotten anyway because he was a first time offender.  Then, Foxx claimed that she didn’t believe there was sufficient evidence to convict.  That last statement flies in the face of everything that has been made public by the Chicago Police Department.

After a momentary outburst of righteous indignation in which outgoing mayor Rahm Emmanuel decried a “whitewash of justice,” Rahm reverted to his hyperpartisan self and blamed Donald Trump for “creating the toxic atmosphere” that made Jussie’s actions possible.

Smollett’s lawyer speculated that maybe the Nigerian brothers were wearing whiteface like the Joker and threatened to sue the city.

What is really going on? Tina Tchen, Michelle’s former aide contacted Foxx.  The conversation went something like this: “Kim, we need you to just drop those charges.  Just make something up.  You will catch heat for a few weeks, and you’ll probably be asked to step down.  But don’t worry.  We have you covered.  There will be a job at Netflix for you if you need it.”

The cue came from the assistant State’s Attorney Joe Magat’s statement.  Magat used words identical to that of Robert Mueller and said that dropping the charges does not mean that Smollett was exonerated.

Here’s my final take.  Dropping the charges was a direct poke in Trump’s eye by the Obamas.  It was meant to send a message and that message is “You may control a few things in DC, but we are still boss in Chicago, the West Coast, and the Deep State.” 

The Smollett fiasco is very bad on 3 levels.  It was an egregious exercise of clout in a city known for its corruption- these people put the bananas in banana republic.   It showed that consequences are for the little people.  Finally, and the worst part, is that a fake hate crime is worse than an actual hate crime.  A hate crime hurts a single person.  A fake hate crime rips at the fabric of our entire society by propagating a lie.  It is designed to pull us apart, to put us at odds with one another, make us suspicious of each other.   Fake hate crimes should be punished even more severely than real hate crimes.  The justification that Magat provided, that “we work to prioritize violent crime and the drivers of violent crime” doesn’t pass muster.  In this case, Smollett did extreme violence to the cohesiveness of our entire society.

The real bottom line is that real hate crimes and real disrespect shown to others because of their race, religion or ethnic origin is actually quite rare in America. But because racial division is politically profitable and vital to the narrative of the Democratic party, we are seeing more instances of hoaxes.  And it is important that the perpetrators of hoaxes and false narratives suffer consequences.   In the case of the smear against the Covington Catholic kids, the courts will sort that out.  In the Smollett case, courts also would have, but they were not allowed to function.

I think we found the obstruction of justice thing. And it was right here in Chicago.

Filmography

 From time to time, I like to blog about interesting films and books that captivated me.  Two films released recently that I have tagged as “must see” and which I will likely see again. Both films involve the affect of war on individuals and the disruption in causes in peoples’ lives.  Both raised questions that lingered with me for days.  These films had short runs and are out of most theaters now, but look for them on On-Demand, Amazon or Netflix.  You will not be sorry.  I promise.

They Shall Not Grow Old

About the same time as he launched his midnight raid with bulldozers on Meigs Field in Chicago to destroy the runways before opposition could mount, the son of the Great Patriarch of Chicago, Richard M. Daley (with the concurrence of the Chicago Bears) began to push for corporate naming rights for the home of the Chicago Bears—Soldier Field.  As word of the deal leaked out, Daley took increasing flak.  For Pete’s sake, the stadium is a war memorial, dedicated to the soldiers that sacrificed themselves during WWI.  The whole point of a war memorial is to erect a permanent structure so that these people will never be forgotten.  Astonishingly, it did not occur to Daley to think about the origins of the stadium’s name.

My own introduction to WWI came when I was about eight years old.  My grandparents bought an old farmhouse in Wisconsin and hidden in the attic was a bound collection of raw photographs of WWI from the Chicago Tribune.  These newspaper photos were not for young eyes as they explicitly showed the horror of trench warfare--- the gassed corpses, skeletal remains, the gruesome injuries, horses half-blown away by shells.  I don’t know whatever happened to this collection, but it left an impression on me. 

They Shall Not Grow Old is a magnificent project by Peter Jackson that involved an enormous technological effort.  Jackson took old black and white herky-jerky film footage of WWI held in the British archives, smoothed out the motion caused by hand crank cameras, colorized it, and overlaid the voices of the soldiers to bring the catastrophe of WWI back to life.  And unlike the special effects of Jurassic Park, it’s the real thing.  The 100^th anniversary of the end of WWI came and went without much fanfare.  We don’t think about that war much anymore.  It has faded from memory,  but it left a deep scar on Europe and we are still feeling the effects of it to this day.

What most struck me about this film is the fraternity like camaraderie that the soldiers expressed in the beginning through training, as if they were going to sports camp.  And secondly, how they stepped back into ordinary life after it was over, as if this horrendous thing had never happened.  As I have gotten older, I have become more pacifistic, even though war has never personally touched me.  They Shall Not Grow Old helped confirm my evolving view.  The recent actions that erase our history--- like tearing down statues, or covering over murals (as Notre Dame just did with its mural of Columbus) are an anathema.  Our history, in all its glory and its ugly parts needs to be preserved.  Peter Jackson did a great service to our history by building this visual memorial.

Never Look Away

I almost passed on this film.  Its length of over 3 hours nearly scared me off as a film of that length is almost always a sign of poor, self-indulgent editing.  But just as you can’t tell a book by it’s cover, you can’t tell a film by its length.   This film staggered me with its complexity, beauty, and emotionality.  Loosely based on the life of Gerhard Richter, whose artistic life was torn between two totalitarian regimes--- the Nazis and the Stalinists, until his escape to West Germany.

What made this film an even richer experience for me was listening to the filmmaker Florian Henckel von Donnersmark’s interview with Terry Gross on Fresh Air (https://www.npr.org/2019/03/06/700663706/never-look-away-asks-why-make-art-who-is-it-for) and I highly recommend that you do so before you see the film.  In it, the filmmaker tells us that the art pieces depicted at the beginning of the film are reproductions of Richter’s work from old photographs of his exhibitions.   We also learn that Richter’s  aunt did suffer from some form of mental illness and an open question for me was whether living under the Nazi regime triggered or worsened her condition.  The interview reinforced for me the feeling of authenticity of the film.

Never Look Away shows us the incredible soul crushing weight of both regimes--- the Nazis and the Communists that followed.  The authenticity of the film itself contrasted with the suppression of individual authenticity of artistic expression by the Nazis and the Stalinists. 

The film is at once a wonderful love story with the artist caught between the regimes and facing his love’s father, a holdover Nazi official, that wishes to disrupt and destroy his relationship with his daughter.  Sebastian Koch is masterful in his role as Carl Seeband, the smart, skilled and soulless Nazi physician.   It is a film which could easily have become maudlin and tedious but it never was.

There are so many striking scenes in this film—his aunt’s mental breakdown, the firebombing of the historical city of Dresden, the scene in which his art professor ignites the political posters of the candidates in democratic West Germany.  And yes, there are several sex scenes, but none of them gratuitous, all artfully shot and all well done with a purpose in the film to advance the story line.  The music score is beautiful and perfect for the rhythm of this film.  The title itself perfectly conveys the message of the film.   Never Look Away is one of the only movies I’ve seen over the past decade.  The screenplay, the acting, cinematography, and the music were all superb.  It was a film  in which all of the pieces fit into a gorgeous, authentic mosaic.

I recommend that you see them back to back.  In an era of godawful filmmaking, these are two works of art—one about an artist—that remind us of the destructiveness of war and totalitarianism.  In his Q&A, von Donnersmark said that the cast and crew felt “an incredible responsibility to our parents and grandparents, to do justice to their story, to the decades that they lived through.”

I believe that both of these films succeeded in that task in a major way.

So Many Swamps, So Little Time

Two major scandals have roiled higher education recently.  First there was the Larry Nassar scandal at Michigan State which ended the career of former president Lou Anna Simon, who was indicted for lying to federal authorities.   MSU athletic director Mark Hollis was forced out and the school reached a $500 million settlement with victims.  At one point, bankruptcy was one of the options considered by the school.  In a real twist of irony, a female president was at the helm of an institution that failed to protect young women from an egregious and ongoing pattern of sex abuse.

Now we are faced with yet another major scandal involving wealthy individuals paying bribes to get their children into elite colleges.   Well to do actors and actresses and even the co-managing partner of a major law firm have been swept up in the sting.  Elite schools such as Yale, Georgetown, Princeton and USC are involved in a maelstrom of privilege, collegiate athletics and bribery and fraud.  What is so shocking about the sting is how widespread it is and how many institutions were involved. 

The admissions scandal, along with the MSU scandal are symptomatic of poor governance and internal controls as well as structural problems in our higher education system, particularly in the area of intercollegiate athletics.  

The breadth of the scandal points to a widespread lack of internal controls.  No company or institution can insulate itself against fraud, but lax processes and controls do invite it.  One of the points in his book Why They Do It: Inside the Mind of the Why They Do It: Inside the Mind of the White Collar Criminal by Eugene Soltis, is that opportunity itself is one of the factors that contributes to wrongdoing. Leaving the door open to the opportunity (and worse, looking the other way in the MSU case) existed in both scandals.  Alan Dershowitz commented that the admissions scandal did not hit Harvard because Harvard has a committee of 6-7 people involved in the admissions process.  So Harvard apparently has some internal controls around this.  Caught in the scandal, Yale has started this process in reaction to the scandal and has announced that it is reviewing its entire admissions protocol and athletic recruitment process.   Put another way, tuition at Georgetown is $54,000/year, making each one of those slots an asset worth over $200,000.  You would never give sole control over assets of an organization valued at seven figures without rudimentary checks and balances like dual signing authority, auditing outcomes for athletes, etc.   Clearly there have been multiple breakdowns of internal controls.

In addition to laxity of internal controls, there are structural reasons for this to have occurred.  Many of the same elements that precipitated the housing crash are at play and have festered in higher education.  Raghuram Rajan, in his acclaimed book Fault Lines, wrote of the mortgage crisis that the crisis was largely a result of people making rational choices in a flawed system.   Overcapacity and easy credit availability, along with cultural shibboleths—a college degree as emblems of status and a ticket to wealth—have provided the tinder for this crisis.  Just as easy credit inflated home prices, it has bloated education costs (most of which was in exploding administrative costs).   This phenomenon was masked for some years since parents funded college education with their home equity loans.  When home equity financing began to dry up, schools just shifted the debt burden to the balance sheets of the students.  Student debt now totals $1.5 trillion ($37,000 per student, on average).  And just as in the housing crisis, where individuals that could not absorb equity risk became homeowners, millions of young people are attending college that don’t necessarily belong there.  The consequence is the same – a bubble with a debt overhang.   The education bubble has implications for home ownership, marriage rates, and household formation.

I hate making predictions but I will make two of them.  We will see yet another scandal of the magnitude of Michigan State or the college admissions scandal within the next 12-18 months.  And over the next decade higher education is going go through a restructuring as wrenching as the one retail is going through now.

Some schools have already begun to feel the pain.  Locally, Western Illinois University enrollment has shrunk from 11,700 in 2013 to about 6,700 today.  Valparaiso University Law School spiraled downward so quickly that it was forced to close and will do so in 2020.

WordCom and Enron gave us Sarbanes-Oxley.  The mortgage crisis gave us Dodd-Frank.  Because much of higher education is and should be out of the reach of regulators, reform will need to be generated by the schools themselves.  Here are a few ideas (some of which would need to be fleshed out):

•         Like the mortgage crisis, the universities should have skin in the game.  Just as lenders retain some of the risk of making mortgage loans now, schools should retain some of the risk of loan defaults.
•         Strengthen community colleges and HBCU’s (Trump took some initiative on the latter last year).
•         Take away tax deductions for noneducational assets·  
•      Since athletic departments seem to be a place where a lot of this shenanigans occurs, tracking athletes should become a requirement for federal dollars (just as Trump talked about cutting federal dollars for schools that do not support free speech).
•         Disconnect big time athletics from education (See, e.g. Indentured:  The Battle to End the Exploitation of College Athletes by Joe Nocura and Ben Strauss). Big time college athletics is a tax subsidized and labor cost controlled minor league for the NBA and the NFL.  Let’s call it what it is.
•        Perhaps consider suspension of 501(c)(3) status for egregious violations.
• ·        Legacy, athletic, affirmative action and other favored admissions criteria need to be examined, reduced or capped.
• ·        Consider tying federal funding to staying within certain parameters of administrative expenses.
• ·        Retool universities so that education is not front-loaded but a source of lifelong skills training (again community colleges and HBCU’s are uniquely positioned for that). 

The last point is most important.  It involves changing the model to match the changing demands of the economy. 

We are in the midst of some difficult adjustments with qualifications and provisos tacked on to long held shibboleths.  Home ownership is a good thing but it is not universal for those that should not take equity risk.  Free trade is good, unless a major trading partner isn’t trading fairly and stealing your intellectual property.  College education is a good thing, except when it is systemically corrupt and creates mismatches between needed skills and the labor market and leaves kids burdened with nondischargeable and unserviceable debt.

Think of the college admissions scandal as the Lehman Brothers of higher ed or the Challenger disaster of NASA.  It is indicative of systemic imbalances and flawed incentives coupled with poor governance and oversight.  There is an old aphorism that “Once is an accident.  Twice is a shame.  Three times is a message.”  We’ve now had two.

The CAIR Bears

My January 12 post The New Kids in Town (http://commonsense-mark.blogspot.com/2019/01/the-new-kids-in-town.html), had the most hits of any of my blog posts ever, which tells me I was on to something.  In that post, I argued that the New Left had dropped all pretenses and had ceased using euphemisms and sleight of hand to advance their positions.  They were bold and blatant, putting their embrace of such positions as “any time anywhere” abortions, an open border, hostility toward the 2^nd Amendment, Islamism and advocation for straight up socialism on the table.

It turns out that I underestimated the hard turn that the New Left was taking.

Over the last couple of decades, the Democratic party decided that one of its core constituencies was no longer useful to them—white working class America.  Over time, the Democratic party paid less and less attention to the white working class.   In 2016, the New Left went a step further and actually turned openly hostile to it.  Barack Obama derided them as “bitterly clinging” to their guns and religion and suggested they were racist.  Hillary labeled them as Deplorables during her campaign and that statement probably cost her the election.

But now, the New Left has turned on another loyal constituent group--- Jewish Americans.  Jews have been pretty loyal to the Democratic party.  Democrats can usually count on 80% of the Jewish vote year in and year out, and count on some big donors like Lloyd Blankfein.  But the New Left has taken a big step.

I saw the BDS movement growing.  I saw the failure of Democrats to reject anti-Semite Louis Farrakhan (Bill Clinton appeared on stage with him at Aretha Franklin’s funeral).   I saw posters on the bulletin board at a local college with blatant and shocking anti-Semitic messages on them.  And in November, Marc Lamont Hill was fired from CNN for using language suggesting that Israel should be eliminated. Airbnb was sued for discriminating against Israel in the disputed West Bank settlements.

All the warning signs were there.

Finally, a couple of months ago, I sent this email to a liberal Jewish friend of mine:

“You may not realize this yet but  they just aren't that into you anymore.   You are no longer in the club.  The New Left has a hot new girlfriend.  Her name is Rashida.  So you might as well pull up a bar stool next to us Deplorables.”

But nothing really prepared me for what happened last week.  

What has happened is nothing short of a hostile takeover of the Democratic Party by the Sisters of Cerebus—Rashida Tlaib, Alexandria Ocasio-Cortez and Ilhan Omar.  And they are backed by none other than Linda Sarsour.  Linda Sarsour has been boasting that she influenced the House measure to condemn hatred.  Of this, I have no doubt.  Sarsour to Tlaib and Omar is like William F. Buckley was to Reagan.   Sarsour now has two seats in Congress via proxy.

Omar had unleashed a number of anti-Semitic statements since she took office, with language that is unmistakably anti-Semitic, not simply anti-Israeli, accusing Jewish Americans of having dual loyalties.  It was stunning to see the Democrats twist themselves into pretzels to defend and rationalize her.  James Clayburn said Omar’s experience was more painful than the descendants of Holocaust victims.   Nancy Pelosi claimed that she “did not believe she understood the full weight of her words.”  Rep. Jan Schakowsky wrote off Omar’s tropes because “she is from a different culture.”  The same crowd that hears dog whistles at every turn can’t seem to hear the foghorn blast of anti-Semitism.

Of course, Omar and her sidekick, Tlaib blamed the dust-up on a desire to squelch debate on policy toward Israel and the reflexive defense of Islamophobia. 

And in the end, Democrats could not bring themselves to condemn Omar, and instead opted for an all-inclusive condemnation of hate of several different kinds, including Islamophobia.

Just like that, Omar managed to turn a call for her removal from the House Foreign Affairs Committee to a watered down resolution against all forms of hate.  Democrats turned Omar from perpetrator to a member of the victim class.   We can now expect to see the two CAIR Bears- Omar and Tlaib to raise the Islamophobic defense frequently to blunt criticism.

To defeat that defense, we need to distinguish between an Islamic and Islamism.

Writer Martin Amis put it very succinctly in his recent collection of essays, The Rub of Time,  in response to the question: Are you an Islamophobe?

“No, of course not.  What I am is an Islamismophobe.  Or better say an anti-Islamist, because a “phobia” is an irrational fear, and there is nothing irrational about fearing people who say they want to kill you….Anti-Islamism is not like anti-Semitism.  There is an empirical reason for it.”

Omar and Tlaib must be judged based on statements and actions that will determine whether they are Islamic or Islamist.  And that distinction is critical.

Based on their statements, their associations (Linda Sarsour), and the individuals that sing their praises (Hamas-linked CAIR, David Duke and Louis Farrakhan), the evidence is pointing to the latter.

If you were revulsed by the white supremacists in Charlottesville , wait until you get a load of the Islamist supremacists in the halls of Congress.

Winter of Our Discontent

As winter drags on and refuses to loosen its grip, it gets a little harder to remain optimistic.  As February closed out, we were faced with a barrage of disappointing (but not unexpected) news last week.  Spring may be just around the corner, but as a second polar vortex descends on us,  green shoots seem farther away, both metaphorically and otherwise.

North Korea Summit

President Trump’s summit with North Korean leader Kim Jung Un ended as predicted---early and with no progress.  While Trump’s approach of engagement and treating the North Korean dictator with respect and even lavishing sickening praise on Dear Leader (“We fell in love.”), Kim Jung Un has not varied one inch from his position that he will only commence denuclearization 

simultaneously with a drawdown in sanctions.  We have played this game over and over for 25 years and we remain stuck in the same place.  Trump wisely folded his briefcase and went home.   So far, we have achieved a temporary cessation of testing and missile launches.  But Kim has achieved recognition and a cessation of military exercises on the Korean peninsula.  Worse, Trump indicated that he took Kim Jung Un “at his word” when Kim Jung Un claimed he did not know about the abuse and torture of Otto Wambier.

Vatican summit on clergy sex abuse

Like the summit between Trump and Kim Jung Un, the Vatican summit on clergy sex abuse resulted in no real progress.  I had hoped for specific and bold measures to combat the crisis in the Catholic Church, especially after the defrocking of Cardinal McCarrick and the conviction of Cardinal Pell.  Crises often give organizations latitude to make changes that they would not otherwise make, but this Pope squelched the U.S. bishops from developing their own plan, and instead convened his own summit.  Unsurprisingly, no new concrete measures came out of it.   Pope Francis is more concerned with climate change and immigration than fixing his own sick organization.

Michael Cohen hearings

And this week we were treated to the Michael Cohen hearings.  As with the summit with North Korea and the Vatican, nothing happened except that Cohen affirmed for us what we suspected all along—that he looks something that looks like you cleaned out of your drain trap.  Just listening to him makes you want to take a shower with disinfectant soap.  Cohen’s opening statement was clearly written by Lanny Davis, longtime Clinton consigliere and opened by asserting that Trump was “a bigot, a con man and a cheat.”  Cohen tried to position himself as the victim of Trump’s misdeeds, and while he made headlines, Cohen brought out no new revelations and probably persuaded no one to change their views—of him or Trump.

Transgender Athletes

The LGBT community continued to throw its weight around as transgender athletes won the girls state indoor championships in the sprint events in New Jersey and the Olympic Committee announced that transgender athletes that have not completed sex reassignment surgery may compete in the Olympics. Women’s sports are now in grave danger, and will likely be set back to pre-Title IX levels unless this absurdity stops.  The phrase “tyranny of the majority” is often used in politics, but here we have the tyranny of the minority.  A tiny fraction of the population is going to ruin things for all girls and women athletes.

Twitter Outrage

It wouldn’t be a week without yet another outrage from Facebook or Twitter.  This week, Twitter sent conservative pundit Michelle Malkin a letter saying that she needed to obtain counsel because her transmission of Muhammed cartoons violated Pakistani blasphemy laws which are punishable by imprisonment or death and the Pakistanis were complaining about it.  This set off the predictable response from the self-described “angry brown woman.”  I tweeted out, “Well there goes spring break in beautiful Islamabad for the Malkin family.”  I don’t think the Pakistanis know quite who they are tangling with.

Bibi

Benjamin Netanyahu, the leader of our closest ally in the Middle East has been indicted on corruption charges.  While Bibi has not yet been convicted, it certainly is not helpful for us to have one of our staunches allies under pressure.

Those were not the only setbacks this week, but just the top half dozen.  Before you come to the conclusion that Western Civilization is lost completely, there were a couple of things that gave me a faint glimmer of hope.

First, The Washington Post in an Editor’s Note began to walk back its account of the confrontation between Nathan Phillips and the Covington boys.  The sting of a $250 million lawsuit has evidently gotten its attention and there is some hope that the MSM will be forced to report a little more responsibly in the future.

Second, Donald Trump at CPAC announced that he will be signing an executive order requiring colleges and universities to support free speech and  that cuts of federal funding for colleges and universities that do not.   The University of Chicago has set the standard in that regard and several schools have adopted the “Chicago Principles” which establishes wide latitude for free speech.   Trump makes us all crazy sometimes but sometimes he hits the ball squarely.  The issue of free speech on campus (and otherwise)  is vital to the existence of the West.  It has eroded on campus and in Europe.  It is encouraging to see Donald Trump take a huge step in the right direction on this issue.

Last week was a tough week, but all hope is not lost.

Venezuela of the Midwest

I listened carefully to J.B. Pritzker’s inaugural address and budget proposal last week, and it made my stomach lurch.

Last fall I heard University of Chicago economist Austan Goolsbee speak at a small luncheon.  His prepared remarks concerned the national economy, and I asked him in the Q &A, “By taking the House, it looks like we are back to gridlock in Washington, but now that Pritzker won, and has a supermajority, there won’t be gridlock in Illinois.  What does that mean for the state?”

Austan Goolsbee answered, “I said that the United States is not Greece.  But Illinois could be.”

When Bruce Rauner came into office, he proposed a series of reforms, each of which was summarily rejected by Speaker Mike Madigan, who runs the state with an iron fist.  Madigan’s Democratically controlled house overrode a Rauner veto, and Madigan was able to jam through a 32% income tax increase.

And yet it is not enough.

I heard Pritzker’s speech and rhetorically it might as well have been Bernie Sanders.  Laced with the usual “the rich have to pay more of their fair share,” and “fairness” Pritzker’s budget is laden with tax and spending increases, and Pritzker is itching to get a progressive tax implemented (which he will have to get a Constitutional amendment to do).

Ironically it is the Constitutionally mandated provision that forbids changing pension obligations that is the problem.   So sacred is that provision that when Quinn tried to alter the pension because it mandated 3% pay increases when inflation was 1% (which amounts to a direct wealth transfer to retirees).  With pension costs chewing up 25% of the budget, the only way to address the sad state of Illinois finances is to address the pension costs, as they are squeezing out other state services.   Worse, Illinois is losing population—and its most productive members.  Illinois had a 113,000 decrease in population and the net average income differential between those coming and going is $20,000 per year.  I personally know 5 people that have left Illinois whose decisions in part were based on the state’s financial condition and where it is headed.  New York governor Andrew Cuomo last week complained that tax rates have driven high earners out of New York and he now has a $1.3 billion shortfall as a result.  Amazon nixed plans to move to New York because of its hostile environment for business.

One of the benefits of living in a republic is that you can see what other states do to determine what works and what doesn’t.

Illinois appears to have learned nothing from New York’s experience.

Desperate for cash, Pritzker vows a headlong rush at a progressive tax system, legalizing cannabis and sports betting and slapping taxes on those activities.  Since Chicago has a long legacy with prostitution (See Sin in the Second City), I’m surprised that legalized and taxed prostitution wasn’t served up as an alternative.  Perhaps that’s next.  We will have to gamble, smoke and screw our way out of this fiscal mess.

Let’s face facts, Illinois is in a turnaround mode.  Illinois debt is near junk status.  It has a backlog of bills of $15  billion, accruing interest at 12%.   It has a structural deficit of $3 billion.  One legal definition of insolvency is not being able to pay your debts as they come due, and Illinois is there.  The state is meeting its obligations by borrowing—like borrowing under one credit card to pay off another.  In short, it’s a mess and we are in a financial recovery and have been for a decade. 

Much of my professional work has been working with struggling companies or companies in crisis.  I am a 25 year member of the Turnaround Management Association, a trade organization dedicated to revitalizing financially ailing entities.   At a roundtable of business executives a couple of years ago, I asked a simple question, “If your son or daughter had transferable skills, and you wanted him or her to have a happy and prosperous life with a bright future, would you advise them to settle in Illinois?”  The room responded with guffaws and mumbling. 

Pritzker’s speech violated basic precepts of any successful turnaround.  First, there must be structural and radical changes to your day to day operations.  Pritzker proposed none of it.  Nowhere did he address cuts, efficiencies, or cost reductions.  Not one word of it.  Second, all constituencies must take some pain.   Madigan and Pritzker propose once again that the Madigan patronage army and the retirees take no pain at all.  Instead, the pain will all be absorbed by the already overburdened Illinois taxpayers, many of whom are fleeing to other states as soon as it is practicable to do so.

There was nothing in his speech about attracting businesses, relieving the pressures on businesses to operate in Illinois, or any words about making Illinois a vibrant, robust place to do business.  Nothing.  Not a word.

The speech was not lost on the rating agencies, Fitch and Moody’s, both of which indicated that they were not impressed by Pritzker and stood ready to downgrade Illinois debt and turn their outlook to negative.   Without a fix to the pension problem, Illinois’s fiscal situation doesn’t get better.  You don’t fix a problem unless the problem gets fixed.

Illinois should be a wonderful place.   It has a diverse economy and an educated workforce.   It is centrally located and is accessible by air, rail and via the Great Lakes.  Chicago is a magnificent world class city, with two great universities, a cultural scene that can rival any other city in the world, and ethnically diverse neighborhoods.  We should be firing on all cylinders.

But we are not.  We are circling the drain and in great danger of becoming the next Baltimore.

I have deep roots in Chicago.  A branch of my family was here before the Chicago Fire.  I grew up in one of the ethnic enclaves of Chicago, and even wrote my college admissions essay on The Jungle by Upton Sinclair.  I’ve never lived anywhere else. But I am not questioning how long I can stay.  Several friends have already abandoned the state for less punitive states, and many others are actively making plans to leave. 

When will they learn?