1/ This is a thread about the deteriorating state of affairs in #Illinois and, specifically, #Chicago. But it’s probably applicable to other cities and states that in recent years have experienced rising #crime and slowing #economic growth.
2/ I'm writing this because there comes a time when everyone reaches some personal boiling point on some issue and I've hit it. I'm not going to stand back, silently while my family's safety and economic outlook is increasingly at risk.
3/ My thoughts aren’t 100% formulated yet, but I want to start building out my thinking on some urgent issues and hopefully create an intelligent discussion space. As time goes on, I will likely have more to say and bring more data and actionable ideas to the table.
4/ Before diving in, let me make clear that I’m intensely non-partisan. I have what some might today call a libertarian / center-right bent, but I’m not party-driven in my views. I just want to see society function well and that requires skilled leadership and sensible policies.
5/ I appreciate everyone who wants to make the professional and personal sacrifices to get involved in public service. Please note that any criticism I have is in no way, shape or form personal, but rather based on a good-faith disagreements over policies and priorities.
6/ So #Illinois and #Chicago. The state and city are in quite the pickle. To start, we have out of control, unfunded pension liabilities.
7/ We have the worst credit rating amongst all 50 states (to my non-finance friends, the color red and letter Bs are bad).
8/ Stagnant to shrinking population growth.
9/ Sluggish economic growth (using 2018-19 GDP growth rates prior to the onset of Covid).
10/ A high tax burden.
11/ And rising crime.
12/ It’s not the best combination of factors and the trends are getting worse. Most frustrating, it doesn’t need to be this way. The future of the state and our city is at stake, and I think it’s time for pragmatic and thoughtful people to speak up before it’s truly too late.
13/ Let’s start with the economics side of the picture, because I think an improving economic outlook is key to the solutions.
14/ Illinois is a state. It doesn’t have a reserve bank like the Fed to finance our deficits. To all the new-age progressive economists out there, you can’t do MMT at the state level. Nor can we depend on more federal bailouts.
15/ This all means taxpayers are ultimately on the hook for our liabilities. And boy, do we have a lot of them…
16/ This is bad because money spent on unfunded pension contributions and debt servicing could otherwise be used for education, infrastructure, community services, etc. You can see the elevated levels of pension and debt servicing expenses in state and city budgets below.
17/ So the options are (A) borrow your way out of this mess, which really just pushes the can down the road. But we have such bad credit ratings at the state and municipal levels that borrowing carries a high price.
18/ Though yields have come down somewhat thanks to federal assistance, last May Illinois borrowed $800m at the state level at 5.85% (which at the time was close to a 5% spread to U.S. 10-year Treasuries).

19/ Chicago has benefitted from a rally in municipal bonds, but we still have a higher cost of borrowing relative to more fiscally disciplined cities.
20/ (B) We can theoretically tax our way out of this hole, but raise taxes anymore and we will see businesses and people begin to take their talents to South Beach (literally, but by this I mostly mean lower tax burden locations).

21/ (C) We can grow our way out. This is by far the best possibility. Attract new residents, businesses, jobs, tourists, etc and create more revenue as a result of the additional economic activity in the state.
22/ (D) We can also default and go through bankruptcy, but that's an extremely remote possibility (and the IL Supreme Court has ruled pensions are protected under the state constitution). Also, a default means we’d have a hard time ever borrowing again.

23/ C is really the only viable choice. But it's also maybe the hardest to imagine at the moment given how disastrous the current state of affairs seems.
24/ In short, you can’t grow your way out of an economic mess if the average person and business feels increasingly under threat and fewer and fewer from out of state would think to set up shop here, let alone visit.
25/ As an aside - not worth getting into now - businesses also need to feel like the political leadership appreciates their role in contributing to a prosperous society. Anti-capitalist, anti-business sentiment isn't helpful.
26/ To all my liberal, progressive and even democratic socialist friends: money doesn’t grow on trees (at least at the state level). It grows on the productive output and taxable assets and income of in-state businesses, workers, consumers and property owners.
27/ Unless the city and state intend to build an impenetrable wall around our borders, you can’t just tax people to oblivion. People and businesses can leave. Leaving a state is not like giving up US citizenship. You move and mostly get on with life just as before.
28/ There should be and are compelling reasons to live here. We have world class universities, relatively affordable costs of living compared to coastal cities, no natural hazards (like fires, earthquakes or flooding), a rich cultural scene and still large base of good employers.
29/ But very few are moving in at the moment – especially in this Zoom-centric, post-pandemic age, where if you have valuable service-sector skills, you can really work from anywhere.
30/ To diagnose and treat our problems, I think we need to understand some first principles. Let’s start with a little political history and theory.
31/ I won’t bore anyone with historical and philosophical citations (though I suggest brushing up on #Hobbes and #Locke), but governments don’t just arise out of thin air.
32/ As a history professor of mine in college said: the first rule of history is people need to eat. People need basics: like food, water, shelter, energy and security.
33/ The history of government (and for what it’s worth, conflict) is largely a history of people giving up individual sovereignty in exchange for securing these basic needs (and yes, I'm aware of all the egregious exceptions where people were conquered rather than acquiesced).
34/ No matter how a government came into being, its legitimacy – regardless of the form - is conditioned on securing the basic needs of its subjects. Fail for long enough, or fail severely enough, and you lose the seat of power.
35/ Relevant to #Chicago in particular, you can’t have a vibrant and prosperous society when the city or state is under the constant threat of violence, which has forestalled the chance of a durable economic rebound.

36/ So it’s strange to me that we are experimenting with policies that seemingly will make this situation worse.
37/ I don’t doubt that public officials like @SAKimFoxx, @ToniPreckwinkle, or Judge Evans at @CookCntyCourt have their hearts in the right place. I do have questions about their policy choices though.
38/ State's attorney Foxx has pushed for dropping an increasing number of felony charges, which may be leading to a jump in repeat offenders. I certainly see many anecdotes suggesting this.

39/ I also learned of a new theory recently from the office of SA Foxx regarding "mutual combatants." I don't remember the part of my criminal law course where you can't pursue prosecutions because two sides were shooting at each other in mutual combat.

40/ The Cook County Board President, Toni Preckwinkle, supports defunding the police.

41/ And the Chief Judge of the Circuit Court of Cook County, Timothy Evans, supports more lenient bail rules even for those accused of violent offenses.

42/ Even our Mayor, Lori Lightfoot @LoriLightfoot – who I think is operating under exceedingly difficult conditions – has probably made some errors.
43/ For one, why not send in the national guard to help with crime? A lot of people would feel safer. Is it optics? If so, I assure you that the optics of a child getting injured in a carjacking (as almost happened yesterday to neighbors) is worse.

44/ I think people should get vaccinated for their own safety and that of the community, but if I’m getting robbed or my house is on fire – I really don’t care if the police or firemen have taken the Covid vaccine.

45/ All these lax criminal justice policies are rooted in some degree I think in the painful experiences that many of our city’s most disadvantaged communities have had with law enforcement.
46/ I can’t speak to those experiences, nor will I even attempt to. I think its important to listen to those who can speak to these issues first hand and learn.
47/ But here’s also a harsh reality for those who support progressive criminal justice policies: the lives of socioeconomically disadvantaged people are not going to sustainably improve without economic opportunity.
48/ And no economic opportunity is coming when the city is descending into chaos. So perhaps police reform is a lot better idea than police defunding
49/ Unfortunately, the lax crime policies in Chicago may ultimately cause more pain for economically disadvantaged communities. These communities – like the rest of the city – need a safe environment for businesses to feel good about investing and creating opportunities.
50/ Now my experience with law enforcement might be 180 degrees different than others (I truly appreciate that), but my impression is these are mostly hard-working men and women trying to make a positive difference in the community.
51/ They are operating under extreme stress, with an increasingly thankless populace and antagonistic politicians, all while being underpaid relative to the risks they assume. And you wonder why we can’t attract better people to the police force…

52/ Look, I'm not really politically aligned or active, so I’m not sure how much my advice is worth to all the left-leaning politicians and their supporters out there.
53/ I’m just an investor (with an appreciation for history and philosophy), but I’m pretty good about spotting the second and third order effect of things.
54/ To #Chicago and #Illinois’ current #progressive leadership, I’d say that you are winning the short-term battles with respect to criminal justice reform at the expense of losing the long-term war.
55/ If these policies result in chaos for the city and state, you run the risk of getting voted out and the pendulum will likely swing far to the other side.
56/ Whatever progressive priorities you may have (criminal justice or otherwise) are entirely at risk of achievement if you lose popular support because of our crime and economic issues are getting out of hand.
57/ Most people aren’t hyper-partisan and vote on dinner table issues. Is my life better or worse? For a lot of people in the city and state, it’s far worse than a few years ago.
58/ These issues have reached a boiling point for me because my family’s safety is now in danger. I don’t mean at all to detract from others who live in far rougher neighborhoods, but I am definitely not used to daily crime at the barrel of a gun.
59/ Just in the last 18 months I have been present or right by the following: a crew armed with AK-47s slammed into a police vehicle on my street corner, injuring an officer, which led to an armed chase down my alley.
60/ A woman was carjacked by an armed thief in broad daylight directly outside my son’s daycare, just moments before I picked him up and while other parents were getting their children.
61/ A young woman was carjacked by an armed criminal – again in broad daylight around 9:30 am - right by the route of my son’s Halloween school parade.
62/ A close-by family just yesterday – again in daylight on a quiet Sunday morning – was carjacked by a gunman with their toddler still in the backseat. The parents bravely got their child out despite having a gun to their heads demanding the vehicle.

63/ For those unfamiliar with Chicago, I live on the North Side in a quiet neighborhood of mostly working professionals and families with kids (and dogs). Crime never felt like an issue here until the current slate of politicians came into power and it accelerated post-Covid.
64/ I know a lot of my friends on the left and political leaders would say that we need to consider the circumstances of the criminals when determining punishment, and we have to try empathizing with the plight of anyone who was drawn into crime. I guess my question is why?
65/ Being a parent has made me more empathetic than I've ever been. To love a child is to understand that at one point we were all children. Every life is precious.
66/ But along this line of reasoning, there has to be some clear moral order for society to function or we will all descend into chaos. If every life is valuable, we have to as a society place a high value on everyone's safety.
67/ Those that don’t value life – to the point they threaten the lives of others with guns – are not functional members of society. If we excuse their behavior, we will undermine the humanity for the rest of us who can appreciate it.
68/ I get that many suffer from troubled upbringings and desperate circumstances. But why should that in any way serve as an excuse for pulling a gun on someone? In focusing on the humanity of criminals, we are dehumanizing their innocent victims.
69/ The drastic uptick in crime in my neighborhood and across the city is nothing short of domestic terrorism. People are nervous to walk outside, drive to the grocery store, take their kids to school without running the risk of being robbed or shot in a random act of violence.
70/ Our response to terrorism has historically not been to let the terrorists off easy because they may come from a tough background.
71/ Functional society can’t exist when decent, moral people who are law-abiding citizens feel under threat all the time. There is no prosperity without security and no security without much stronger criminal behavior deterrence.
72/ If we continue to let these crimes go unpunished or undeterred, more will surely come. And they have been.
73/ This will drive people and businesses to leave the area, causing the state and city's economic problems to spiral further downward.
74/ The solutions here aren’t rocket science. Hold accountable those who commit violent crimes and don’t let them back out on the streets so easily. Doing the opposite will imperil our economic recovery and just create more hardship for communities already suffering.
75/ People whose lives have meaning typically stay away from crime. In history, it's usually just the economically disassociated and desperate who become rebels. Those who are content in life or see hope for a better future tend to not want to mess that up.
76/ So this may seem counterintuitive for those on the far left end of the political spectrum, but by being hard on crime, we can create better conditions for economic growth, which will in turn create more opportunities for those most in need.
77/ As a caring and concerned resident of #Chicago and citizen of #Illinois, let’s grow our way out of this mess together, civilly and prosperously.
78/ Let’s give businesses a reason to invest here again. Families a reason to move here. College students a reason to stay. Entrepreneurs a reason to take risks. Tourists a reason to visit. And most importantly, everyone a reason to have optimism about their futures.
79/ Bob Dylan sang “when you ain't got nothin, you got nothin to lose.” So most importantly, we have to make sure everyone in our community has something to live for. Let’s rebuild the kind of safe environment where we can again create conditions for all to have opportunities.
80/ We can solve these issues for our great state and city, but we have to start getting smarter about policy choices today. We don't have the time or the livelihoods to waste.
I want to moderate #64 in my thread. It came off as too harsh and that wasn’t intention. Of course we need to care about circumstances that lead to criminality and try to rehabilitate people. But my primary concern right now is with innocent victims well-being and safety.
81/ A more formal and very slightly refined examination of the issues of rising #crime and the sluggish #economy in #Chicago and #Illinois. Please share if you are concerned and agree. Thank you everyone for your positive feedback so far.

With respect to #43, please note that only the Governor can send in the national guard, but the Mayor has not been supportive of that this fall.

Just to clarify for #22, only cities can declare bankruptcy (and under IL law they need legislative approval).

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More from @StuLoren

19 Oct
1/ This is a thread on concerns I have with #ESG investing and the role of #markets in a functional, #capitalist #democracy. Warning: it’s long and nothing in here is necessarily original on its own, but I wanted to tie together some thoughts.
2/ At the outset, I want to make clear that the following is my analysis, not my firm’s. If ESG factors matter to you, by all means invest accordingly. I also care about environmental, social and governance issues. My guess is almost everyone does to varying degrees.
3/ Additionally, over the last 5+ years I have invested in firms benefitting from cost declines in renewable power, advised clients to do so and at one point was trying to raise an energy transition fund.
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2/ For decades, the U.S. was reliant on energy supplies from the Middle East, which dictated our foreign policy decisions in the region. The #shale revolution provided a brief, decade-long reprieve from the mercy of #OPEC.
3/ But rather than use our energy abundance as a geopolitical and national/economic security tool, we are ceding power back to those whose national interests are not aligned with those of the U.S.
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1/ This is a thread on my rationale underlying the #investment opportunity in #defense firms. A compelling #value opportunity in an otherwise mostly expensive market. Touches on the realities of human nature and the growing risk of global conflict.
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3/ Governments serve many key functions and can take many forms - I'm partial to liberal (lowercase L) democracies - but historically all share a common purpose and source of legitimacy: to keep their citizenry safe. There can be no prosperity without security.
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