This is the top story from our daily newsletter published on August 13, 2020. To have this and more delivered directly to your inbox scroll down and enter your email or click here to sign up. Cover: Chicago, Illinois.
Businesses Being Blown Away From Windy City: Following a police shooting on Chicago’s South Side Sunday night, hundreds of people streamed into downtown Chicago early Monday “smashing the windows of dozens of businesses and making off with merchandise, cash machines and anything else they could carry,” according to the Associated Press. “Police Superintendent David Brown told reporters that the Sunday afternoon shooting of the man who had opened fire on officers apparently prompted a social media post that urged people to form a car caravan and converge on the business and shopping district.” Here is what both sides are saying about the Sunday shooting and subsequent looting.
On the Left: A press release from Black Lives Matter Chicago states that on “August 9, 2020, Chicago police shot another Black person in Englewood. Chicago police allege that they stopped someone who they suspected of possessing a gun. Next, the young person ran away, rightfully fearing for his safety in this dangerous interaction with racist armed police. The cops then pursued him on foot, going directly against the DOJ recommendation to eliminate foot chases. The chase culminated in CPD shooting that young person, creating violence out of a situation where no one was in danger. CPD claims the victim shot first and that they found a gun on the scene. These details are uncorroborated, partially because CPD also claims there is no body camera footage available for this interaction. This is a clear violation of state law and CPD policy and another example of police showing a lack of transparency.” According to NBC 5 Chicago, “Members of Black Lives Matter held a solidarity rally on Monday night with the more than 100 individuals who were arrested after the night of looting and unrest in Chicago. “I don’t care if someone decides to loot a Gucci or a Macy’s or a Nike store, because that makes sure that person eats,” Ariel Atkins, a BLM organizer, said. “That makes sure that person has clothes. That is reparations,” Atkins said. “Anything they wanted to take, they can take it because these businesses have insurance.”
On the Right: The Wall Street Journal Editorial Board says “the narrative of peaceful protesters set upon by bloodthirsty law enforcement officers in [cities like] Portland [and Chicago] is becoming unsustainable even for progressives.” In Portland, “Mayor Ted Wheeler, who ostentatiously denounced the Trump Administration’s efforts to protect the federal courthouse, had a rendezvous with reality after people tried to set ablaze a police precinct on Wednesday night. ‘When you commit arson with an accelerant in an attempt to burn down a building that is occupied by people that you have intentionally trapped inside,’ he said, ‘you are not demonstrating. You are attempting to commit murder.'” In Chicago, “Mayor Lori Lightfoot agreed that the melee had nothing to do with a protest. ‘This was straight-up felony criminal conduct,’ she said. ‘This was an assault on our city.’” The WSJ Ed-Board says, “All of this raises the question of how long the mainstream press and Democratic politicians can publicly maintain the fiction that violence surrounding ‘mostly peaceful’ protests is a nuisance of little consequence and that the real villains are the police.” To that end, Joseph A. Wulfsohn of Fox News wrote Tuesday that “MSNBC skipped coverage of the Chicago riots during prime time, and CNN aired less than 3 minutes.” The WSJ Ed-Board concludes that “The longer this willful distortion continues, the longer the economic immiseration of places like Chicago will persist even after the pandemic ends.”
Flag This: Regardless of which side you agree with above, here is why the latest unrest is an issue for the Windy City. Three years ago, in 2017, S&P Global Ratings and Moody’s gave Illinois the lowest bond rating on record for a state. Investors use credit ratings as a way to assess the riskiness of a particular city, state, or country’s bonds. The lower the rating, the higher the interest rate on any debt that is issued. At the time, Robert Wimmel, head of municipal fixed income for BMO Global Asset Management said, “I wouldn’t advise an individual to purchase [Illinois] bonds.” At the end of last year, Lord Abbett, an investment management company, echoed that sentiment in a research note. More specifically, Eric M. Friedland, CFA, Director of Municipal Bond Research said, “The city of Chicago and the state of Illinois may have alleviated some near term risk with their proposed budgets, but will need to identify new sources of revenue in the long-run.” Friedland says that, “while the City and the State are known for having outsized unfunded pensions, they’re also recognized for their large and diverse tax bases, and are home to the headquarters of numerous Fortune 500 companies.” Said another way, despite Illinois’ horrific balance sheet, they’ve been able to fall-back on a large tax base of name-brand companies that call Chicago home. This includes tech-giants like Apple, retail icons like Old Navy, and pharmacy chains like CVS. The problem, however, is that all three of these companies had their windows smashed and stores looted. Best Buy and Yves Saint Laurent’s Gold Coast shop was also collateral damage as were small mom-and-pop shops like the one owned by Yogi Dalal, who had his liquor store vandalized. What this means is that, as a business owner you now have second thoughts about investing in a place like Chicago. If you’re Tim Cook, the CEO of Apple, or Yogi Dalal the owner of a local liquor store, this is scarring and causes hesitation. Hesitation leads to less investment. Less investment leads to less jobs. Less jobs leads to less taxes. Less of a “diversified tax base”, as Mr. Friedland mentions above, leads to more assumed risk from rating agencies like S&P and Moody’s. More risk means higher interest rates, which makes it harder to borrow to fund obligations like pension funds, and the whole thing creates a self-fulfilling downward spiral. If the unrest in Chicago is unrelenting, current and future businesses may simply be blown away. This would not be good for the Windy City.