- Policy Study (pdf)
Chicago Metropolis 2020, produced in 1999 by the Commercial Club, attempts to tell us who should do what to make the metropolitan area a more nearly ideal place. It is concerned with the six counties– Cook, DuPage, Kane, Lake, McHenry, and Will–that contain nearly all of the population and jobs in the official nine-county primary metropolitan statistical area. This critique subjects some of the report’s important hypotheses to economic analysis.
1. Education: Correct diagnosis, weak prescription
Chicago Metropolis 2020 frankly acknowledges that U.S. public schools in general, and Chicago’s inner-city public schools in particular, are poor and produce poorly qualified students and graduates. It recognizes that state and local public education authorities seek excessive bureaucratic control and overemphasize inputs (in particular, money) to the neglect of learning quality. It shows understanding that charter schools, discussed only briefly, are at least a first step toward circumventing some of the bureaucratic controls that hold back public schools.
Although the Commercial Club is undoubtedly genuine in its wish for less government control over schools, its recommendations would probably increase such controls. It advocates a state cabinet-level education department, encompassing the Illinois State Board of Education. It apparently would like the new department to oversee standard-setting as well as efforts to increase the supply of principals and teachers and improve school quality in general. But why should we believe this would work? Local education monopolies are bad enough; strengthening state control is likely to make things worse.
The Commercial Club’s report contains some sound analysis of the problems facing public schools and the need to improve them, especially for the sake of disadvantaged children. The endorsements of competition and school choice in Chicago Metropolis 2020 are right, but much too timid.
2. “Smart growth” myths lead to anti-car and pro-public transit biases
A basic defect of Chicago Metropolis 2020 is its unjustified bias against automobile travel and in favor of fixed rail public transit use in Chicago. Competent transportation economists have known for 35 years that investment in urban fixed rail transportation systems is wasteful, yet the Commercial Club, along with other advocates of “smart growth,” continue to be enamored with it.
The Commercial Club claims car ownership and use contribute to excessive suburbanization (“sprawl”), and hence to excess commuting and congestion. The argument is wrong in both its parts. Suburbanization per se does not lead to longer commutes or congestion: With two-thirds of both residents and jobs now located in Chicago’s suburbs, it should be possible for workers to reside close to jobs in both the central city and suburbs. Land use regulations in the suburbs that mandate excessively low-density housing and commercial development, not private ownership of cars and trucks, cause sprawl.
Underpricing of metropolitan transportation of all kinds, not sprawl, is also a major cause of excessively long commutes and congestion. Commuters pay only a small fraction of operating and capital costs to travel by fixed rail from distant suburbs to central business districts. Bus and car travel is also underpriced, though to a lesser extent. By urging greater investment in public transit, the Commercial Club would unintentionally increase the tendency toward sprawl.
3. Getting the prices right: A better way to limit sprawl
Use of roads and urban public transit are both underpriced. On urban roads, the appropriate user fee is what would be charged if road travel were provided by a competitive private sector. The government can approximate the private outcome by imposing fuel taxes. The appropriate fuel tax would be about five times its present level, say $2.50 per gallon, bringing the total fuel cost close to $4.00.
Such a large fuel tax increase would need to be federal, to avoid large distortions among state or local taxing jurisdictions. Americans would not, and should not, tolerate a net tax increase of the magnitude implied by my proposed fuel tax, so they should be promised a corresponding reduction in other taxes, probably federal income taxes. Unfortunately, Americans are properly cynical of such “tax swaps” because federal, state, and local governments have so often lied to the public about taxes.
Much higher fuel taxes would result in pervasive decreases in driving, as did high fuel prices during the gasoline crises of 1974 and 1980. People would omit some frivolous trips and carpool more, and at least a few would take public transportation. Over time, people would move to homes closer to where they work, or find work closer to where they want to live. Commuting miles could easily fall by 20-30 percent.
Building and improving roads would be a continual need, but this could be done at relatively low cost. The capacity of city streets could be increased by one-third or so by the expenditure of a few tens of millions of dollars on more one-way and reverse-direction streets and lanes, sequenced traffic lights, and off-street parking; discouraging on-street parking; and better enforcement of traffic controls.
4. Land use restrictions: The real cause of sprawl
Chicago Metropolis 2020 repeats the “smart growth” cliches about lost farmland and “open space,” yet it fails to call for effective measures to rein in the real cause of sprawl: excessive restrictions on land use imposed by municipal authorities and increasingly by state and federal agencies.
During the last half century, local governments have developed a panoply of controls that enable them to dictate characteristics of housing development, maintenance, repair, and remodeling in the greatest detail. Such controls are applied less stringently in Chicago suburbs than in many other metropolitan areas, but they become more stringent every decade. Whatever justification is given for such land use controls, the result is to limit housing supply, raise housing prices, and push residential and commercial development farther and farther from the city core.
Resource misallocation occurs because governments simply forbid development by private owners on their land. Federal wetlands and endangered species acts, federal and state waterfront development controls, and many other programs curtail development on private land. Such government programs simply confiscate private property rights and impose the costs of open space preservation on private owners. The result is to motivate governments to preserve excessive amounts of open space.
5. “Thou shalt impose no restrictions on housing . . .”
The Commercial Club recommends new or expanded government programs to enable more minorities and low-income families to obtain suburban housing. This is hardly a novel suggestion: Since 1937, dozens of variants of many government housing programs have been implemented. Almost none of the voluminous benefit-cost analyses that economists have undertaken of such programs has found any whose benefits exceed their costs.
I am shocked that the Commercial Club advocates expanding government housing and land use control programs, which have done so much harm for so many decades. They should have asked how we can get governments out of housing, not how we can get them in more deeply. The U.S. has the world’s most efficient housing development, construction, and finance systems. All that is needed is to let markets work.
The easiest remedy would be a one-sentence state law: “Thou shalt impose no restrictions on housing except those needed to protect the health and safety of its residents.” Housing would then be built at greater densities in suburbs, especially near suburban employment centers, highway interchanges, and public transit stops. Suburban expansion would be slowed at least somewhat. And developers would be permitted to build dwellings, such as manufactured housing, affordable to low-income residents.
Of course, my proposed one-sentence state law is much too radical to be adopted, and I would not expect the Commercial Club to advocate it. But readers have been sold short by the Commercial Club’s naive advocacy of more government regulations to undo the effects of excessive government intervention.
6. The Regional Coordinating Committee: More waste and bureaucracy
The Chicago metropolitan area has so many local government units that all but a few elected officials are effectively autonomous. The report does no more than mention the problem and propose to establish a task force to study it. The report’s real concern is “coordinating” local government activities, which it proposes be done by a new government agency, to be named the Regional Coordinating Council (RCC).
Since funding for the RCC is to be from region-wide taxes, local government entities would bid furiously for RCC assistance. All government units can persuasively justify investments that will be mostly paid for by someone else. As evidence, one need only note the pork barrel projects Congress and state legislatures authorize: projects that bring only local benefits but are wildly popular with local representatives.
The proposed RCC would introduce another layer of bureaucracy and rules between developers and their efforts to build houses for people. Housing costs would rise, worsening the tendency to blame developers for not building enough “affordable” housing and increasing demands for yet more regulations.
7. Chasing jobs, distorting economic development
High-technology research, development, and manufacturing are the most footloose of industrial sectors. Deliberate attempts to attract high-tech employment to the region, such as those endorsed by the Commercial Club, will just waste taxpayers’ money. The same is true of public-private cooperative venture capital partnerships. Venture capital is the riskiest of industrial investments and should be left to the private sector.
Chicago Metropolis 2020 rails against suburbs that limit residential densities excessively–yet it does not mention excessive land use controls applied to businesses. In fact, there was no need to exempt the City of Chicago from the charge of excessive limitations on either residential or business development. Some suburbs try to attract businesses, as the report indicates, but others, predominantly distant and high-income suburbs, limit commercial as well as residential development.
Chicago Metropolis 2020 also endorses Tax Increment Financing (TIF). TIF districts certainly result in decreased unemployment in the jurisdiction, and politicians love them because apparent benefits are quickly realized. But the costs are borne by taxpayers in the future, when the entrepreneurial elected official expects to have left office. Every dollar spent from TIF bonds must be paid for by taxes levied on local people, and those tax collections have the same direct and indirect effect as TIF expenditures, but with the signs reversed. TIF should not be considered a valid tool for economic development.
Based on Edwin S. Mills, “Dreams, Plans, and Reality: A Critique of Chicago Metropolis 2020,” Heartland Policy Study #97 (Chicago, IL: The Heartland Institute, January 2002). Copies of the 28-page study are available from The Heartland Institute for $10 each. You can also download the full text, free of charge, in Adobe’s PDF format; click here.
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Copyright February 2002 The Heartland Institute. Nothing in this Executive Summary should be construed as reflecting the views of The Heartland Institute, nor as an attempt to aid or hinder the passage of any legislation. Permission is hereby given to reprint or quote from this Executive Summary; please send tearsheets to The Heartland Institute, 19 South LaSalle Street #903, Chicago, Illinois 60603.