One of the dumbest things I’ve ever done was setting up camp in Denali National Park in Alaska downstream of a small, peaceful creek on an overcast night. Well, it doesn’t take much imagination to guess what happened when it started raining. By morning, the tranquil creek had transformed into a torrent that ran across the campsite, soaking all our gear. Luckily, I was able to pack up and move on.
Unfortunately, Chicago doesn’t have that luxury. For years, City Hall has lived precariously in the floodplain of structural deficits and swelling long-term pension obligations, assuming the financial weather would hold. But it hasn’t. We are now facing a fiscal storm, and, unlike a camper, the city cannot simply hike to higher ground.
This matters more than ever because capital, businesses and talent have never been more mobile. In an economy with decreasing geographic friction, cities increasingly vie for investment and opportunity. Policies such as the corporate head tax and the expanded cloud services tax threaten to make Chicago’s fiscal problems worse over time by discouraging job creation and economic activity in a city that is already falling behind its peers.
Start with growth. Using the most recent data from the U.S. Bureau of Economic Analysis, Chicago posted the slowest real gross domestic product growth among the 25 largest U.S. metro areas over the past five years. After adjusting for inflation, the city has averaged annual real economic growth below 1%. That is catastrophic. Everything dependent on growth suffers when an economy stagnates — job creation, household income, public finances and city services.
Wages tell the same story. Since 2020, average hourly earnings in Chicago are up about 15%. That sounds respectable until put in context. Nationally, wage growth exceeds 22%, while inflation has risen roughly 25%. In real terms, Chicago workers are about 10% worse off than they were five years ago. That outcome is painful but predictable. Weak growth leads to a weak labor market, and weak labor markets do not compel employers to bid up wages.
Job growth reinforces the point. Employment in Chicago is essentially flat since before the pandemic, compared with more than 5% nationally. An economy that doesn’t add jobs doesn’t create leverage for workers. And it doesn’t generate the organic revenue growth City Hall needs.
Yet despite this stagnation, city spending has surged. Chicago’s corporate fund budget grew by 38% from 2020 to 2025, far outpacing inflation, income growth and nominal GDP. That disconnect is unsustainable.
When expenses rise faster than the economic base supporting them, the gap must be filled somehow — higher taxes or borrowing and one-time gimmicks that defer problems into the future. Indeed, there is a reason Stanford’s Municipal Finance Dashboard ranks Chicago as having the worst fiscal health of any large U.S. city.
Unsurprisingly, credit markets are responding. Chicago’s long-term bond yields now trade close to 170 basis points above AAA municipal benchmarks — three times the spread paid by New York City. Ominously, even Chicago’s A+ and AAA-rated sales tax-secured debt is pricing at levels typically associated with riskier Better Business Bureau-rated credits. In a recent refinancing, investor demand was so weak that Goldman Sachs was left holding $75 million of unsold bonds.
Higher borrowing costs matter. With our long-term rates approaching 6%, every additional basis point paid in interest is money the city cannot spend on schools, services or infrastructure. As budget negotiations drag on, the risk of further credit downgrades and rising rates grows by the day.
To be sure, Mayor Brandon Johnson’s administration is attempting to stabilize our finances. However, his proposed measures risk further compounding our challenges. Rather than confronting the structural weakness underlying our fiscal position, the mayor has framed the budget impasse as a distributional dispute. He is presenting our revenue shortfall as a moral choice, pitting working families against corporations and higher-income residents, while deprioritizing spending restraint and operational reforms.
That framing may be politically convenient, but it misdiagnoses the core issue. Chicago doesn’t suffer from insufficient taxation; it suffers from insufficient growth. The debate worth having is not how to extract more from businesses — which already pay some of the highest local corporate and commercial property tax rates in the country — but how to expand the tax base.
I am sure Johnson and his supporters would argue that public services and school funding must take priority over business concerns. That the public sector will spur the private sector’s revival. But this ignores how cities function. Public services depend on a healthy private sector for funding.
A dynamic business environment benefits the entire city by spurring investment, creating jobs, attracting residents and lifting wages. This naturally broadens the tax base, generating the revenue needed to fund essential city functions. Economic growth is not an alternative to the mayor’s priorities; it is the precondition for achieving them.
Taxpayers are already near their maximum pain threshold between property, income and sales tax levies. And borrowing more at punitive rates is hardly a solution. There is no safe ground to retreat to here other than economic growth. Thus, proposing policies that risk impairing growth is particularly misguided and self-defeating.
In Denali, the lesson was obvious: Move to higher ground before it rains. Chicago lacks that option. It cannot pick up and relocate. It cannot tax its way to safety. The only durable path forward is to strengthen the economic foundation beneath it.
Stuart Loren is a managing director at Fort Sheridan Advisors, where he manages client investment portfolios and is responsible for market and economic analysis. Formerly, Loren was a corporate lawyer in Boston. He lives in Chicago with his family.
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