Watching the Wind Get Knocked Out of the Windy City

Much was made this week about Chicago being passed up for the 2016 Summer Olympics. In spite of a personal appearance from President Obama and the First Lady, the International Olympic Committee (IOC) voted to have Rio de Janeiro, Brazil play host instead. Even more embarrassing, Chicago did not even get out of the first round of voting, receiving a meager 16 votes.

President Obama received a lot of criticism for his $1.2M taxpayer-funded sales job in Denmark, and it came from both sides of the aisle. Those on the right were elated at such a failure, while those on the left cringed in the face of another political setback. And after a miserable August and September, Democrats desperately needed a victory, even if it would have been largely symbolic. It was a huge gamble that backfired in a major way. Not helping matters was a video that surfaced early last week showing a 16-year-old honor student being beat to death in a rival Chicago gang fight. 

What got lost in all the pomp and circumstance were two very interesting stories. For starters, it seemed like Chicagoans had some reservations about how the games would be funded. While a recent Chicago Tribune poll showed widespread support for playing host to the 2016 games (64% in favor, 28% opposed), more than 75% of those surveyed say they were against the use of tax money to cover any financial shortfalls. While Mayor Richard Daley insisted taxpayers would not be on the hook for any debt, the city had already pledged $500M to cover any operating shortfalls as part of their bid.

News also leaked regarding the upcoming 2010 Winter Games in Vancouver. A June 15th, 2009 article from the CTV Olympics website noted that “Olympic-related construction bills continue to soar over budget for beleaguered Vancouver taxpayers, with some estimates putting the total added costs at close to $45-million. That’s apart from the troubled Millennium Project to house Olympic athletes, which is over its original budget by more than $100-million and has had to have its financing taken over by the city.” It is a stunning failure of budget management but our Canadian friends to the north were no exception …

The spectacular 2008 Summer Olympics in Beijing were originally estimates carrying an expense of $1.6B while the actual costs came in around $40B. The 2004 Summer Olympics in Athens had a budgeted price tag of $1.6B as well. Final bills? Try $16B. Perhaps the British would learn something from history as they prepare for the 2012 Summer Olympics in London? Sadly that does not seem to be the case. With a seemingly more realistic budget of  $8B, close to $19B has been spent already … as of June 2008!

To put these cost overruns in perspective, Canada taxpayers are just now paying the final $1.5B worth of debt on the 1976  Montreal Winter games … 30 years later. Amazing. Whats more, GDP growth for most of the host countries seem to surge in the year before and during the games of the Olympiad but drop sharply in the years that follow … once the invoices start coming in, of course.

With the United States already hemorrhaging debt at record levels and our government completely comfortable spending money they do not have now or will have within the next 30 years or so, perhaps getting passed up for the 2016 games was more a blessing than it was a defeat.