07.23.2013 in Economy, Featured by Rick Manning 8

Are we all destined to be Detroit?

By Rick Manning

Apparently sloganeering, Joe Biden’s bluster and Super Bowl car ad buys could not pull the Motor City back from the brink.

The once proud city of Detroit buried under $18 billion of debt, a taxpayer exodus, collapsed infrastructure and public employee pension promises that cannot be kept has filed for bankruptcy, making it the largest city in U.S. history to do so.

But fear not America, Flint, Michigan Democrat and freshman Representative Dan Kildee thinks he has a better idea than bankruptcy — let Uncle Ben Bernanke, the bail bondsman to out of control governments take on Detroit’s debt.

Kildee wrote Bernanke in one of the most amazing displays of ignorance about local government budgeting complained, “For too long, lawmakers and regulators have stood aside as cities grapple with budget deficits, unfunded pensions and crumbling infrastructure.”

Just who does Mr. Kildee think passed the budgets, agreed to the public employee contracts and allowed the infrastructure of Detroit to crumble, the people of Dubuque, Iowa?

No, it was the elected officials of Detroit who chose a path that promised sweet pension payouts without actually putting away the money to meet those obligations.  It was the elected officials of Detroit , who raised taxes while services deteriorated until their tax base had all moved away.  And it was the elected officials of Detroit who failed to take care of basic infrastructure like keeping street lights functioning, while sitting on billions of dollars of artwork in the Detroit Museum of Art.

So, exactly why should the people of Dubuque or anywhere else for that matter, pay for Detroit’s mismanagement?

But the real danger in Kildee’s request is the precedent it would set if the Federal Reserve actually turned its bond buying penchant toward municipal and state debt.  According to the Cato Institute, state and local governments across the United States have $3 trillion in unfunded pension liabilities alone.

The very act of Fed involvement would send a clear signal to state and local governments across the nation that they could spend their tax money on other concerns and promise whatever extravagances it takes to get re-elected, because the Fed would pay the bill when it came due.

When coupled with the additional $3.7 trillion in state and municipal bond debt that has been accrued over the years, the Fed would be presumed to be the financial backstop for all state and local debt, an almost $7 trillion moral hazard.

It should not come as a surprise that far left economist and New York Times columnist Paul Krugman looks at the wreckage of socialism and wants to assign a “no fault” label to Detroit’s debt.

Shrugging off the Detroit bankruptcy in a New York Times piece Krugman writes, “So was Detroit just uniquely irresponsible? Again, no. Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces.”

Detroit is anything but an innocent victim, instead it suffers from a self-inflicted wound.

Yes, when you raise taxes, market forces drive tax payers to seek lower tax environments, but it was the liberals in the City who failed to understand that higher taxes don’t increase revenues over time, they just destroy your tax base.  That is not the market’s fault, it is the fault of the politicians who ignored the obvious results of their actions.

Yes, when it takes 58 minutes for police to arrive, and shot out street lights are not replaced, the market economy causes families to move to safer environs in droves, leaving behind abandoned neighborhoods over run by rats and gangs.  No shocker there, I’m pretty confident that even Paul Krugman would move his family under these conditions.

And yes, when you choose to pander to public employees by keeping unaffordable pension agreements in place rather than spend the town’s treasure on lower taxes, and providing basic services to attract job creators, you are feeding the parasites until the host is dead.  This is not exactly a news flash to anyone who reads any publication less liberal than The Nation.

When combined with the past history of Michigan as a bastion of the United Auto Workers, which caused auto manufacturers to locate their plants anywhere but the Motor City, you have the unmitigated disaster that is MoTown.

In the past couple of years, the state of Michigan has taken steps in the right direction by pushing through a right to work law that will help its cities compete for future manufacturing jobs.  But the promises of the failed socialist Detroit experiment cannot be kept, and people are going to be hurt who depended upon the false promises.

At some point, the toll comes due.

In the past election campaign, Obama proudly talked about how he “wouldn’t let Detroit go bankrupt” in taking credit for the auto manufacturers bailout that were actually done by George W. Bush, in the month before Obama became president.

Now, less than a year after the 2012 campaign blather, a city that has led the way in spending what it doesn’t have, promising what it cannot provide, and hoping that somehow the consequences of their policies could be avoided, is paying the piper.

What is scary is that hundreds of city and state governments are somewhere on the same path, and with more than $17 trillion in debt, our federal government is not far behind.

A scary realization that someday soon, we all may be Detroit.

Rick Manning (@rmanning957) is the Vice President of Public Policy and Communications for Americans for Limited Government.

Are we all destined to be Detroit?

By Rick Manning

Apparently sloganeering, Joe Biden’s bluster and Super Bowl car ad buys could not pull the Motor City back from the brink.

The once proud city of Detroit buried under $18 billion of debt, a taxpayer exodus, collapsed infrastructure and public employee pension promises that cannot be kept has filed for bankruptcy, making it the largest city in U.S. history to do so.

But fear not America, Flint, Michigan Democrat and freshman Representative Dan Kildee thinks he has a better idea than bankruptcy — let Uncle Ben Bernanke, the bail bondsman to out of control governments take on Detroit’s debt.

Kildee wrote Bernanke in one of the most amazing displays of ignorance about local government budgeting complained, “For too long, lawmakers and regulators have stood aside as cities grapple with budget deficits, unfunded pensions and crumbling infrastructure.”

Just who does Mr. Kildee think passed the budgets, agreed to the public employee contracts and allowed the infrastructure of Detroit to crumble, the people of Dubuque, Iowa?

No, it was the elected officials of Detroit who chose a path that promised sweet pension payouts without actually putting away the money to meet those obligations.  It was the elected officials of Detroit , who raised taxes while services deteriorated until their tax base had all moved away.  And it was the elected officials of Detroit who failed to take care of basic infrastructure like keeping street lights functioning, while sitting on billions of dollars of artwork in the Detroit Museum of Art.

So, exactly why should the people of Dubuque or anywhere else for that matter, pay for Detroit’s mismanagement?

But the real danger in Kildee’s request is the precedent it would set if the Federal Reserve actually turned its bond buying penchant toward municipal and state debt.  According to the Cato Institute, state and local governments across the United States have $3 trillion in unfunded pension liabilities alone.

The very act of Fed involvement would send a clear signal to state and local governments across the nation that they could spend their tax money on other concerns and promise whatever extravagances it takes to get re-elected, because the Fed would pay the bill when it came due.

When coupled with the additional $3.7 trillion in state and municipal bond debt that has been accrued over the years, the Fed would be presumed to be the financial backstop for all state and local debt, an almost $7 trillion moral hazard.

It should not come as a surprise that far left economist and New York Times columnist Paul Krugman looks at the wreckage of socialism and wants to assign a “no fault” label to Detroit’s debt.

Shrugging off the Detroit bankruptcy in a New York Times piece Krugman writes, “So was Detroit just uniquely irresponsible? Again, no. Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces.”

Detroit is anything but an innocent victim, instead it suffers from a self-inflicted wound.

Yes, when you raise taxes, market forces drive tax payers to seek lower tax environments, but it was the liberals in the City who failed to understand that higher taxes don’t increase revenues over time, they just destroy your tax base.  That is not the market’s fault, it is the fault of the politicians who ignored the obvious results of their actions.

Yes, when it takes 58 minutes for police to arrive, and shot out street lights are not replaced, the market economy causes families to move to safer environs in droves, leaving behind abandoned neighborhoods over run by rats and gangs.  No shocker there, I’m pretty confident that even Paul Krugman would move his family under these conditions.

And yes, when you choose to pander to public employees by keeping unaffordable pension agreements in place rather than spend the town’s treasure on lower taxes, and providing basic services to attract job creators, you are feeding the parasites until the host is dead.  This is not exactly a news flash to anyone who reads any publication less liberal than The Nation.

When combined with the past history of Michigan as a bastion of the United Auto Workers, which caused auto manufacturers to locate their plants anywhere but the Motor City, you have the unmitigated disaster that is MoTown.

In the past couple of years, the state of Michigan has taken steps in the right direction by pushing through a right to work law that will help its cities compete for future manufacturing jobs.  But the promises of the failed socialist Detroit experiment cannot be kept, and people are going to be hurt who depended upon the false promises.

At some point, the toll comes due.

In the past election campaign, Obama proudly talked about how he “wouldn’t let Detroit go bankrupt” in taking credit for the auto manufacturers bailout that were actually done by George W. Bush, in the month before Obama became president.

Now, less than a year after the 2012 campaign blather, a city that has led the way in spending what it doesn’t have, promising what it cannot provide, and hoping that somehow the consequences of their policies could be avoided, is paying the piper.

What is scary is that hundreds of city and state governments are somewhere on the same path, and with more than $17 trillion in debt, our federal government is not far behind.

A scary realization that someday soon, we all may be Detroit.

Rick Manning (@rmanning957) is the Vice President of Public Policy and Communications for Americans for Limited Government.

  • http://movermike.powerblogs.com/ movermike

    “A scary realization that someday soon, we all may be Detroit.”

    Scary, yes, but “someday soon” is misleading. It took five generations or more for Detroit to go bankrupt. The U.S. has been on this path for 100 years. It looks like we could go on for quite some time yet.

    Go back to Hemingway’s, “The Sun Also Rises” quote on how did
    you go bankrupt? “Two ways – very, very slowly, and then all at once.”

  • redquard

    Excellent.

  • sreynolds

    IF we do not stop obamacare and amnesty in it’s tracks then yes we are desstined be like detroit (detoilet)

  • donl

    As long as the Demo-Commies are in charge YES !! UNLESS we “turn the tables to the Right side.

  • pduffy

    The blog said, “It was the elected officials of Detroit , who raised taxes while services deteriorated until their tax base had all moved away.”

    Now you know why communism puts up walls to keep the sheeple from escaping. If not for the freedom to vote with their feet, the poor working slobs that lived in De-toilet would be held a slaves to keep that system running, but instead they fled from the high taxes and imposition of liberalism. The only question now is where will the rest of us flee when our freedom to vote with our feet is removed by federalism? If we are forced to bail out De-toilet with federal tax dollars, this is in essence a communist wall put up by the federal government. There will be nothing left but to flee the USSA itself if this kind of bailout is allowed to proceed. This is the turning point in our history. If Detroit is bailed out, America is finished as a nation.

  • guest

    Anyone still listening to Krugman, long past his sell date, has to be a complete numbskull.
    Unions were useful once, but when it did more for the leaders than the workers; when they forced workers to join and pay for the leaders choice of political party, they became obsolete. Look at what Happened in Wisconsin when the Governor allowed more freedom -freedom to work. How many workers left the Union?
    High taxes, high pensions for the few, Unsustainable eventually!

  • FloridaJim

    This is just what Obama has prayed for another crisis for him to steal tax dollars and give to sleazy union and politicians to waste further. Detroit has been a sewer for 60 tears all led by democrats who reaped millions and retired wealthy. Chicago did the same with Daley.

  • Death2Unions

    With any bad luck, the Marxist in Chief and his Puppet Master Valerie Jarrett are going to be smiling when they install the Hugo Chavez like State. People, it gets rather bloody if that is the case.

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