A graphic economic illustration
July 25, 2013
It has finally happened. The chickens have come home to roost. Actions of the past now have consequences. They reaped what they sowed. I am out of clichés.
I am talking, of course, about the largest crash yet of liberal fiscal policy in the U.S. If you haven’t heard, Detroit filed bankruptcy last Thursday. That bastion of liberal rule and “kick the can down the road” financial planning is now dead broke. They have $20 billion in debt to over 100,000 creditors and bond holders. That is $28,500 for each of Detroit’s 700,000 people.
It is amusing and entertaining to listen to the liberal media try to spin this one. For example, Ed Schultz told his handful of listeners that Detroit went bankrupt because it became a conservative utopia. I am sure there will be a few who believe that in spite of those sadly neglected pesky facts.
Detroit has not had a Republican, much less fiscally conservative, city council or mayor since 1961. Population has declined from 1.8 million and the fourth largest U.S. city to about 700,000 now. It is now one of America’s most dangerous cities. Response time for police averages 58 minutes; the national average is 11 minutes. Its murder rate is 11 times that of New York City. There are about 80,000 abandoned houses. Yes, this sounds to me like a conservative utopia. Isn’t this everything conservatives stand for?
Generations of liberal politicians fell under the spell of overspending. They were abetted by the strong union presence in Detroit and the inability to say no to ever-increasing demands. As of the bankruptcy filing there are 10,000 public workers for every 20,000 public retirees. Detroit has an unsustainable obligation to fund pension funds, which far exceeds operating needs. Detroit also has a shrinking economic base. Population is leaving due to lack of employment and high taxes. Every time taxes are raised Detroit’s revenue goes down. Laffer Curve, anyone?
The only thing Republicans can be blamed for recognizing is that the can is mangled beyond recognition and can’t be kicked any more. Republican Gov. Rick Snyder says only that the problem is not tough to see. The bankruptcy filing was done only after almost a year of negotiation attempts with union officials, bondholders and creditors fell apart. Apparently some still think Obama will bail them out. I assume this will come from the “Obama stash” somewhere in the White House.
The saddest part of this whole affair is that Detroit is not the first, only the largest so far. There are at least three other cities that have filed for Chapter 9 protection for the same reasons. Those are overspending and an onerous pension fund obligation for retirees. There will undoubtedly be more cities and some states. The most likely state appears to be California.
There are two frightening aspects. The first is that all of the cities and states in trouble have in the back of their minds that the federal government will help them out. After all, they bailed out the banks, General Motors and Chrysler, didn’t they? I can hear the liberals railing about those poor retirees who will lose everything. I don’t mean to under-emphasize their plight. It is true, they might lose some benefits and that is sad. Remember, though, who kept electing the corrupt morons that got them in this position to begin with. Even sadder would be asking the rest of us to support them.
The second aspect is that the federal government might actually bail them out. This is the same government who has shown exemplary fiscal restraint in their own dealings, has had a balanced budget for several years, and has spending under control. You believe that, don’t you?
Those in Washington D.C. would do well to study Detroit. It is a fine example of liberal governance, union influence and corrupt elected officials. Detroit, though, is not as irresponsible as Washington. They have seen fit to operate for five years with the only budget being the sequestration decision that the president thought Republicans would cave on. Debt has increased by almost $5 trillion in five years. They spend their time on toothless immigration reform instead of budgets. There seems to be a scandal each week that needs to be investigated. The president selectively regulates by fiat rather than law. The Federal Reserve is unaudited and unrestrained.
What Reagan set right is his successors have allowed asunder. When reality hits, I suspect Washington will make Detroit look like amateur hour.
Tom Riggins’ column appears every other Friday in Perspective.