09 November 2009

For a Preview of Obama's US, Watch Detroit

Detroit, Michigan, is a city on the edge of bankruptcy. Detroit no longer collects enough taxes to support all of its obligations. The city of Detroit is sinking under a load of unionised city employees and employees' pensions, and even the well-intentioned new mayor -- Dave Bing -- seems helpless to do anything to save motor city.
To make ends meet, Mr. Bing is planning to issue "tax anticipation" notes to lenders to raise $94 million against expected tax revenues. This money, along with the biannual property taxes that the city collected in August, might keep Detroit running through the end of the fiscal year next June.

But that won't address the underlying fiscal imbalances. For that problem, Mr. Bing wants to squeeze $5 million in savings every month by asking the city's roughly 13,000 workers to take a 10% pay cut, a 10% benefit cut, and a 10% staff cut. He also wants to privatize or outsource many city services and consolidate various departments. "Our people [city workers] need to understand that entitlement is gone," Mr. Bing told the Detroit News in August. "There are people who think we are job providers. We're service providers."

Mr. Bing is going to have a very hard time making the city's entrenched unions play ball. John Reihl, president of the American Federation of State, Council and Municipal Employees (AFSCME) Local 207, regards Mr. Bing's talk of cuts as a personal insult. "It is just a way to mess with the unions," he told the Detroit News in July. "It's not our role to give anymore concessions."

So far Mr. Bing has shown little indication that he'll stand up to the unions. For the third time on Friday, Mr. Bing backed off on his threat to lay off more workers if unions don't accept a wage cut. Yet a recent study by the Mackinac Center for Public Policy found that if state and local government employee benefit packages in Michigan were limited to what is typical for Midwestern private sector workers—including those in unions—taxpayers would save as much as $5.7 billion annually.

The fiscal mess puts Mr. Bing in a Catch-22. He can't cut the city's taxes because the short-term hit to cash flow would leave the city unable to pay its bills. But without tax reform the city can't lure businesses back. _WSJ
Mayor Bing is independently wealthy, and is paying his salary to the Detroit police department. He apparently means well. But he cannot stand up to the partnership between unions, public employees, and organised crime that controls the city now.

US President Obama is putting himself in a similar position as Mayor Bing finds himself. Mr. Obama is enthralled to labour unions already, and is setting the stage for the unions to establish deeper and broader roots throughout all sectors of the US economy. Behind the unions, you can almost always find organised crime outfits -- such as the one that helps control Obama's Chicago.

Once that monstrous coalition gains control, voters (and even politicians) have little to say in the matter. Look at California, for an example of the same phenomenon at the state level. Michigan, Illinois, New Jersey, and New York are little better.

If a person wanted the US to become a nation-sized Detroit, he could not have chosen a better president than Mr. Obama. His connections to the coalition of organised crime and labour unions go back 20 years or more.

But it is more likely that voters chose Mr. Obama for either iconic or ideological reasons. Too bad they didn't look behind the curtains, to see where the real power behind the icon lies.


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Blogger .. said...

Al - What is your ideal world?

Monday, 09 November, 2009  
Blogger al fin said...

The very concept of an "ideal world" is what has gotten utopians into so much trouble.

The problem is that my idea of an ideal world would not be an ideal world for anyone else but me. Just like my idea for God would be unique for myself, and not applicable to someone else.

So instead of mandating "an ideal world" from the top down, you give people enough space and freedom to create their own "ideal world" on a reduced level.

You limit intervention from above to cases of violence, theft, fraud, and injurious neglect.

You allow failure to take place and you allow success.

Remember Conway's game of "Life", cellular automata? Complex phenomena growing out of a simple set of rules?

Everything comes from how you set up the incentives that sit within the rules.

Always prepare to be surprised.

Monday, 09 November, 2009  
Anonymous Anonymous said...

With far leftists candidates getting nominated by the Republican party it is probable that little will change. Even the Reagan and Bush administrations could only just slow the growth of government, not reverse it. At least it can't go on forever. Eventually there is nothing left to tax and no industries to nationalize. At that point you either start conquering and looting neighbors or default and colapse. All nations are headed down this road by unstopable inertia so it will be an interesting time ahead.

Monday, 09 November, 2009  
Blogger .. said...

Al - I was asking for your ideal world because I want to know what your philosophical world view is.

Monday, 09 November, 2009  
Blogger neil craig said...

Bankruptcy is a, posibly the, vital part of the enterprise system. In Detroit's case it would also end any contractual obligations to public employees. I suspect a few years being run by liquidators would do wonders.

Tuesday, 10 November, 2009  
Blogger Ugh said...

Having been to Detroit on numerous occasions I am saddened. This was once the most prosperous city in the U.S. It is now every bit as bad as New Orleans, in this case the storm was liberalism, globalization, unionism and very poor corporate governance. Many old steel towns in Ohio and especially in PA have been resurrected so what is wrong with Detroit? I think this article spelled it out nicely.

Tuesday, 10 November, 2009  
Blogger al fin said...

Thanks for your comments, everyone.

AI Guy, I suggest you look through the archives of this blog and follow a few of the category labels. As a blogger, I have rarely been accused of being coy.

Tuesday, 10 November, 2009  

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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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