Come See Detroit, America’s Future

[Valin]

NY Times:

CHARLIE LeDUFF

July 25, 2013

 

(Snip)

How did it get this way, Im asked? After all, it was just 99 years ago that Henry Ford offered the workingman $5 a day and profit-sharing. How, in less than a century, did it come to this?

 

The short answers: municipal mismanagement, race riots, white flight, black flight, dead flight (people routinely disinter their deceased and relocate them to the suburbs). There were the overreaching unions and management that couldnt balance a ball. Proof? The multibillion-dollar bailout of the auto industry. Thank you, American taxpayers!

 

(Snip)

 

So Detroit files for bankruptcy. What does this mean? Pay close attention because it may be coming to you soon, Los Angeles, Baltimore, Chicago, Philadelphia. In 2011, Moodys calculated the unfunded liabilities for Illinoiss three largest state-run pension plans to be $133 billion. (It is expected to be even larger this year.) Thats the size of six Detroit bankruptcies give or take a few hundred million.

 

(Snip)

[clearvision]

Sad state of affairs.

 

I like how one of the first comments blames it on capitalism. I don't think some understand how bad life would be for the masses. Yes, maybe for 5% in Detroit who have no initiative at all (and probably still have a big screen and a bottle of booze when they want it) life would not be much different. 94% would be way way worse off. 1% would still be doing fine even without capitalism, although still without big screen TV and and iPhones, but with a fleet of 500 peasants (or party workers) how bad could life be.... unless you get sick....

[Valin]

Sad state of affairs.

 

I like how one of the first comments blames it on capitalism.

60 years of Democratic party rule and its capitalism fault. Suddenly its all clear to me! I don't know why i didn't see it before?

[Draggingtree]

July 27, 2013

Plans for a new, $400 million hockey arena in Detroit still going forward

Rick Moran
Because, after all, what's a little bankruptcy between crony capitalists?

 

Advocates of the arena say it's the kind of economic development needed to attract both people and private investment dollars into downtown Detroit. It's an argument that has convinced Michigan Gov. Rick Snyder and Kevyn Orr, the emergency manager he appointed to oversee the city's finances, to stick with the plan. Orr said Detroit's bankruptcy filing won't halt the arena plans.
http://www.americanthinker.com/blog/2013/07/plans_for_a_new_400_million_hockey_arena_in_detroit_still_going_forward.html

[Valin]

July 27, 2013

Plans for a new, $400 million hockey arena in Detroit still going forward

Rick Moran

Because, after all, what's a little bankruptcy between crony capitalists?

 

Advocates of the arena say it's the kind of economic development needed to attract both people and private investment dollars into downtown Detroit. It's an argument that has convinced Michigan Gov. Rick Snyder and Kevyn Orr, the emergency manager he appointed to oversee the city's finances, to stick with the plan. Orr said Detroit's bankruptcy filing won't halt the arena plans.

http://www.americanthinker.com/blog/2013/07/plans_for_a_new_400_million_hockey_arena_in_detroit_still_going_forward.html

I'm sorry, but I'm having a little problem wrapping my head around this.

 

Blue Solutions: Detroit Plans for $450 Million Sports Arena

 

Here’s a humdinger: despite everything that’s happened, Detroit is still going ahead with its plan to build a $450 million taxpayer-funded sports arena. One might might think that the largest municipal bankruptcy filing in US history might put Detroit’s leaders into a period of modesty and introspection.

 

One would be wrong. CNN reports that even Michigan Governor Rick Snyder and emergency manager Kevyn Orr support sticking with the city legislature’s December vote to build a half billion-dollar hockey stadium:

 

“I know there’s a lot of emotional concern about should we be spending the money,” said Orr. “But frankly that’s part of the economic development. We need jobs. If it is as productive as it’s supposed to be, that’s going to be a boon to the city.” […]

(Snip)

Far be it from us to recall any instance in which a city government decided to live a little by using taxpayer funds for “job-creating,” “revenue-generating,” white elephant construction projects that in the end saddled taxpayers with decades of debt (see here, here, here, here, here, and here). According to CNN, Michigan taxpayers will be on the hook for nearly two-thirds of the arena’s bill. With interest, that’s a projected $444 million in taxpayer funds over the next thirty years. And if you believe the initial cost projection won’t slowly balloon over the next several years, we’ve got a monorail to sell you.

 

Remember that this is the same city that can’t afford streetlights, an adequate police force, or education system to give its children a decent shot in life........(Snip)

[Valin]

The Once and Future Liberalism

We need to get beyond the dysfunctional and outdated ideas of 20th-century liberalism.

Walter Russell Mead

March/April 2012

 

Writing about the onset of the Great Depression, John Kenneth Galbraith famously said that the end had come but was not yet in sight. The past was crumbling under their feet, but people could not imagine how the future would play out. Their social imagination had hit a wall.

 

The same thing is happening today: The core institutions, ideas and expectations that shaped American life for the sixty years after the New Deal don’t work anymore. The gaps between the social system we inhabit and the one we now need are becoming so wide that we can no longer paper over them. But even as the failures of the old system become more inescapable and more damaging, our national discourse remains stuck in a bygone age. The end is here, but we can’t quite take it in.

 

In the old system, most blue-collar and white-collar workers held stable, lifetime jobs with defined benefit pensions, and a career civil service administered a growing state as living standards for all social classes steadily rose. Gaps between the classes remained fairly consistent in an industrial economy characterized by strong unions in stable, government-brokered arrangements with large corporations—what Galbraith and others referred to as the Iron Triangle. High school graduates were pretty much guaranteed lifetime employment in a job that provided a comfortable lower middle-class lifestyle; college graduates could expect a better paid and equally secure future. An increasing “social dividend”, meanwhile, accrued in various forms: longer vacations, more and cheaper state-supported education, earlier retirement, shorter work weeks, more social and literal mobility, and more diverse forms of affordable entertainment. Call all this, taken together, the blue model.

 

In the heyday of the blue model, economists and social scientists assumed that from generation to generation Americans would live a life of incremental improvements. The details of life would keep getting better even as the broad outlines of society stayed the same. The advanced industrial democracies, of which the United States was the largest, wealthiest and strongest, had reached the apex of social achievement. It had, in other words, defined and was in the process of perfecting political and social “best practice.” America was what “developed” human society looked like and no more radical changes were in the offing. Amid the hubris that such conceptions encouraged, Professor (later Ambassador) Galbraith was moved to state, in 1952, that “most of the cheap and simple inventions have been made.”1 If only the United States and its allies could best the Soviet Union and its counter-model, then indeed—as a later writer would put it—History would end in the philosophical sense that only one set of universally acknowledged best practices would be left standing.

 

Life isn’t this simple anymore. The blue social model is in the process of breaking down, and the chief question in American politics today is what should come next.

(Snip)

[Valin]

The Economist: The Unsteady States of America

It is not just Detroit. American cities and states must promise less or face disaster

Jul 27th 2013

 

(Snip)

America seems in a similar state of denial about Detroit filing for bankruptcy (see article). Many people think Motown is such an exceptional case that it holds few lessons for other places. What was once the countrys fourth-most-populous city grew rich thanks largely to a single industry. General Motors, Ford and Chrysler once made nearly all the cars sold in America; now, thanks to competition from foreign brands built in non-union states, they sell less than half. Detroits population has fallen by 60% since 1950. The murder rate is 11 times the national average. The previous mayor is in prison. Shrubs, weeds and raccoons have reclaimed empty neighbourhoods. The debts racked up when Detroit was big and rich are unpayable now that it is smaller and poor.

 

Other states and cities should pay heed, not because they might end up like Detroit next year, but because the city is a flashing warning light on Americas fiscal dashboard. Though some of its woes are unique, a crucial one is not. Many other state and city governments across America have made impossible-to-keep promises to do with pensions and health care. Detroit shows what can happen when leaders put off reforming the public sector for too long.

 

Inner-city blues

 

Nearly half of Detroits liabilities stem from promises of pensions and health care to its workers when they retire. American states and cities typically offer their employees defined-benefit pensions based on years of service and final salary. These are supposed to be covered by funds set aside for the purpose. By the states own estimates, their pension pots are only 73% funded. That is bad enough, but nearly all states apply an optimistic discount rate to their obligations, making the liabilities seem smaller than they are. If a more sober one is applied, the true ratio is a terrifying 48% (see article). And many states are much worse. The hole in Illinoiss pension pot is equivalent to 241% of its annual tax revenues: for Connecticut, the figure is 190%; for Kentucky, 141%; for New Jersey, 137%.

 

(Snip)

 

 

 

H/T Real Clear Policy

[Valin]

Treasury Secretary Lew: No Detroit Bailout

Breitbart News

28 Jul 2013

 

On Sunday, Treasury Secretary Jack Lew told CNN’s State of the Union that the city of Detroit would not be bailed out by the federal government. “Detroit has serious challenges,” he said. “We support Detroit in its efforts. But Detroit’s going to have to work with its creditors.”

 

(Snip)

 

 

I hope the Obama administration stands firm on this.

[Valin]

Kevyn Orr: How Detroit Can Rise Again

Motown's 'benevolent dictator' talks about his fight with creditors and unions, and what the city's leaders can learn from Miami and Atlanta about revival.

ALLYSIA FINLEY

8/2/13

 

Detroit

 

What do northwest Washington, D.C., South Beach Miami and upper Manhattan have in common? Less than 50 years ago, the now vibrant communities didn't look much different from most of Detroit, says emergency manager Kevyn Orrwhom Gov. Rick Snyder tapped in March to revive the broken Motor City. This is what gives him hope that Detroit can stage a comeback.

 

(snip)

 

The emergency manager's biggest challenge, however, isn't negotiating with creditors. Nor is it reviving Detroit's mid- and downtown business districts, which, he notes, have been growing from the "grass roots" without government planning. Rather, he is concerned with planting the seeds for growth in the outlying neighborhoods where 95% of Detroiters live.

 

(Snip)

 

In the 120 days since he started, things have already begun looking up. The city plans to start hanging new streetlights and clearing dilapidated houses later this month. It has placed orders for new Tasers, vests, cars and PCs for the police department, and intends to contract out garbage collection to save $15 million per year.

 

(Snip)

[Valin]

Detroits Pension Funds Get Delusional

8/23/13

 

Now that Detroits bankruptcy filing is official, the battle between Emergency Manager Kevyn Orr and union leaders over the health of the citys pensions has taken center stage. The key question is: How healthy are the citys pensions, exactly? As weve seen before, its a difficult question to answer, as relatively minor-seeming changes in the estimates of the rate of return and discount rate can lead to radically different assessments of the true state of the plans. As a result both sides gearing up for a battle of words (and actuaries) over how best to calculate the amount of the unfunded liabilities; with the funds arguing that they are healthier than they appear, and the city claiming the opposite.

 

But in a new column at Bloomberg, Megan McArdle asks a slightly different and altogether more trenchant question: why are pension funds even fighting this battle in the first place? As she notes, pension funds would actually stand to gain if it looked like they are as insolvent as possible during bankruptcy:

 

 

Heading into the bankruptcy, a pension fund would normally try to inflate the underfunding estimates as high as possible, not minimize them. Thats because the unfunded pension liability is treated as an unsecured debt; it has to assemble with other unsecured creditors to collect whatevers left over after the secured creditors have been paid. The bigger the claim, the larger the amount youre likely to collect.

The fact that the funds are still fighting to prove that they are healthy suggests that they may not actually be jockeying for position with other creditors, but instead think that the city can actually stay out of bankruptcy altogether. If so, they are seriously ignorant of the true state of play:

(Snip)