Archive for the ‘Detroit’ Category
The problems that America is experiencing right now are not just confined to the field of economics. The truth is that there are signs of deep decay wherever we look, and without question the United States is rotting from the inside out in thousands of different ways. For a long time ourdebt-fueled prosperity has masked much of the social decay that has been festering underneath the surface, but now it is becoming increasingly apparent that the thin veneer of civilization that we all take for granted is beginning to disappear. For many Americans, it is easy to point a finger at a particular group or political party and blame them for all of our problems, but the reality of the matter is that our societal decay cuts across all income levels, all political affiliations and all regions of the country. We are being destroyed from within, and this decay can be seen on the streets of the most dilapidated sections of major U.S. cities and it can also be seen in the halls of power in Washington D.C. and on Wall Street. It is undeniable that something has fundamentally changed. The American people do not seem to possess the same level of character that they once had. So where do we go from here?
The following are 25 signs the collapse of America is speeding up as society rots from the inside out….
1. Homicides in Chicago are 38 percent ahead of where they were last year at this time. In fact, the Daily says that “homicide victims in the Windy City outnumber U.S. troops killed in Afghanistan this year”. Things are taking a turn for the worse in other major U.S. cities as well. Just check out the carnage that happened in New York City this past Friday night….
Across barely eight hours, at least seven New Yorkers were murdered and another 21 shot, stabbed or slashed across the city — with only three suspects arrested before the blood stopped flowing
2. Speaking of New York City, a teacher there recently posted the following on her Facebook page….
“Crupi and I survived a shootout today…Thank God we are ok…To all the wanna be gangstas of Staten Island (who say they are from Brooklyn but really aren’t), be grateful you have what you have and stop trying to live a lifestyle you will never understand.”
About a week later, her husband discovered her dead in a pool of her own blood in their apartment. She had been stabbed numerous times.
3. Reporter James Carlini recently discussed the growing problems that roaming gangs of youths are causing along the Magnificent Mile in Chicago….
There is an increase in problems at night with small gangs roaming around looking for the right prey.
Don’t bother looking for any cops, they are far and few between. Little perfume-size pepper spray canisters may be in vogue, politically correct and fit in a purse, but they are not practical. Forget about pepper spray, you’d need a gallon jug of it to stop five or six assailants.
Do you now need a .357 Magnum to walk down the Mag Mile? Maybe a compact .45 or a high-capacity 9MM “just to be on the safe side” is more what you should have. Even the police are telling each other that they better “carry large caliber” off-duty and not be caught unarmed.
4. Down in Florida, a lifeguard named Tomas Lopez was recently fired for attempting to saving a man that was drowning “outside his patrol zone“….
Lopez, 21, was hired by Jeff Ellis Management to monitor a portion of a public beach in Hallandale Beach, Fla. The company allegedly gave Lopez strict instructions to stay inside his patrol zone, ABC News reports.
But when Lopez spotted a man in distress outside his patrol zone Monday afternoon, he ignored those instructions and leapt into action.
By the time lifeguard Tomas Lopez got to the man, other bystanders had already pulled him to shore, the South Florida Sun Sentinel reports. Lopez stayed with the man until paramedics arrived.
That valiant act was Lopez’s last as a lifeguard, as his employer fired him for straying 1,500 feet outside his patrol zone.
5. Authorities say that thieves are stealing identities and filing fraudulent tax returns on a scale never seen before….
With nothing more than ledgers of stolen identity information — Social Security numbers and their corresponding names and birth dates — criminals have electronically filed thousands of false tax returns with made-up incomes and withholding information and have received hundreds of millions of dollars in wrongful refunds, law enforcement officials say.
The criminals, some of them former drug dealers, outwit the Internal Revenue Service by filing a return before the legitimate taxpayer files. Then the criminals receive the refund, sometimes by check but more often though a convenient but hard-to-trace prepaid debit card.
In all, the IRS says that there were approximately 940,000 fake tax returns filed for 2010.
6. U.S. Secret Service agents are supposed to be “the best of the best” and are charged with guarding our top public officials. But even they have exhibited a consistent pattern of moral decay for many years according to one recent report….
Secret Service agents and officers have been accused of leaking sensitive information, publishing porn, sexual assaults, illegal wiretaps, embezzlement and drunkenness on duty, according to a 229-page log released yesterday.
After a prostitution scandal in April, when agents consorted with hookers while preparing for President Obama’s arrival in Colombia, Service Director Mark Sullivan apologized. But he said it was an isolated case, not a “systemic issue.”
However, the log, which the Service Service released yesterday after news organizations requested it under the Freedom of Information Act, shows a pattern of misdeeds dating back to 2003.
7. These days thieves will steal just about anything that is not bolted down and that they can sell for money. For example, three thieves recently broke into a Chicago beauty supply store and took off with hair extensions that were worth a total of $230,000.
9. According to one shocking new report, one out of every 10 Wall Street employees is a “clinical psychopath”. That is a rate about 10 times higher than the general population.
10. Even many police are going crazy these days. Over in Seattle, police zapped a pregnant woman with a taser three times just because she refused to sign a ticket.
11. Down in California, one man recently sliced off the ear of another man with a knife over an unpaid debt.
12. These days we are seeing senseless crimes being committed even in small towns in the heartland of America. Just check out what happened in Helena, Montana about a week ago….
Helena Police are working to identify two young men after what they call a random act of violence over the weekend. Helena Police found a 40-year-old homeless man badly beaten in an alley behind the Gold Bar around 2 a.m. Sunday morning.
Helena Police Detective Sergeant Richard Drysdale states,” The video shows two white males surrounding the victim as he was entering the walkway yelling at him and then knocking him down to the ground where they beat and kicked him until he was unconscious.”
You can find a video report about this incident right here.
13. One town in Connecticut was forced to shut down a beautiful new public fountain because too many people were using it as a toilet.
14. According to one very shocking study, the percentage of U.S. households that contain a married couple with children has fallen from 44.3% in 1960 to 20.2% today.
15. A huge brawl between parents erupted during one recent preschool graduation ceremony down in the Los Angeles area.
16. We continue to see “mob robberies” at retail establishments all over the nation. During one recent mob robbery in Detroit, thugs beat the living daylights out of one very unfortunate stock clerk.
17. Speaking of Detroit, nobody is immune to the spreading violence in that city. For example, just check out what happened recently to a 22-year-old pregnant woman….
A 22-year-old pregnant woman survived after being bound, driven to Detroit, set on fire and shot early Saturday morning.
The woman, who was nine-months pregnant, had returned from a movie with her boyfriend and dropped him off at his house in Warren when she was approached from behind, Warren police Sgt. Dave Geffert said.
The woman’s hands, feet and eyes were bound with duct tape. She was then forced into her car and driven to an unknown place in Detroit where she was doused with lighter fluid, set on fire and shot once in the upper back, he said.
18. Many families returned to their homes following the recent wildfires in Colorado only to discover that their houses had been robbed and looted.
19. One 33-year-old art teacher in Arizona was not satisfied with only having sex with one of her students. In fact, police have charged her with having sex with four of her male students.
20. Down in Florida, one man has actually been charged with biting the lips off of a kitten.
21. Over in Waco, Texas a 22-year-old man recently strangled and ate the family dog while he was high on drugs.
22. Of course most of us have heard of the recent outbreak of “zombie attacks” around the nation where criminals have actually been biting their victims and chewing their flesh. The following is another example of this phenomenon from a recent case in central New York….
A synthetic drug known as “bath salts” is blamed for some bizarre behavior in central New York.
The Utica Observer-Dispatch reports that police officers were called to Stanley’s Bar Saturday night to check out a woman described as emotionally disturbed. When an officer approached her, she lunged at him and tried to bite his face. Police say she screamed that she wanted to “kill someone and eat them.”
The woman was taken to St. Luke’s Memorial Hospital for a mental health evaluation.
Another very disturbing “zombie incident” took place down in Georgia recently….
Karl Laventure, 21, was believed to be high on bath salts when he tried to attack the officers in Lilburn, Georgia.
And after they had managed to subdue him he began threatening to eat them.
Laventure appeared out of some woods and was seen running naked around a golf range near Atlanta, swinging a club around his head and screaming.
Police said that it took several officers to subdue the man who had ‘super-human strength’.
23. All over America, people seem to be losing their minds. Just check out what one man in New Jersey did recently when police arrived at his home….
Officers got a call that morning when a witness said Carter was threatening to harm himself with a knife. Two cops responded, kicked in the door and found Carter in the corner, the station reported.
Carter allegedly ignored officers’ orders to put down the knife, and instead began stabbing himself in the abdomen, neck and legs.
An attempt to pepper spray the bleeding man had no effect, the Associated Press reported.
That’s when Carter — disemboweled but responsive — reportedly threw bits of his skin and intestines at the officers.
24. One woman in the St. Louis area was recently caught cooking meth in her purse inside a Wal-Mart store.
25. Anyone that believes that slavery has been abolished in America does not know what they are talking about. Every single night sex slaves are being horribly abused all over the United States. The following is from a recent Daily Mail article….
The FBI has rescued 79 teens held against their will and forced into prostitution from hotels, truck stops and stores during a three-day swoop on sex-trafficking rings across the country.
The sex slaves were aged between 13 and 17, although one said she had been involved in prostitution since she was just 11, authorities said.
During the sting operations across 57 U.S. cities – including Atlanta, Sacramento and Toledo, Ohio – 104 alleged pimps were arrested.
It is estimated that “100,000 children are victims of prostitution and trafficking each year” in the United States.
Are you starting to get the picture?
Sadly, there are dozens and dozens more examples like these. If you want to see more examples of how the collapse of America is speeding up, check out these articles that I recently published….
The frightening thing is that this breakdown of our society is happening at the same time that our economy is completely falling to pieces.
This economic decline that we are experiencing is shredding the middle class and it is plunging millions of Americans into very desperate circumstances. The following is a brief excerpt from a recent Rolling Stone article….
Every night around nine, Janis Adkins falls asleep in the back of her Toyota Sienna van in a church parking lot at the edge of Santa Barbara, California. On the van’s roof is a black Yakima SpaceBooster, full of previous-life belongings like a snorkel and fins and camping gear. Adkins, who is 56 years old, parks the van at the lot’s remotest corner, aligning its side with a row of dense, shading avocado trees. The trees provide privacy, but they are also useful because she can pick their fallen fruit, and she doesn’t always have enough to eat. Despite a continuous, two-year job search, she remains without dependable work. She says she doesn’t need to eat much – if she gets a decent hot meal in the morning, she can get by for the rest of the day on a piece of fruit or bulk-purchased almonds – but food stamps supply only a fraction of her nutritional needs, so foraging opportunities are welcome.
Prior to the Great Recession, Adkins owned and ran a successful plant nursery in Moab, Utah. At its peak, it was grossing $300,000 a year. She had never before been unemployed – she’d worked for 40 years, through three major recessions.
You can read the rest of the article right here.
What would you do if you were in a similar situation?
Sadly, many more Americans will end up just like her. As I wrote about the other day, the U.S. economy is not going to be able to produce enough jobs for everyone anymore. In fact, the overall employment picture is going to keep getting worse for working Americans.
Things have gotten so bad that even many very highly educated scientists cannot find jobs in America right now. Almost everybody is hurting, and we haven’t even gotten to the next wave of the economic collapse yet.
The next time that there is a major spike in the unemployment rate, millions of Americans will lose all hope and will become very desperate.
And desperate people do desperate things.
The rot and decay that we are witnessing right now is just the beginning.
Things are going to get a lot worse.
So let us hope for the best, but let us also prepare for the worst.
Do you want to know what the future of America is going to look like? Just check out what is happening to Detroit. The city of Detroit was once one of the greatest industrial cities in the history of the world, but today it is a rotting, decaying, post-apocalyptic hellhole. Nearly half the men are unemployed, nearly half the population is functionally illiterate, more than half of the children are living in poverty and the city government is drowning in debt. As economic conditions have gotten worse, crime has absolutely exploded. Every single night in Detroit there are frightening confrontations between desperate criminals and exasperated homeowners. Unfortunately, the police force in Detroit has been dramatically reduced in size. When the police in Detroit are called, they often show up very late if they even show up at all. Detroit has become a lawless hellhole where violence is the currency of the streets. If you want to survive in Detroit, you better be ready to fight because there are hordes of desperate criminals that are quite eager to take literally everything that you have got. But don’t look down on Detroit too much, because what is happening in Detroit will soon be happening all over America.
The following are 20 things we can learn about the future of America from the death of Detroit….
#1 People don’t want to live where the stench of failure and decay is constantly in the air. Back in the 1950s, Detroit was a teeming metropolis of approximately 2 million people. According to the 2010 census, only 713,000 people live in Detroit today. The U.S. Census Bureau says that Detroit lost a resident every 22 minutes during the first decade of this century.
#2 When the economy falls apart, desperate people will do desperate things and many homeowners will fight back. Justifiable homicide in Detroit rose by a staggering 79 percent during 2011.
#3 In major cities where people are scrambling just to survive, any confrontation can quickly escalate into a life or death affair. The rate of self-defense killings in Detroit is currently 2200% above the national average.
#4 When there is not enough money to go around, a lot of local governments will choose to cut back on police protection. Ten years ago, there were approximately 5,000 police for the city of Detroit. Today, there are less than 3,000.
#5 The essential social services that you are enjoying today will not always be there in the future. Officials in Detroit recently announced that due to budget constraints, all police stations will be closed to the public for 16 hours a day.
#6 Economic decay is a breeding ground for chaos and violence. Last Friday and Saturday, a total of nine shootings were reported in the city of Detroit.
#7 More Americans than ever are realizing the benefits of self-defense. The following is what 73-year-old Julia Brown recently told the Daily….
The last time Brown, 73, called the Detroit police, they didn’t show up until the next day. So she applied for a permit to carry a handgun and says she’s prepared to use it against the young thugs who have taken over her neighborhood, burglarizing entire blocks, opening fire at will and terrorizing the elderly with impunity.
#8 When crime gets go bad that the police are powerless to stop it, vigilante groupsbegin to form….
In fact, crime has gotten so bad and the citizens are so frustrated by the lack of police assistance that they have resorted to forming their own organizations to fight back. One group, known as “Detroit 300″, was formed after a 90-year-old woman on Detroit’s northwest side was brutally raped in August.
#9 When criminals become desperate, they will steal literally anything that is not bolted down. In Detroit today, thieves have stripped so much copper wiring out of the street lights that half of all the lights in some neighborhoods no longer work.
#10 As things fall apart, eventually a time comes when it is not even safe to drive down the road in the middle of the day. 100 bus drivers in Detroit recently refused to drive their routes out of fear of being attacked on the streets. The head of the bus drivers union, Henry Gaffney, said that the drivers were literally “scared for their lives“….
“Our drivers are scared, they’re scared for their lives. This has been an ongoing situation about security. I think yesterday kind of just topped it off, when one of my drivers was beat up by some teenagers down in the middle of Rosa Parks and it took the police almost 30 minutes to get there, in downtown Detroit,” said Gaffney.
#11 One of the clearest signs of decline in America is the state of our education system. Only 25 percent of all students in Detroit end up graduating from high school. Many other major cities will soon have graduation rates similar to Detroit.
#12 When local governments run out of money they are forced to make tough choices. After already shutting down dozens of schools, officials in Detroit have announced plans to close down 16 more schools.
#13 A growing percentage of Americans cannot even read or write. This is a very frightening indication of what the future of America could look like. According to one stunning report, 47 percent of all people living in the city of Detroit are functionally illiterate.
#15 The employment situation in America is a lot worse than the government is telling us. An analysis of census figures found that 48.5% of all men living in Detroit from age 20 to age 64 did not have a job in 2008.
#16 When a major city becomes a hellhole, home prices fall like a rock. The median price of a home in Detroit is now just $6000.
#17 When crime and looting become commonplace, homes in an area can become absolutely worthless. Some homes in Detroit have been sold for a single dollar.
#18 When depression-like conditions exist in an area for a number of years, large numbers of people will move on to greener pastures. As of a few years ago, there were more than 40,000 vacant properties in the city of Detroit.
#19 Just because we have a high standard of living today does not mean that will always be the case. Detroit is just a rotting shell of what it once was, and what is happening to Detroit will happen to much of the rest of America very soon. The following is what one British reporter found during his visit to Detroit….
Much of Detroit is horribly dangerous for its own residents, who in many cases only stay because they have nowhere else to go. Property crime is double the American average, violent crime triple. The isolated, peeling homes, the flooded roads, the clunky, rusted old cars and the neglected front yards amid trees and groin-high grassland make you think you are in rural Alabama, not in one of the greatest industrial cities that ever existed.
#20 When government finances collapse, politicians look for things to sell off and “privatize”. Unfortunately, the Detroit city government is so broke that it is now considering selling off some of its most famous assets….
Now, the city of Detroit’s most venerable assets — from Belle Isle to the Detroit-Windsor Tunnel — could end up on the auction block as the city fights for its financial life.
Facing mounting debt and the prospect of a state-appointed emergency manager, the city is looking at all options to shed expenses and raise revenue. If city officials can’t come up with a viable budget plan, an emergency manager would have the power to sell assets as part of a financial takeover of Detroit.
But Detroit is not alone.
Lots of other cities all over America are flat broke and out of options.
For example, just check out what is happening in Scranton, Pennsylvania….
Mayor Christopher Doherty is blunt when asked about a court order forcing his Pennsylvania city to pay about $30 million in wages withheld from police and firefighters under a state-approved fiscal recovery plan.
“I don’t have the money,” said Doherty, 53. As for the chance of borrowing the cash, more than half of the city’s projected general-fund revenue, he added, “there’s no financial institution that’s going to give me $30 million to pay it.”
The U.S. economy never recovered from the last major financial crisis, and now another one is on the way.
As the economy crumbles, so will the fabric of our society.
The American people are terribly spoiled and they do not possess the character to handle depression-like conditions with grace and dignity.
In the years ahead, we are going to see rampant rioting and looting in our major cities. The crime sprees that we will witness in future years will be absolutely unprecedented.
Things did not have to turn out this way, but unfortunately the consequences of decades of really bad decisions are starting to catch up with us.
So what do you think the future of America will look like? Feel free to leave a comment with your opinion below….
Deal Reached to Prevent Michigan Takeover of Detroit; Really? No, Not Really; What’s Best for Bankrupt Detroit?
On January 29 Bloomberg reported Bing Races to Beat Michigan Deadline for Union Detroit Deal
Democratic Mayor Dave Bing is racing to wrest concessions from 48 bargaining units to erase a $200 million deficit in the home of General Motors Co. and the cradle of the U.S. auto industry.
Otherwise, the city of 714,000 dominated by Democrats may face a Republican-appointed manager with authority to sell assets and nullify contracts. State Treasurer Andy Dillon has said Detroit will run out of cash by May, and called for concessions by early February.
This week, Bing began firing 1,000 of Detroit’s 11,300 employees. The mayor also proposes a 10 percent cut in payments to vendors and doubling the 1 percent tax on corporations.
Bing, 68, has said the city must trim annual employee benefit and pension costs, which have risen since 2001 to $35,000 per employee from $18,000.
“We are meeting, not daily but more than weekly, and there are sidebar conversations every day,” said Al Garrett, president of AFSCME Council 25, which represents about 3,000 employees. “I’m not sure an emergency manager would be any more Draconian than what the city itself is asking, but it’s a real possibility.”
Mayor Bing is taking his script straight from Greece where a deal has been “close” for days, weeks, and now months.
Today’s Bloomberg headline does not match the facts presented. Please consider Detroit Reaches Pact With City Unions to Avoid Takeover, Detroit News Says
Mayor Dave Bing and a majority of city employee unions have reached tentative agreement on concessions aimed at avoiding a state takeover.
“This agreement is the first meaningful step in achieving the necessary concessions and structural changes,” Bing, 68, said via Twitter.
The deal, but no details, was confirmed by Al Garrett, president of AFSCME Council 25. The agreement covers about 6,500 of the city’s about 11,000 employees, not including police and firefighters who have resisted a demand for a 10 percent wage cut, he said.
The city and unions must agree to concessions early this month to avoid state action, such as the appointment of an emergency manager with broad powers to cut spending, said state Treasurer Andy Dillon. Dillon is leading a review of city finances, after a preliminary review found it will run out of cash by May, and that it faces a $200 million operating deficit.
Deal Reached? Really? No, Not Really
According to mayor Bing we have an “agreement”, albeit an agreement with no details, and without covering police or firefighters. What kind of deal is that?
What’s Best for Detroit?
The best thing for Detroit would be if there is no deal, or the state rejects the deal.
Unions are the problem and the solution is to get rid of them entirely. That will not happen under Bing, but it could happen in a state takeover.
Bing is not interested in what’s best for Detroit taxpayers nor is he interested is what’s best for Detroit school children where shockingly only 25% graduate high schools. Rather, Bing is out to save as much of the status quo as he can, including his own job of course.
Detroit Schools Bankrupt
Flashback July 24,2009: The Wall Street Journal reports Detroit’s Schools Are Going Bankrupt, Too
Detroit is like many urban school districts—large, unwieldy and bureaucratic, with a powerful union that makes the system unable to adapt to changing circumstances and that until very recently had an indulgent political class that insulated it from reform. That insulation came in two forms. The first was neglect. Mayor Kwame Kilpatrick spent several years distracted by a scandal stemming from his affair with a staffer. He resigned last year, pleaded guilty to obstruction of justice, and was sentenced to four months in jail. Had he been an effective mayor, he might have also been a powerful advocate for students.
The other insulating force was a conscious decision to wall off Detroit from charter schools. In 1993, Michigan’s legislature made it difficult to create new charters in Detroit by declaring that only community colleges could authorize charters for primary and secondary schools in “First-Class Districts”—defined as those with more than 100,000 students. Detroit was the only First-Class District. In 2003 the state, under pressure from the Detroit Federation of Teachers, turned down a gift of $200 million from philanthropist Robert Thompson that would have established 15 charter schools in the city. Those charters are needed today.
The net result has been a school system that’s been coming apart as the teachers union has dug in its heels. In 2006, the union illegally went on strike, killing a plan to force teachers to take a pay cut to balance the system’s books.
Collective Bargaining has Morally and Fiscally Bankrupted Detroit Schools
Read that again. Under pressure from the Teachers’ Union, Detroit turned down $200 Million. That was in 2003 dollars. Wow. No doubt the union “did it for the kids“.
For more on the appalling behavior of Detroit’s teachers’ unions please see Detroit Public Schools (25% graduation rate) teachers unions opposing highly qualified volunteer teachers.
It is time to kill collective bargaining for public unions, every one of them, and nation-wide, not just Detroit.
Mike “Mish” Shedlock – Global Economic Analysis
The Corruption of America
The numbers tell us America is in decline… if not outright collapse.
I say “the numbers tell us” because I’ve become very sensitive to the impact this kind of statement has on people. When I warned about the impending bankruptcy of General Motors in 2006 and 2007, readers actually blamed me for the company’s problems – as if my warnings to the public were the real problem, rather than GM’s $400 billion in debt.
The claim was absurd. But the resentment my work engendered was real.
So please… before you read this issue, which makes several arresting claims about the future of our country… understand I am only writing about the facts as I find them today. I am only drawing conclusions based on the situation as it stands. I am not saying that these conditions can’t improve. Or that they won’t improve.
The truth is, I am optimistic. I believe our country is heading into a crisis. But I also believe that… sooner or later… Americans will make the right choices and put our country back on sound footing.
Please pay careful attention to the data I cite. And please send me corrections to the facts. I will happily publish any correction that can be substantiated. But please don’t send me threats, accusations against my character, or baseless claims about my lack of patriotism. If I didn’t love our country, none of these facts would bother me. I wouldn’t have bothered writing this letter.
I know this is a politically charged and emotional issue. My conclusions will not be easy for most readers to accept. Likewise, many of the things I am writing about this month will challenge my subscribers to re-examine what they believe about their country. The facts about America today tell a painful story about a country in a steep decline, beset by problems of its own making.
One last point, before we begin… I realize that this kind of macro-economic/political analysis is not, primarily, what you pay me for. You rightly expect me to provide you with investment opportunities – whether bull market, bear market, or total societal collapse. And that’s what I’ve done every month for more than 15 years.
But that’s not what I’ve done this month. You won’t find any investment ideas at all in these pages. This issue is unlike any other I have ever written.
I’m sure it will spark a wave of cancellations – costing me hundreds of thousands of dollars. I fear it will spark a tremendous amount of controversy. Many people will surely accuse me of deliberately writing inflammatory things in order to stir the pot and gain attention. That’s not my intention. The truth is, I’ve gone to great lengths throughout my career to protect my privacy.
I am speaking out now because I believe someone must. And I have the resources to do it. I am sharing these ideas with my subscribers because I know we have arrived at the moment of a long-brewing crisis.
Our political leaders, our business leaders, and our cultural leaders have made a series of catastrophic choices. The result has been a long decline in America’s standard of living.
For decades, we have papered over these problems with massive amounts of borrowing. But now, our debts total close to 400% of GDP, and America is the world’s largest borrower (after being the world’s largest creditor only 40 years ago)… And the holes in our society can no longer be hidden…
We’ve reached the point where we will have to fix what lies at the heart of America’s decline… or be satisfied with a vastly lower standard of living in the future.
How do I know? How do I statistically define the decline of America?
The broadest measure of national wealth is per-capita gross domestic product (GDP). Economists use this figure to judge standards of living around the world. It shows the value of the country’s annual production divided by the number of its citizens. No, the production isn’t actually divided among all the citizens, but this measure provides us with a fair benchmark to compare different economies around the world. Likewise, this measure shows the growth (or the decline) in wealth in societies across time.
So… is America growing richer or poorer based on per-capita GDP? Seems like a simple enough question, doesn’t it? Is our economy growing faster than our population? Are we, as individuals, becoming more affluent? Or is the pie, measured on a per-person basis, growing smaller?
This is the most fundamental measure of the success or the failure of any political system or culture. Are the legal and social rules we live under aiding our economic development or holding us back? What do the numbers say?
Unfortunately, it’s a harder question to answer than it should be. The problem is, we don’t have a sound currency with which to measure GDP through time. Until 1971, the U.S. dollar was defined as a certain amount of gold. And the price of gold was fixed by international agreement. It didn’t actually begin to trade freely until 1975. Therefore, the value of the U.S. dollar (and thus the value of U.S. production, which is measured in dollars) was manipulated higher for many years.
Even today, our government’s nominal GDP figures are greatly influenced by inflation. The influence of inflation is particularly pernicious in GDP studies. You see, inflation, which actually reduces our standard of living, drives up the amount of nominal GDP. So it creates the appearance of a wealthier country… while the nation is actually getting poorer.
The only real way to accurately measure per-capita GDP is to build our own model. The need to build our own tools tells you something important – the government doesn’t want anyone to know the answer to this question. It could easily publish data far more accurate than the indexes it puts out. But government doesn’t want anyone to know. And it wants to be able to say “those aren’t the real data” when studies like ours produce bad news.
So pay attention to how we built our charts. You can see for yourself that our data are far more accurate than the government’s figures. Our data are based on the real purchasing power of the currency, not the nominal numbers, which are completely meaningless in the real world.
The question we are trying to answer is: What would per-capita GDP numbers look like, if we used a real-world currency, like gold, or a basket of commodity prices, instead of the paper-based U.S. dollar? What would the figures be if we measured GDP in sound money instead of the government’s funny money?
Here’s how we figured it out. We took the government numbers for nominal GDP and measured them first against commodity prices, and later (after it began to trade freely) gold. We used a standard commodity index (the CRB) up to 1975 and gold post-1975. The result of this analysis shows you the real trend in U.S. per-capita GDP, as measured on a real-world purchasing power basis.
Our analysis shows you what’s actually happened to our real standard of living. The results, we suspect, will surprise even the most bearish among you.
America is in a steep decline.
Americans Are Getting Poorer – Fast
Let me anticipate the “official” criticism of our study. Many people will claim that our numbers aren’t “real.” They will say that we “mined” the data to produce a chart that showed a steep decline.
That’s simply not so. All we’ve done is convert the government’s nominal GDP stats into a fixed currency value that’s based on real-world purchasing power. The fact is, our data are far more accurate than the government’s because they represent the real-world experience. That’s why our data are far more closely correlated to other real-world studies of wealth in America.
Consider, for example, annual sales of automobiles. Auto sales peaked in 1985 (11 million) and have been declining at a fairly steady rate since 1999. In 2009, Americans bought just 5.4 million passenger cars. As a result, the median age of a registered vehicle in the U.S. is almost 10 years.
Our data shows that real per-capita wealth peaked in the late 1960s. Guess when we find the absolutely lowest median age of the U.S. fleet? In 1969. At the end of the 1960s, the median age of all the cars on the road in the U.S. was only 5.1 years. Even as recently as 1990, the median age was only 6.5 years.
Rich people buy new cars. Poor people do not.
Most important, our data “proves” something I know many of you have felt or perceived for many years. You’ve seen the decline of your neighborhoods. You’ve gone years without being able to earn more money in your job. Or you’ve seen your purchasing power decrease to the point where you’re now substituting lower-quality products on your grocery list for the brand-name products you used to buy.
You can see how much harder it is on your children to find good jobs, to buy good housing or a new car. As a result, few people under the age of 40 have the same kind of “life story” as their parents.
And because they can’t “make it,” many have decided to “fake it.” The average college student now graduates with $24,000 in debt… and by his late 20s has racked up more than $6,000 in credit card debt. Meanwhile, median earnings for Americans aged 25-34 equals $34,000-$38,000. (Source: Demos.org, “The Economic State of Young America,” November 2011.)
Can you imagine starting your life out as an adult with a personal debt-to-income level at close to 100%? What does this say about the state of our economy? What does this say about the state of our culture?
Who Suffers Most
It’s not only the young that are having trouble in America. It is also the old.
Debt levels among households headed by people older than 62 have been rising for two decades. The average mortgage size for this population is now $71,000 – five times larger than it was in 1987 (adjusted for inflation), according to William Apgar of Harvard’s Joint Center for Housing Studies.
Older Americans are also more reliant on credit card debt than ever before… credit card debt. From 1992 through 2007 (which is the latest data available) older Americans took on credit card debt at a faster pace than the population as a whole. According to USA Today, lower- and middle-income Americans aged 65 and older now carry an average of more than $10,000 in credit card debt, up 26% since only 2005.
Given average interest rates of 20% for these debts, it’s a fair bet that these obligations will never be repaid. But they will have a terrible impact on the standard of living of these older Americans.
What in the heck is going on? Don’t Americans pay off their mortgages before they retire? Don’t they work hard during their careers, save, and invest, so they can move to Florida and spend their retirement in comfort?
Older Americans living with credit card debt! This doesn’t sound like America, does it? Or maybe it does.
My bet is that most of my subscribers know that something has gone terribly wrong with America. It’s not easy to figure out how all of this happened… but you know from your own experiences that these numbers aren’t wrong. It might not be pleasant to think about… but these figures paint a sad but accurate picture: America is not the country it was 40 years ago. These changes are warping our economy, politics, and culture.
In this month’s issue, I’d like to try to define a few of the core reasons we’re in this situation. I can’t possibly analyze all the factors that have led to this decline. But I want to document the growth of graft in politics. I want to demonstrate – with real facts and examples – how public company leadership has deteriorated. And I want to document some of the things that are occurring in the broader society, all of which I believe are linked to this fundamental decline in our standard of living.
You see, I believe the decline of our country is primarily a decline of our culture.
We have lost our sense of honor, humility, and the dedication to personal responsibility that, for more than 200 years, made our country the greatest hope for mankind. I want to detail some of the factors that gave rise to the current entitlement society. We have become a country of people who believe their well-being is someone else’s responsibility.
I’ve labeled these problems: The Corruption of America.
These problems manifest themselves in different ways across institutions in all parts of our society. But at their root, they are simply facets of the same stone. They are all part of the same essential problem.
The corruption of America isn’t happening in one part of our country… or in one type of institution. It is happening across the landscape of our society, in almost every institution. It’s a kind of moral decay… a kind of greed… a kind of desperate grasp for power… And it’s destroying our nation.
The Ethos of ‘Getting Yours’
Americans know, in their bones, that something terrible is happening. Maybe you can’t articulate it. Maybe you don’t have the statistics to understand exactly what’s going on. But my bet is, you think about it a lot.
For me, a poignant moment of recognition came this month.
Bloomberg news published an article based on confidential sources about how Henry Paulson, the former CEO of Goldman Sachs and the Republican U.S. Treasury secretary during the financial crisis, held a secret meeting with the top 20 hedge-fund managers in New York City in late July 2008. This was about two weeks after he testified to Congress that Fannie Mae and Freddie Mac were “well-capitalized.”
I knew for a fact that what Paulson told Congress wasn’t true. I wrote my entire June 2008 newsletter detailing exactly why Fannie and Freddie certainly had billions in losses that they had not yet revealed to investors – $500 billion in losses, at least. There was no question in my mind, both companies were insolvent – “zeros,” as I explained.
And yet, in front of Congress, the U.S. Treasury secretary was saying exactly the opposite. Either I was a liar… or he was.
Then… only a few days later… what did Paulson tell those hedge-fund managers?
He told them the same thing I had written in my newsletter. He told them the opposite of what he’d said publicly to Congress. He told these billionaire investors that Fannie and Freddie were a disaster… They would require an enormous, multibillion-dollar bailout… The U.S. government would have to take them over… And their shareholders would be completely wiped out.
Here you had a high-government official, explicitly lying to Congress (and by extension, the general public), while giving the real facts to a group of people who represented the financial interests of the world’s wealthiest folks. The story didn’t come to the public’s attention for two years.
This was the most outrageous example of graft and corruption I have ever seen. Certainly it involves more billions of dollars in misappropriated value than any other similar story I can recall. These managers had the risk-free ability to make tens of billions of dollars, if not hundreds of billions, by using derivatives to capitalize on what they knew was the imminent collapse of the world’s largest mortgage bank. Who picked up the tab? You know perfectly well. It was you and me, the taxpayers.
(One of the investment managers present at this meeting was Steve Rattner, who by that point was already deeply involved in another bit of graft, his efforts to bribe New York state pension-fund managers for large investments into his hedge fund, from which he earned perhaps as much as $100 million. He later settled the charges for a mere $10 million shortly after Andrew Cuomo was elected governor of New York.)
The Bloomberg story… about a crooked Treasury secretary handing a room full of crooked billionaires inside information worth billions of dollars… hardly caused a ripple. As far as I know, no actions are being planned against Henry Paulson or any of the hedge-fund managers involved. No other major media outlet picked up the story. I saw nothing about it from the Department of Justice or the Securities and Exchange Commission.
What does that say about our country when even the most egregious kind of corruption – involving hundreds of billions of dollars – is simply ignored?
It seems like everyone in our country has lost his moral bearing, from the highest government officials and senior corporate leaders all the way down to schoolteachers and local community leaders. The ethos of my fellow Americans seems to have changed from one of personal integrity and responsibility to “getting yours” – the all-out attempt, by any means possible, to get the most amount of benefits with the least amount of work.
You can see this in everything from the lowering of school standards (revising the SAT) to the widespread use of performance-enhancing drugs in professional, college, and high school sports. Cheating has become a way of life in America.
I have an idea about how this happened… about the root cause of this kind of corruption and why it was inevitable, given some of the basic facts regarding how we’ve organized our government and our corporations.
Let me show you the numbers – the hard facts – behind what’s happened to our country…
The Corruption of Politics
I’ll start with one of the biggest factors in the decline of our civilization – the link between welfare, education, crime, and politics.
It is routinely alleged in national political debates that something is fundamentally unfair and un-American about the huge “wealth gap” between the poorest Americans and the wealthiest. Some politicians like to argue that the poor never have a real shot at the American dream, and as a nation, we owe them more and more of our resources to correct this injustice. Most important, it is alleged that only the government has the resources to correct this inequality.
This is a dangerous notion…
First, it promotes the idea of entitlement. Entitlement is a fairly new idea in the American political lexicon – perhaps because most of our nation’s wealth is still fairly new. The American idea of entitlement argues that because you were born into a rich society, other people owe you something. The idea has become pervasive in our culture. It underlies the basic assumptions behind the idea of a “wealth gap.” Implicit is the assumption that successful Americans haven’t rightfully earned their wealth… that in one way or another, they’ve taken advantage of the society and have an obligation to give back most of what they’ve “taken.”
As you’ll see, I believe the idea of entitlement lies at the root of many of our most serious cultural problems.
The more obvious problem is the idea that the government is responsible for fixing the “wealth gap.” But the government has proved wholly ineffective at dealing with poverty in America. The data is nearly conclusive that government efforts are far more likely to be the cause of the wealth gap than the solution.
The simple fact is, the government has to take resources from someone before it can dole them out to others. And this act of taking turns out to be economically destructive. It reduces the market’s incentives for entrepreneurs. The more you take from the productive members of society, the less productive they become. That’s the primary lesson of the history of socialism. Yet… many of our political leaders seem oblivious to this iron law of human nature.
Consider a simple analysis that compares the unemployment rate with the size of the federal government’s spending, as measured against GDP. (We created this chart after reading a similar analysis at Mark Perry’s excellent financial blog, Carpe Diem.)
As you can see in this chart, the larger the government grows as a percentage of our economy, the higher unemployment rises. The more government, the less opportunity. These figures are similar when studied comparatively across many different countries.
We also know from decades of experience that little of the government’s funding for the poor will ever reach those who are actually in need. Instead, these kinds of socialist policies end up sending billions of dollars into the hands of unions, “community organizers,” and other sponsors of the Democratic Party. This tightens their political control of America’s inner cities, which have become the source of our country’s most intractable social problems.
Believe me, I have reams of data and decades of case studies for these conclusions. But before we get to my proof, I want you to simply assume that what I’m saying is 100% correct. Assume most of the government’s social spending ends up corrupting the politics of the inner city. Assume these efforts actually make the “wealth gap” larger. Assume these policies and the politicians who sponsor them are actually creating a society of complete dependence, where the spread of ignorance has created entire generations of people who aren’t educated enough to know they’ve been enslaved by their own leaders.
If these things are true, if my conclusions are exactly right, what would America’s poorest communities look like today?
It has now been almost 50 years since the start of the War on Poverty, President Lyndon Johnson’s program to radically increase domestic welfare spending. These programs and their various spinoffs have been at the center of Democratic politics ever since. In fact, if you compare speeches about these programs from the mid-1960s until today, you will find the verbiage never changes. Obama is merely echoing the same calls for “social justice” that Robert Kennedy used in his ill-fated 1968 campaign for president.
But besides the soaring rhetoric, besides the promise of a “chicken in every pot,” what have these programs actually achieved? The wholesale destruction of urban communities across America, communities that are overwhelmingly African American. If the intention of these programs had been to destroy black communities, you could have hardly done more damage than the last 50 years of Democratic policy.
I don’t think most Americans realize how dangerous these communities have become or the toll they take on our country as a whole. That’s primarily because talking about this problem is seen as racist. That’s complete nonsense. The victims of these policies are primarily black people. Trying to help them restore dignity and independence to their communities isn’t a racist goal. It’s humanitarian.
And let me offer a prediction… Sooner or later, the people in these communities are going to finally point their finger at the politicians who’ve lied and pandered to them for decades, all while stealing from them at every turn. When that moment comes, having a track record of correctly speaking out about the real nature of these problems will be a valuable political asset.
No, I’m not running for office… I’m just trying to buck-up the politicians who I know read this letter. They need to get out in front of this issue.
Let me give you some of the numbers that define the enormous scope of these problems.
According to the NAACP, Texas taxpayers spent $175 million in 2009 to imprison residents from a small part of Houston – only 10 zip codes out of 75. Thus, people from neighborhoods that are home to only about 10% of the city’s population account for more than 33% of the state’s entire $500 million annual prison spending. These neighborhoods are overwhelmingly poor and African American.
In Pennsylvania, taxpayers will spend $290 million in 2009 to imprison residents from just 11 of Philadelphia’s neighborhoods, representing about 25% of the city population. On this relatively small urban area, the state will spend roughly half its $500 million prison budget. These neighborhoods are overwhelmingly poor and African American.
In New York, taxpayers will spend $539 million to imprison residents from only 24 of New York City’s 200 different neighborhoods. Only 16% of the city’s population lives in these areas, but they will account for nearly half of the state’s $1.1 billion prison budget. These neighborhoods are overwhelmingly poor and African American.
America has many problems… but these neighborhoods represent more than a society in decline. Life in these places reflects a complete collapse of Western civilization. What’s happening in these communities? A breakdown of the family and the resulting collapse of the school system. What you have left is crime – violent and political.
In Detroit, only 27% of the black male students in the school system graduate from high school. This is not a racial problem: Only 19% of the white male students graduate from those same schools. What’s causing this problem? A complete breakdown of society. When communities can no longer teach their children the most basic academic skills, such as reading, math, history, literature, and economics… what future can we expect? And what kind of society do you expect after several generations of total ignorance?
These problems are still found primarily in urban areas, but they are spreading across the country. In Pinellas County, Florida, only 21% of black male students graduate from high school. In Palm Beach County, Florida, you find a similar number. Likewise Duval County, Florida… and Jefferson Parish, Louisiana… and Charleston County, South Carolina. In Nebraska, only 40% of black male students graduate from high school. In Nevada, only 45%. In New York state, only 25%.
What opportunities are available in America to people without even a basic education? The New York Times reports almost 70% of black males without a high school diploma are unemployed in the United States.
In many predominantly black, urban communities, the actual unemployment rate is close to 100% for young dropouts. Given these figures, it isn’t surprising that many of these people end up in jail.
According to various studies, black males who dropped out of school by age 16 are four times more likely to end up in jail than those who remained in school. Crime is literally all they know. Likewise, a black youth whose mother was a high school dropout is 88% more likely to end up in jail. These are the two primary reasons nearly one in 11 adult black men are either in jail or on parole.
How did this all happen? How did we end up with expensive schools that can’t teach? How did we end up with young mothers who aren’t married? How did we end up with entire generations of people who won’t – and probably can’t – work in the labor force? How did we end up with a skyrocketing prison population? The prison population in America has soared from less than half a million people in 1980 to more than 2.5 million people today. More than 7 million adults are in prison or on parole in the United States. We have an incarceration rate that’s seven times higher than any other industrialized nation.
The land of the free?
Let’s ask the most basic question: What has the gigantic increase in welfare spending and education spending done for the underclass of America? It seems apparent that growth in federal spending has caused far more harm than good. When you study these neighborhoods, what you find is a horrifying story that’s been repeated, generation after generation since the early 1960s. It’s a story of families who have been destroyed by their dependency on the state.
The truly extraordinary part is that all these things happened after these neighborhoods began voting and electing their own (typically black and Democratic) leadership. The socialism they voted for themselves led most directly to the destruction of their communities. It was their own mayors, ward leaders, and congressmen who chose this path for these communities.
Let me show you one case study – Detroit.
How Socialism Came to America… and Destroyed Detroit
In 1961, the last Republican mayor of Detroit, Louis C. Miriani, lost his re-election bid. He probably would have lost to anyone who ran against him because he was known to be a crook. He later served 10 years in prison for tax evasion.
The man who defeated him, Jerome Cavanagh, was a Democrat. He ushered in a new kind of politics in Detroit. Cavanagh, who was white, got elected by promising to give Detroit’s African American population the civil rights they deserved. But he didn’t stop there. Seeing the political advantage to serving this community’s interests, he did all he could to bring government benefits and government spending to Detroit’s black community.
Cavanagh brought socialism to Detroit.
Mayor Cavanagh was the only elected official to serve on President Johnson’s Model Cities task force. The program was modeled after Soviet efforts to rebuild whole urban areas in Eastern Europe. At the time, this centralized approach to urban development was proclaimed as an advantage to the Soviet system, something that could give them an edge in the Cold War.
Detroit received widespread acclaim for its leadership in the program, which attempted to turn a nine-square-mile section of the city (with 134,000 inhabitants) into a “Model City.” To help finance the effort, Cavanagh pushed a new income tax through the state legislature and a “commuter tax” on city workers. He promised the mostly poor and black residents of the Model City area that the rich would pay for all of these benefits. He bought their votes with taxes they didn’t have to pay.
It was classic American socialism.
More than $400 million was spent on the program – and that was back when quarters still had actual silver in them. The feds and Democratic city mayors were soon telling people where to live, what to build, and what businesses to open or close. In return, the people received cash, training, education, and health care.
But they didn’t like being told what to do… or how to live. Not surprisingly, the Model Cities program was a disaster for Detroit. Within five years, it had helped trigger a complete breakdown of civil order and the city’s population began to rapidly decline.
On July 23, 1967, police attempted to break up a notorious “blind pig” in the heart of the new Model City. Blind pigs were after-hours clubs that featured gambling and prostitution. They were part of the black culture of Detroit, with many having been in operation since the Prohibition period. The community tolerated these establishments – but the political leadership didn’t want any blind pigs in the new Model City area.
On this particular night, at this particular club, the community was celebrating the return of two Vietnam War veterans. More than 80 people had packed into the club. The police decided to arrest everyone present, including the two war vets. This outraged the entire neighborhood, which began to riot. The scene turned into the worst race riot of the 1960s.
As my friend Doug Casey likes to say about the War on Poverty, “The poor lost.” The violence killed more than 40 people and left more than 5,000 people homeless. One of the first stores to be looted was a black-owned pharmacy. The largest black-owned clothing store in the city was also burned to the ground. Cavanagh did nothing to stop the riots. (He claimed a large police presence would make matters worse.) Five days later, President Johnson sent in two divisions of paratroopers to put down the insurrection.
The situation destabilized the entire city. Most of the people who could afford to leave did. Over the next 18 months, 140,000 upper- and middle-class residents – almost all of them white – left the city.
And so, you might ask… after five years of centralized planning, higher taxes, and a fleeing population, what did the government decide to do with its grand experiment? You’ll never guess…
Seeing it had accomplished nothing but failure… The government expanded the Model City program with 1974′s Community Development Block Grant Program. Here again, politicians would decide which groups (and even individuals) would receive state funds for various “renewal” schemes. Later, big business was brought into the fold. In exchange for various concessions, the Big Three automakers “gave” $488 million to the city for use in still more redevelopment schemes in the mid-1990s.
What happened? Even with all of their power and all of the money, centralized planners couldn’t succeed with any of their plans. Nearly all of the upper- and middle-class citizens left Detroit. The poor fled, too. The Model City area lost 63% of its population and 45% of its housing units from the inception of the program through 1990.
Even today, the crisis continues. At a recent auction of nearly 9,000 seized homes and lots, less than one-fifth of the available properties sold, even with bidding starting at $500. You literally can’t give away most of the property in Model City areas today. The properties put up for sale represented an area the size of New York’s Central Park. Total vacant land in Detroit now occupies an area the size of Boston. Detroit properties in foreclosure have more than tripled since 2007.
None of this is surprising. It’s exactly what you’d expect to see given the implementation of a socialist scheme like a Model Cities’ program. Quite simply, coercion doesn’t work for economic development. You cannot tax yourself into prosperity.
It might buy votes… but sooner or later the voters will realize all that’s been promised was a lie. Won’t they?… Maybe not.
You see, the failure of the Model Cities program and of the War on Poverty wasn’t surprising. What is surprising is that every single mayor of Detroit since 1961 has been a Democrat. And extremely liberal, black politicians have filled almost every major political office in the city since the mid-1960s.
For example, John Conyers, Jr. has represented most of Detroit’s worst neighborhoods since 1965. Today, Conyers is the second-longest serving congressman in the House. And his election track record could be described as “Putin-esque.” Conyers doesn’t merely win all of his election campaigns… He wins by margins that aren’t explainable in a normal, two-party system.
He defeated Republican Robert Blackwell in 1964, getting 84% of the vote. He was re-elected 13 times in a row from that district, all with a greater margin of victory than 85%. Ironically, the district was so ill-served by his socialistic policies that about half of the people moved away. The population losses led to redistricting. From then on, his margin of victory has fallen… to “only” around 80%.
These election results don’t seem reasonable, do they? They aren’t. By controlling the state legislature in Michigan, the Democrats are able to draw the congressional districts in a way that guarantees them almost permanent control. It’s no different than what despots do all over the world. They hold an “election.” But it’s only for show.
And what do the Democrats do with this power? They push a form of American socialism. This political system features transfer payments, government jobs, and lucrative government contracts to voters in exchange for political support – and in many cases, outright bribes. They do all of these things under the cover of “progressive” politics and “social justice.”
But if you brush away the veneer, what you find is a history of abuse of power, corruption, and outright bribery. Conyers himself was found guilty of several minor ethical violations in 2006 – mainly of using his staff as personal servants, forcing them to babysit and chauffer his children. In 1992, he was one of the most egregious abusers of the House Banking scandal. He wrote 273 bad checks and left his account overdrawn for nine months. But that’s all small-time graft compared to how things really work in his office and in his district.
How do I know? Well… just ask yourself where Conyers’ wife sleeps today.
Monica Conyers, the wife of the second-longest tenured congressman in the United States, sleeps in a federal prison in West Virginia. She pled guilty to bribery in June 2009. She is serving a 37-month sentence for accepting $60,000 in bribes as the president pro tempore of the Detroit City Council. And yet… and yet… Conyers won re-election handily in 2010.
How is that possible?
These kinds of people and their political philosophy have destroyed what was once America’s fourth-largest city. There is almost nothing left of what was the capital of America’s industrial heartland. It’s not hard to understand what has happened. When you start taxing people at extremely progressive rates to pay for socialist “benefits”… when you start telling them which schools their children must attend… when you start giving jobs away to people based on political patronage, race, or anything other than ability… you quash human freedom, you create dependency. And you deter capital and investment… which bogs down productivity and economic growth. If continued for long enough, it leads to social collapse.
And Conyers is hardly an anomaly. Just look at those same blighted districts in Houston and Philadelphia…
In Houston, most of the city’s worst neighborhoods in terms of high-school graduation rates and crime are found in Texas Congressional District 18, where Democrats have won every election since the district was created through re-zoning in 1972. In 1994, Sheila Jackson Lee won the seat by promising to deliver more federal benefits to her constituents…
To appreciate the sterling representation the Honorable Ms. Jackson Lee provides, consider this… In 2010 in bizarre remarks before Congress, she demanded the government recognize victory in Vietnam. You can try to figure out what she’s talking about here. She also alleged racism on the part of her fellow members of Congress who were voting against raising the debt ceiling. Don’t believe it? View for yourself.
In Philadelphia, Chaka Fattah represents the worst parts of the city, Pennsylvania’s 2nd Congressional District. The 2nd District is the fifth-most Democratic Congressional District out of the 435 in Congress (and the most Democratic outside of New York) based on the consistency and margin of Democratic victories. A black Democrat has held the seat since 1963.
Among Chaka Fattah’s political highlights is his economically illiterate plan to implement a 1% surcharge on all financial transactions and transfers in lieu of all other forms of tax. This ill-fated plan, which hasn’t gotten a single co-sponsor, ignores everything we know about actual human behavior. (If you implemented such a cost to financial transactions, the viability of those transactions would be destroyed and they wouldn’t occur.)
Fattah’s other notable political position is his support for convicted cop killer Mumia Abu-Jamal. Mumia’s case has been a cause célèbre for years. The details of his endless appeals are tedious… just know the evidence presented against him is overwhelming. And the Fraternal Order of Police has consistently campaigned against Fattah’s re-election over his support of Mumia.
The larger point is… These districts are among the most blighted in our nation. Society has broken down there to a horrible degree. Opportunity has vanished… Crime is rampant… Dependency on the state is the norm. The leadership in these communities should be the most scrutinized, their elected positions among the most contested. And yet, they are the safest seats in Congress. The officials dominance goes unchallenged.
Why haven’t these policies and these leaders been dropped – even after they’ve pled guilty to outright bribery? You would think having experienced enough failure, having lived through horrible riots, terrible crime, total economic collapse, brazen corruption… that sooner or later, the voters in Detroit (and many other cities in America) would come to their senses. But that’s not what happened. Instead, these systems have continued to fail up to the point of total collapse. It is as if one part of our society decided to run off the cliff… and then continued to do so for decades.
Why? Why did this happen? Why does it continue to happen?
Read the rest at Stansberry Research
Detroit has hit the end of the line. It’s budget deficit is between $446 million and $466 million (28% to 29%) of $1.6 billion with few ways other than drastic cuts in wages and benefits to address the problem.
If unions will not give in (and they won’t), Detroit Faces Bankruptcy.
Mayor Dave Bing and the City Council must reduce the size of government and slash the city’s budget deficit to stave off bankruptcy or state receivership, according to a report released Monday.
Without draconian cuts and changes aimed at downsizing government, the city could end up with a “possible” general fund deficit between $446 million and $466 million to its $1.6 billion budget.
“Detroit city government must be restructured,” according to the report from the Citizens Research Council of Michigan, a nonprofit that has studied Detroit finances for decades. “The new structure must reflect both the reduced tax base and the limited ability of state government to provide shared revenues.”
The report, titled “The Fiscal Condition of the City of Detroit,” was prepared at the request of Business Leaders for Michigan, a statewide coalition.
The 60-plus page report outlines much of what officials know: The city’s dramatic population loss, high unemployment and other ills have had adverse effects on the city. And now government must respond in a dramatic way to downsize and make sound budget choices, the report argues.
The Fiscal Condition of the City of Detroit
With that introduction, inquiring minds are diving into the Citizens Research Council report on The Fiscal Condition of the City of Detroit
The Economic Base
The deterioration of the economic base of the city has accelerated. There were an estimated 81,754 vacant housing units (22.2 percent of the total) in Detroit before the recession; that number increased to an estimated 101,737 (27.8 percent of the total) in 2008.
The average price of a residential unit sold in the January through November, 2009 period was $12,439, down from $97,847 in 2003. Remaining businesses and individuals are challenging property tax assessments on parcels that have lost value and, in some cases, cannot be sold at any price.
More than half of employed city residents work outside the city limits; the metro area has the highest unemployment rate of the 100 major metro areas in the U.S.
All major tax revenues will be below budgeted levels, significantly so in some cases. State revenue sharing was budgeted at an amount equal to the prior year budget, but state budget problems will result in reductions that could add $40 million or more to the projected deficit.
The city budgeted $275 million as revenue from the monetization of assets. Although there is precedent for the sale of future revenue streams in other cities and states (Chicago leased the Chicago Skyway Toll Road and parking meters, and tried but failed to lease Midway Airport), it is highly unlikely that Detroit can sell future revenues from the parking and lighting departments.
The Potential Deficit
The city could well end the year with an accumulated deficit that is over a quarter of the total $1.6 billion general fund:
- $280 million – Budgeted prior years accumulated deficit
- $46 million – Estimated increase in prior years accumulated deficit
- $80-$100 million – Estimated current year general fund operating deficit
- $40 million – Potential state revenue sharing shortfall
The possible general fund deficit is $446-$466 million.
Personnel costs are 50.1 percent of all general fund appropriations. The plan for reducing expenditures includes a ten percent wage cut and layoffs. If laid off employees earn salaries in the $30,000 to $50,000 range and if civilian pension and fringe benefit costs are 65 percent of salaries, about $66,000, less unemployment benefits, could be saved per laid off employee in the first full year. One thousand layoffs would therefore produce a savings of $66 million, less unemployment benefits, in the first full year of the layoff.
Clearly, the city government cannot afford to remain at its present size. There are four ways the government can downsize:
• The elected mayor and city council can develop and implement required changes.
• The mayor and city council can implement changes specified in a consent greement
reached with a review team appointed by state officials under the Local Government Fiscal Responsibility Act
• An emergency financial manager appointed under the Local Government Fiscal Responsibility Act can negate the authority of the mayor and city council, can implement changes, and can renegotiate (but not abrogate) contracts.
• If an emergency financial manager recommends, and the state approves, reorganization and restructuring can occur under protection of bankruptcy, which does allow contracts to be abrogated. No Michigan municipality has ever filed under federal bankruptcy laws.
In order to address what could be an accumulated general fund deficit exceeding $400 million, Detroit city government must be restructured. The new structure must reflect both the reduced tax base and the limited ability of state government to provide shared revenues. Restructuring will necessitate process improvements, load shifting, load shedding, privatizing, concentrating service delivery on an area
smaller than 138 square miles, and other strategies.
The most recent Crisis Turnaround Team has recommended closing facilities, privatizing services, improving and centralizing processes, renegotiating contracts, improving debt collection, restructuring debt, and other actions. It remains to be seen whether the city’s elected officials will be able to implement these recommendations.
While the most recent published actuarial valuations for the city’s pension systems indicate that there were no unfunded accrued liabilities, all public and private
pension systems have suffered the effects of stock market and real estate market volatility over the past two years.
The Auditor General’s analysis notes that the budget includes a third excess funding
credit of $25 million used to reduce the required contribution to the Police and Fire Retirement System, and that no provision has been made for the cost of implementing the defined contribution plan, estimated to exceed $20 million.
Detroit has an unconditional contractual obligation to make debt service payments on the pension obligation certificates. Failure to make payments when due allows the contract administrator to file a lawsuit to force payment. A court judgment could require the city to raise the payment through an unlimited tax levy, for which voter approval is not required by Michigan law.
The 1997 Detroit City Charter created new provisions ostensibly authorizing the city to privatize city services. The process created in Section 6.307 of the Detroit City Charter, for the most part, laid out best practices for a meaningful examination of the costs and benefits of privatizing services.
However, interwoven in that section is language that does more to hinder privatization than to facilitate it. The most glaring hindrance is created in subsection 7 requiring a super-majority (2/3) vote by city council to approve the privatization of any city services.
Detroit city government must be restructured; the organization chart must be more compact. This will require strong leadership and clear lines of authority. The new structure must reflect both the reduced tax base and the limited ability of state government to provide shared revenues. Restructuring will necessitate process improvements, load shifting, load shedding, privatizing, concentrating service delivery on an area smaller than 138 square miles, and other strategies. The most recent “crisis turnaround team” has recommended closing facilities, privatizing services, improving and centralizing processes, renegotiating contracts, improving debt collection, restructuring debt, and other actions. It remains to be seen whether the city’s elected officials will be able to implement these recommendations.
Detroit Should Embrace Bankruptcy
The only legitimate solution for Detroit is shed pension obligations, privatize everything it can including the fire department, and dump unions contracts en masse. Since those items can only happen in restructuring, Detroit should openly embrace bankruptcy.
Detroit Mayor on Unions "They can't read, they can't add, they can't comprehend"; 33% of Detroit is Vacant Lots or Abandoned Homes
Three cheers to Detroit mayor Dave Bing for his truthful comments about unions: ‘Either they can’t read, they can’t add or they can’t comprehend’
Mayor Dave Bing today criticized leaders of the city’s largest union for foot-dragging on contract negotiations, saying it’s costing the financially strapped city $500,000 a month and could result in more layoffs.
“Either they can’t read, they can’t add or they can’t comprehend,” Bing said at a press conference this morning in his office at City Hall. “It has to be one of the three.
“Everyone is running with a deficit in their budgets. It’s leadership or a lack of leadership that has got us to where we are.”
Bing said he’s ready to impose a contract on the American Federation of State, County and Municipal Employees Council 25 but said the city must follow the law. Both parties are now in fact-finding, a process which could last until July.
Bing has been at odds for months with AFSCME leaders over calls for concessions, including 10 percent pay cuts through 26 furlough days and fringe benefit cuts. The union represents about 3,600 workers such as landscapers, street pavers and crossing guards.
Problems With Bing’s Approach
The big problem with Bing’s approach is that he is not going far enough. He should privatize everything he can. Pussyfooting around with unions is generally a waste of time. The major goal should be to eliminate the unions entirely. The compromise position is the end of defined benefit pension plans coupled with a 33% salary reduction.
Ask for a lousy 10% cut and you end up in court, after months of delays, and all you end up with is a lousy 5% with no headway on the defined benefit issue.
By the way, Bing brought this on himself. Why is it so hard to see the need to privatize landscapers, street pavers and crossing guards? Hells bells, the goal ought to be to privatize the fire department, better yet, to have a volunteer fire department.
Thus, on second thought … Two cheers (not three) to Detroit mayor Dave Bing. He said what needed to be said, but he certainly is not acting like he means business.
33% of Detroit is Vacant Land or Abandoned Homes
Inquiring minds are investigating Mayor Bing’s Plan To Shrink Detroit
Mayor Dave Bing said Wednesday he “absolutely” intends to relocate residents from desolate neighborhoods and is bracing for inevitable legal challenges when he unveils his downsizing plan.
In his strongest statements about shrinking the city since taking office, Bing told WJR-760 AM the city is using internal and external data to decide “winners and losers.” The city plans to save some neighborhoods and encourage residents to move from others, he said.
“If we don’t do it, you know this whole city is going to go down. I’m hopeful people will understand that,” Bing said. “If we can incentivize some of those folks that are in those desolate areas, they can get a better situation.”
Bing’s staff is using its own data and a survey released last weekend by Data Driven Detroit. The block-by-block study of the 139 square-mile city showed that roughly one in three parcels are vacant lots or abandoned homes.
John Mogk, a Wayne State law school professor, said Bing’s on the right track but will face four major challenges: political support; money; creating a bureaucracy to administer the project and legal challenges.
Among the court challenges he sees ahead include the legality of cutting off city services to particular neighborhoods and using eminent domain to relocate residents. In 2006, voters approved a prohibition on government’s ability to take property for economic development.
Talk Is Cheap
Daniel Howes, a Detroit News columnist correctly hammers the talk is cheap message in Bing must put actions behind words
A new tone at City Hall may be refreshing, necessary to steering Detroit out of a ditch deepened by its own digging. But it’s not sufficient without action and the kind of rigorous financial management that should control wild overspending on overtime ($54.3 million last year), that should be more aggressive in collecting $50 million spent to demolish dilapidated buildings.
In other words, talk sounds even cheaper than it is when the numbers are so grim, because the numbers don’t lie. Detroit is operating some $325 million in the red; its tax base is shrinking amid a jobs-killing recession and plunging property values; union concessions, a test of Bing’s mettle, remain undelivered.
Kwame Kilpatrick, no friend to the city’s unions, eliminated some 4,000 jobs during his abbreviated tenure. You, more than six months into a deepening crisis, have cut some 450 slots and reduced pay for salaried appointees by 10 percent, but have so far retreated from promises to take out more.
Another example: Look to Lansing, where a two-term governor in her final year in office steadfastly refuses to exercise the prodigious powers bestowed on her office by legal precedent and the state constitution. Gov. Jennifer Granholm is probably feared by no one, and she has the record to prove it.
Detroit’s crisis, likely to deepen this year, is your opportunity to change the direction of a city whose leaders — elected, appointed and union — have together led Detroiters down an unsustainable path they are unable to finance, much less afford.
But we’re not seeing much. Your spokesman still promises 10-percent pay cuts for union employees in the form of furloughs that don’t come. Your penchant to let your actions speak for themselves (like they did on NBA basketball courts) would be admirable if you had enough actions to let do the talking.
It’s a cliché, but a crisis is a terrible thing to waste. So is the support of folks inside and out of Detroit counting on you to make the difference you can.
The news commentary and columns from the Detroit News are excellent. I have several readers sending me links every day. While I can only give two cheers to Bing, I am in a cheerful mood today, so it’s three cheers for Daniel Howes.
Now if only Mayor Bing would follow through with some tough actions to go with his tough words. A good place to start would be to privatize everything in sight, including the fire department. Complete annihilation is the only thing unions understand, so why not give it to them?