Detroit’s Public Sector Unions may push the City into the Biggest Municipal Bankruptcy in U.S. History

Posted by PITHOCRATES - December 16th, 2012

Week in Review

Michigan just became a Right to Work state in an effort to lure business into Michigan.  Whose high union costs have chased business away from Michigan.  Detroit, The Motor City, auto capital of the world, home of the Big Three, is a dying city.  While Mercedes, BMW, Toyota, Honda, etc, have built new auto plants in the United States not a one of them built in Michigan.  Because of their high union costs.  So Detroit has the Big Three.  But no one else.  And even two of the Big Three recently filed bankruptcy thanks to those union legacy costs (pensions and health care for retirees who outnumbered the active workforce).

So Michigan is bad.  But Detroit is worse.  They’ve lost so much industry that the number one and two employers in the city are the City of Detroit and the Detroit Public Schools.  Both who have unions doing to the City of Detroit what the unions did to the Big Three (see Detroit has “serious financial problem”: Michigan treasurer by Ann Saphir posted 12/15/2012 on Reuters).

A check of Detroit’s finances has found a “serious financial problem” with the cash-strapped city, a step that could lead to the biggest municipal bankruptcy in U.S. history…

That official would have the power to put the city of 700,000 into Chapter 9 bankruptcy if other rescue plans are not feasible or effective.

Detroit, home of General Motors Co., has been hit by a steep population decline, years of severe budget deficits and escalating employee costs, all of which led state officials to begin an intervention process last year.

Detroit’s population peaked at 1,850,000 in 1950.  The city has since lost over half of its population.  First the jobs left.  Then the people.  During this time the size of city government grew.  As did the public sector union pay and benefit packages for those public sector workers.  The city’s costs soared as their tax base disappeared.  So it’s no surprise that the city is facing perhaps the biggest municipal bankruptcy in U.S. history.

At this point in time it’s probably not a question if Detroit will file bankruptcy.  But a question of when.  They’re going to have to do what the Left wants to do for people underwater in their mortgages.  And for students buried in student loan debt with no job prospects (because they got degrees in Philosophy, Religious Studies, Anthropology, Archeology, Area Ethnic Studies, Civilization Studies, Information Systems, etc.).  Forgive their debt.  So these people can crawl out from underneath their debt and return to some sense of normalcy in their lives.  But the Left will not endorse this same solution for Detroit.  Because the city’s debts just happen to be to the Left’s greatest campaign contributors and constituency.  Public sector unions.  The Left will screw banks and mortgage companies every day of the week.  But when it comes to the public sector unions they’d rather screw the taxpayer.

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Thanks to Advances in Medical Care People are Living long enough to Bankrupt Social Security and Medicare

Posted by PITHOCRATES - December 16th, 2012

Week in Review

People talk a lot about an aging population.  The cost impact on Social Security.  Medicare.  And pensions.  Something the actuaries are experts at doing.  Calculating costs.  The only problem for Social Security, Medicare and pensions is that when the experts calculated these costs medical care wasn’t as good as it is today.  And people were dying a lot earlier than they are today.  And this is the cost impact of an aging population.  People that are NOT dying as early as the actuaries originally calculated (see A sick world: We live longer, with more pain and illness by Kate Kelland posted 12/13/2012 on Reuters).

The world has made huge progress fighting killer infectious diseases, but as a result we now lead longer and sicker lives, with health problems that cause us years of pain, disability and mental distress…

The Global Burden of Disease study, led by the Institute for Health Metrics and Evaluation (IHME) at Washington University, finds that countries face a wave of financial and social costs from rising numbers of people living with disease and injury.

Social Security, Medicare and pensions are going broke because people stopped having babies during the Sixties and Seventies like they used to have before then.  As birth control and abortion came into vogue.  This became a big problem because it followed the baby boom.  The rate of older sicker people leaving the workforce who no longer paid income taxes grew at a greater rate than younger healthier people entering the workforce who paid income taxes.  And the older people are living longer.  So long that they can get sicker and become more costly to care for.  All because they’re living 10-20 years longer than the actuaries originally calculated.  Thanks to advances in medical care.

Things will get worse before they get better until the last of the baby boomers die.  And these two growth rates approach each other.  And pass.  Going from an aging population to one that grows younger.  So the number of taxpayers once again grows at a greater rate than tax consumers.  Which Obamacare will help speed along with their quasi death panels.

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As Obamacare is set to Raise Costs for Old Sick People and Export Jobs Democrats suffer Buyer’s Remorse

Posted by PITHOCRATES - December 16th, 2012

Week in Review

The Republicans warned that Obamacare was too expensive.  But did the Democrats listen?  No.  They were hell-bent on passing anything remotely resembling national health care.  They even voted for it without reading the final bill.  Though at 2,000+ pages chances are they knew what was in it.  As it was probably sitting in a drawer someplace waiting for the perfect time to introduce it.  And that time came in 2010.  With liberal Democrats in charge of the House of Representatives, the Senate and the White House.

The vote was along party lines.  No Republican voted for it because it was too costly.  Some Democrats voted against it but they were able to bribe a couple of holdouts with some political favors and kickbacks to get the necessary votes to pass it into law.  Now some of these same Democrats are saying whoa, now, let’s not be so hasty implementing the law (see Obamacare’s Tax Chickens Come Home to Roost by Peter Roff posted 12/13/2012 on US News and World Report).

Call it politics as usual. Call it hypocrisy. Call it whatever you like—the fact remains that Obamacare’s chickens are coming home to roost and some Democrats don’t like it one bit…

… As the Republicans warned, time and again, Obamacare includes any number of hidden and not so hidden tax increases that are going to hit everyone where it hurts, right in the wallet.

This is especially true for sick people, who are very soon going to have to pay a new medical device tax that is scheduled to go in to effect on January 1, 2013. It’s a $20 billion tax, the Medical Device Manufacturers Association says, based on a 2.3 percent excise tax assessed on a manufacturer’s yearly gross sales—regardless of whether they show a profit. And, like anything else, the cost of the new tax will be passed along to consumers and taxpayers in the form of higher prices.

The medical device industry is one of the few flourishing in America these days. By taxing it, Obamacare creates an incentive to move operations overseas or, as the Democrats like to put it, “exporting jobs.”

Taxing sick people is bad politics. Exporting jobs is bad politics. Which is probably why, it should come as no surprise, that a large number of Democrats in the U.S. Senate who voted for Obamacare and its medical device tax in the first place now want Senate Majority Leader Harry Reid to put the breaks [sic] on its implementation.

At first the thought of taxing businesses $20 billion was no doubt too delicious for these Democrats to pass up.  But now that they risk cheesing off one of their core constituencies, old sick people who they’re supposed to be looking out for, as well as exporting one of the few remaining domestic manufacturing industries, they’re having a change of heart.  And they’re worried.  Because they don’t have any way to blame this on the Republicans.  For Obamacare was a straight party vote.

And it’s only going to get worse.  There will be more taxes.  And higher costs.  Resulting in budget cuts.  Increase waiting times.  And rationing of health care.  Just like the British have to do in their NHS.  Including a quasi death panel.  Something they call the Liverpool Care Pathway.  All in the name of reducing costs.  Because national health care is so expensive.

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Useless College Degrees leave Graduates with Massive Debt and Unmarketable Skills

Posted by PITHOCRATES - December 16th, 2012

Week in Review

The Left wants to provide free college education for everyone.  They’ve even taken over the student loan program.  And talk about making more funding available to states to help kids afford the one thing that grows more costly than health care.   And kids are going to college in record numbers.  And when many of these kids graduate they can’t find a job.  Why?  Because they’re getting useless degrees for that massive student loan debt the government encouraged them to borrow.  Degrees requiring little math or science (see Don’t Bother Earning These Five Degrees by Terence Loose posted 12/13/2012 on Yahoo! Education).

Unwanted Degree #1 – Architecture

Unwanted Degree #2 – Philosophy or Religious Studies

Unwanted Degree #3 – Anthropology or Archeology

Unwanted Degree #4 – Area Ethnic or Civilization Studies

Unwanted Degrees #5 – Information Systems

Architecture does require some math.  And it’s not that easy.  But it’s on the list because of the government’s massive real estate bubble that exploded into the subprime mortgage crisis.  The whole construction industry being in the toilet because of the government’s pressure to qualify the unqualified for mortgages.

Every other unwanted degree on the list is a worthless degree.  None of them have any market value in a high-tech economy.  Not one of them will build a better iPad.  A better smartphone battery.  Or find a new miracle drug that will help ease the cost of our aging population.  So why do kids get degrees in these fields?  Because their workloads are lighter than in degree programs that require math and science.  Leaving more time for having fun the first time these kids are out from under their parent’s supervision.

The Left wants to help these kids with degrees that won’t get them a job.  By forgiving their debt.  Which is probably the worst thing that we can do.  The colleges who gave them these degrees should refund their tuition for selling them a defective product.  The American people shouldn’t pick up the tab just so college professors and administrators can earn large salaries and generous benefits.  Especially when they are teaching our kids an anti-capitalist curriculum.  Which is primarily responsible for the anti-business climate in this country today.  Giving us our high unemployment rates in the first place.

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Michigan Vote to become Right to Work show a Political Realignment in the Rust Belt?

Posted by PITHOCRATES - December 16th, 2012

Week in Review

First Wisconsin and Indiana and now Michigan.  Something is happening in the Rust Belt states.  These union strongholds appear to be going through a midlife crisis.  The marriage between the unions and the people appears to be not as strong as it once was.  As if the unions can’t satisfy the needs of the people anymore.  Who are looking to get out of a failing marriage (see Snyder Wades Into Angry Debate Over Michigan Union Dues by Chris Christoff & Esme E. Deprez posted 12/12/2012 on Bloomberg).

Republican Governor Rick Snyder, who portrays himself as a pragmatic unifier, plunged Michigan into conflict by signing so-called right-to-work legislation.

Less than a week after Snyder ended his neutrality on the issue, lawmakers yesterday approved two bills that prohibit compulsory union dues for employees in organized workplaces. The governor signed them hours later.

“As a nonpolitician, I don’t respond to political pressure,” Snyder, 54, said at a Lansing news briefing. “I try to do what’s best for the citizens of Michigan.”

His decision to make Michigan the 24th right-to-work state in the U.S. made the self-described nerd and non-ideologue a new nemesis to Democrats and their union allies. Similar fights in Wisconsin and Indiana this year and last brought protesters into the streets, accusing Republicans of trying to gut labor’s power in its Midwestern stronghold…

About 17 percent of Michigan workers belong to unions, according to the U.S. Department of Labor. In the early 1960s, about 40 percent did…

Snyder said unions started the battle when they led an unsuccessful campaign to enshrine collective-bargaining rights in the Michigan constitution. The ballot proposal was defeated Nov. 6, despite a $23 million drive funded mostly by labor…

Supporters said the laws, which affect all government and private employees in organized workplaces except for police and firefighters, let workers withdraw support from unions they view as ineffective or politically unpalatable.

Then again, with only some 17% of the Michigan workforce unionized and an unemployment rate that was north of 10% for almost 3 of the past 4 years one can see why the people would want a divorce.

The interesting thing is that Michigan has a Republican legislature and a Republican governor yet this state voted for President Obama in 2012.  How is that possible?  How do you reject liberal policies at the state level and yet vote for them at the federal level?  Rust Belt states Indiana, Michigan, Ohio, Pennsylvania and Wisconsin all have Republican legislatures AND Republican governors.  And yet all but Indiana voted for President Obama, perhaps the most liberal president in U.S. history.  How does the national election NOT reflect the state elections?

Union supporters in Michigan are saying Governor Snyder ran as a moderate and then bowed to big money on the Right.  Of course that doesn’t explain the Republican legislature.  It would appear there is a political realignment in the Rust Belt.  Perhaps there will be a recall drive in Michigan.  Like there was in Wisconsin.  Of course, before the union spends another $20 million in a recall attempt they should note that Governor Walker won that recall election with a slightly larger margin than the election that brought him to office in the first place.

It could be that the people want jobs.  And to get jobs they need businesses to come to Michigan.  The Big Three (Ford, Chrysler and General Motors) have been in Michigan forever.  They’ve been bastions of union power.  But every new manufacturer since the Big Three chose to build in some state other than Michigan.  Most of them locating in the Right to Work South.  Something no doubt the people in the Rust Belt are tired of seeing.  Especially when your state has an unemployment rate higher than the national average.

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