The Federal Government’s Finances may be a Mess but they could be Worse…like in Detroit

Posted by PITHOCRATES - March 2nd, 2013

Week in Review

President Obama has posted the largest deficits in history.  Exceeding $1 trillion dollars.  In every year of his first term.  Exceeding Ronald Reagan’s maximum deficit of $452.67 billion (adjusted for inflation).  Exceeding George H.W. Bush’s maximum deficit of $474.51 billion.  Exceeding Bill Clinton’s highest deficit of $404.92 billion.  And exceeding George W. Bush’s maximum deficit of $501.21 billion.  President Obama’s average deficit is twice the highest of the 4 previous presidents.  Is anyone a more irresponsible spender than President Obama (see Michigan Gov. Snyder to Appoint Detroit Emergency Manager by Marilisa Sachteleben posted 3/1/2013 on Yahoo! News)?

Detroit has been operating in deficit for some time… The treasurer’s report found that Detroit is currently $327 million in debt, including retiree pensions and healthcare benefits, and owes $14 billion in long-term debt. The Detroit News reports that Dillon said that city officials were borrowing to cover the deficit and treating loans as revenue. Had they not borrowed, the deficit was projected to reach $937 million in fiscal year 2012. The review team’s recommendation was to appoint an emergency manager for Detroit, and Gov. Snyder had 30 days to make the final call…

On March 1, Gov. Snyder made the call and announced that Detroit would be getting an emergency manager.

Well, we have the answer to our question.  Detroit is.

To put this into perspective let’s compare the federal government to Detroit.  With total federal outlays about $3.8 trillion the federal deficit is about 26.3% of total outlays.  Under the 2012-13 budget Detroit will spend approximately $1.12 billion.  Making the real deficit about 83.7% of total outlays.  Is it any wonder the City of Detroit will be getting an emergency manager?

The problem with Detroit is that they’re still spending money like they have a population of 1.8 million (their peak).  The tax base is long gone but spending obligations for pension and health care for retirees are still there.  Why did this happen?  Detroit became one of the most unfriendly places to do business.  High taxes, including a city income tax, and exceptionally high regulatory costs chased the jobs out of Detroit.  And with those jobs went the people.  The tax base.  An object lesson of what liberal Democrat policies gone wild can do to a city.


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