Democrats and Unions are impoverishing American Cities

Posted by PITHOCRATES - December 21st, 2013

Week in Review

Detroit had a massive public sector.  Lots of union government jobs.  With very generous benefits.  Then the city began losing population.  As the city shrank the public sector did not.  As the city could no longer support the public sector on tax revenue they turned to borrowing.  At her bankruptcy her pension obligations were in the billions.  And were just unsustainable.  With a lot of those retirees going to see huge cuts in their retirement benefits.  A first for a public sector union.  And one that may set a precedent for other impoverished cities (see Cities where poverty is soaring by Michael B. Sauter and Thomas C. Frohlich, 24WallSt.com, posted 12/16/2013 on Yahoo! Homes).

Many of these cities show a symptom of the regions hit hardest by the recession — a significant decline in real estate value. Nationally, the average home value during the three-year period of 2010-2012 was down by 9% compared to the previous three-year period. In eight of the 10 cities with soaring poverty rates, property values fell by at least 10%. Homes in Eastpointe lost nearly half of their value. In Inkster, Michigan, another city where poverty grew substantially, an average of 43.3% of homes were worth less than $50,000 between 2010 and 2012, compared to just 11.8% of homes during the 2007-2009 period…

Several of these cities were already struggling prior to the recession, in part because of their reliance on manufacturing. The industry had been declining for years, and the recession only made matters worse. In Salisbury, North Carolina, employment in manufacturing fell from 15.5% of all jobs to 8.3%. Goshen, Indiana, another city with a major increase in poverty, is heavily dependent on the auto industry — more than a third of the working population was employed in manufacturing between 2010 and 2012. According to Joe Frank at the Indiana Department of Workforce Development, this dependence had particularly dire consequences during the recession.

The Democrats are all Keynesians.  Who believe in government spending.  And keeping interest rates artificially low to stimulate the economy.  To encourage people to buy big expensive houses.  Just because interest rates are low.  So people did.  With mortgages so cheap everyone was getting them.  And as these buyers flooded the market housing prices soared.  Creating a great housing bubble.  Which collapsed when interest rates rose.  Resetting the rates on those subprime adjustable rate mortgages (ARMs).  Raising monthly payments.  Beyond what some people could afford.  Forcing them into bankruptcy.  Creating the subprime mortgage crisis.  And the collapse of housing prices.

The UAW made American cars so expensive people started buying the less expensive imports.  As most people don’t have UAW contracts giving them a fat paycheck and generous benefits.  Leaving them to get by on less than UAW workers.  Which meant they turned to the less costly imports.  Built by companies that didn’t have those great legacy costs of years of overly generous contracts that became unsustainable.  Pension costs and health care for retirees (which outnumbered active workers) forced GM and Chrysler to ask for a government bailout to avoid bankruptcy.  Asking the taxpayer to help them pay the generous pensions and health care costs of others.  Instead of bringing these benefits into line with the rest of America.

Democrats are Keynesians.  They believe in government intervention into the private sector economy.  And they protect their friends in unions to get their votes.  Raising costs for everyone else.  These policies, though, are just impoverishing American cities.  At least the ones dominated by unions and/or Democrats.

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