Detroit, Michigan is now bankrupt.
Is the United States traveling the same road as Detroit?
On July 18 of this year, the city of Detroit filed in bankruptcy court for protection from its creditors. This filing was not entirely unexpected. But Detroit, once a city of 1.9 million people and only 50 years ago considered one of the wealthiest and fiscally healthiest of cities, has been reduced to a population of just over 700,000, riddled with racial tension, crime and tax funds mismanagement.
The years immediately following WWII created an economy in Detroit that no one seemed to think would ever slow down. It promised secure working careers and near opulent retirements.
It appears residents both believed it, and even expected it.
And when the reality of the city taking in less income than the promises it had made loomed on them like a very slowly advancing tsunami, the government tried taxing the wealthiest of citizens, declaring it their duty to pay their “fair share.”
Wealthier citizens responded much like France’s Gerard Depardieu: They moved out, to cities and states whose governments were less inclined to grant themselves unfettered access into successful people’s pocketbooks.
You’ve got to admit: The similarities between Detroit and the United States are more than eery.
- Racial tension: Many chart Detroit’s demise as starting with the July 1967 boiling racial tension resulting in full-blown riots
- Asian competition: With the United Auto Workers Union either unable, or unwilling, to negotiate for their workers to be able to compete with more efficient, and less-entitlement-saddled, Japanese workers at Toyota and Datsun, Detroit began to concede market share to the Asian market
- Higher taxes: With a dwindling tax base, Detroit government officials, faced with either scaling down entitlements or keeping them, flexed their muscle to exercise control over the ability to reach further into wealthier citizens’ pockets by raising taxes
- Government scandals, with finally a mayor about to be sentenced in prison for mail fraud, wire fraud and racketeering, among other charges
- The government, sensing pending chaos, attempted to exert more control over the economic affairs of the city, simply making things ultimately far worse by creating both power-hungry politicians and entitled population masses
- Borrowing money: Detroit made consistent appeals to the United States to bail them out
- Despising free market approaches: They disdained, with the apparent full support of many liberal progressives, any suggestion that Detroit should just “let nature take its course.” Mitt Romney’s suggestion that General Motors participate in a planned debt restructure decried by the low-information-friendly headline in the New York Times of “Let Detroit Go Bankrupt”.
- Lowered bond rating: Detroit suffered a series of having its credit worthiness rating lowered. Several California cities have suffered through this. And although Detroit is the largest city so far to actually declare bankruptcy, Chicago has now had its bond rating lowered.
See any similarities to the United States?
- Racial tension?
- Asian competition?
- Tax increases to wealthier people as tax revenues dry up?
- Government scandals?
- The government attempts to exert more control? Are Americans now feeling more entitled? Is the government gaining more access to your private life?
- The government borrowing money? (As of this writing, 46 cents of every dollar the United States government spends is borrowed)
- Despising free market approaches? Anyone have a problem with “millionaires, billionaires and corporate jet owners”?
- The United States, for the first time in its history, had its bond rating lowered from AAA to AA+ in 2011 by S&P. And that was probably quite generous by S&P, given that AA+ rating is generally earned by companies with virtually no debt and sterling histories of repayment.
The government, to date, has been marvelously adept at spinning the precipitously precarious state of the economy, while somehow, almost miraculously, managing to sidestep scandal after scandal.
But, like Detroit, as people are owed, and the government cannot pay them and runs out of lenders to lend them the money, the issue WILL surface.
The Detroitification of America. Coming to your life soon.