The Other Shoe
I have to drive west to attend a Rambler car show in the Hoosier State- a strange thing, but I will explain tomorrow. I am going to wave to Detroit as I go by. It will be another hot day, and I am taking the last of a dozen eggs to fry on the hood of the Panzer for lunch. I have to remember to take a plastic spatula so I don’t scratch the rich silver paintjob.
There would be plenty to talk about this morning. The cost of Health Care was the topic of discussion yesterday, the President commenting that costs had come down in some of the states that have implemented the exchanges. He did not explain why they are doubling and tripling elsewhere, and the news was so good that I knew immediately that it must be another government fabrication.
The results of other government fabrications also came to light. The other shoe dropped on Detroit, which has gone into Chapter Nine bankruptcy, or at least has sent the request to the desk of Governor Rick Snyder. It is the largest municipal failure in American history, and to a degree I am proud of that.
When the Motor City does something, it does it big. Big loss of population inside Eight Mile: the population reached 1.8 million when I lived on Kentucky Street in the 1950s, and is now struggling to stay above 700,000. Anyone with brains left the city, driving the tax base into the basement. City services are a joke.
The annual deficit is nearly $400 million- chicken feed, really, since the Much of the middle-class and scores of businesses also have fled Detroit, taking their tax dollars with them.
Detroit’s budget deficit is believed to be more than $380 million, though the books are so scrambled that Emergency Manager Kevin Orr can’t really tell. The total debt has mounted, and may range as high as $20 Billion- and that is “Billion” with a “B.”
You would think that this doesn’t have much to do with ObamaCare, but you would be wrong. One major component of the “unsecured” debt (there are various obligations that total up to $20 Billion) is the money owed to public sector workers.
There is a big fight about it, of course. Orr was unable to convince a host of creditors, including the city’s union and pension boards, to take pennies on the dollar to help facilitate the city’s massive financial restructuring.
Some creditors were asked to take about 10 cents on the dollar of what the city owed them. Underfunded pension claims would have received less than 10 cents on the dollar under that plan.
It is those folks who are going to take it in the shorts, getting as little as a dime on the dollar. Some of the obligations the corrupt city government- Council and sequential Mayors- will be paid in full. The practical consequences of the failure are to shift health care and other costs direct from the Detroit Comptroller to the United States Treasury.
I take the point about “ruin porn.” But the impact of seeing the proud places of Detroit, built at vast cost in treasure, simply abandoned is shocking. Take a look at the link- some of them don’t look like this anymore because they have burned of fallen down. But there is nothing like taking a ride on the bizarre monorail around the old down town and seeing it for yourself.
What’s next?
The Detroit Free Press says: “The filing leads to a 30 to 90 day period that will determine whether or not the city of Detroit is eligible for Chapter 9 protection, and define the number of claimants who may compete for Detroit’s limited settlement resources.”
You better believe people are interested in this. There have been eight cities or counties that have already tried bankruptcy since 2000. The cities of Houston and Baltimore are closing in on the same situation. There is no big city- including Chicago- that does not have a major problem from years of budget shenanigans and unfunded pension obligations.
The answer is not to kick the poor pensioners in the shins, though they were complicit in all this, voting again and again for politicians who promised unicorns and fairy dust. Someone will have to take care of them. And you know who it is, don’t you?
Hahaha. Thankfully, this could never happen to the US Government, whose unicorns and fairy dust is really first rate.
Like I said, I will wave as I go by. I will be on the road for the weekend, so reporting could be sporadic. Stand by for news.
Copyright 2013 Vic Socotra
July 19, 2013
DailySocotra
