In 1960, Detroit bragged of being America’s richest per capita city.
Today, 53 years later, it sits decimated and bankrupt.
Although most AMERICAN FREE PRESS readers don’t reside in the Motor City, its plight is highly relevant to their lives, especially senior citizens dependent on monthly pension checks.
Just as importantly, does Detroit serve as a reflection of our entire country, specifically the consequences of astronomical debt, corruption, promises that can’t be kept, and tone-deaf politicians?
By Victor Thorn
Nearly $19 billion in debt, on July 18 Detroit city officials filed for Chapter 9 bankruptcy, the largest city in the history of the United States to file for this type of economic protection. With over 100,000 creditors and $9.2 billion owed on future pensions and healthcare costs, 38¢ of every Detroit tax dollar is currently earmarked for servicing debts. Analysts foresee that total rising to 60¢ on every dollar in coming years, especially since it takes four employed city workers to support six retirees.
The biggest question now facing federal judges is: Does U.S. bankruptcy law override Michigan’s constitution, which asserts that pensions of retired city employees cannot be revoked?
On July 23, CNBC economic reporter John Schoen placed this matter into perspective:
“The legal precedent this case sets will be watched closely by dozens of other states and cities grappling with underfunded pension promises.”
Resolutions many not arrive for years. In the meantime, Detroit suffers from a 50% illiteracy rate and 60% of its children living below the poverty line. With official employment statistics standing at 18%, real numbers reveal that over half of all blacks in Detroit aren’t working.
As a result of losing three-quarters of its population over the past half-century, one-third of Motown’s 140 square-miles lays vacant. Over 40% of all streetlights are inoperable, 9-1-1 calls require an hour wait time, whereas 78,000 properties sit abandoned, many with 40-year-old trees growing through their roofs. Not surprisingly, homes in Detroit sell for as little as $1,500, meaning a monthly mortgage payment of $7.
With attorneys wrangling over how this bankruptcy debacle will proceed, emergency manager Kevyn D. Orr has suggested privatizing or selling Detroit’s airport, art museum, zoos, parks and trash collection services.
On the other hand, union officials are pressuring President Barack Hussein Obama’s aides to initiate a government bailout. But, with $82 billion in federal loans already forked over to GM and Chrysler in 2009, this idea seems highly unpopular among voters. Senator David Vitters (R-La.) has even sponsored a bill banning city and state bailouts.
During a July 21 appearance on NBC’s “Meet the Press,” Michigan Governor Rick Snyder lamented the scarcity of available options:
“For the last 60 years people have ignored the realities of this situation. We’re being real now.”
The Toll of Bankruptcy
• Detroit retirees in real fear they’ll see their pensions slashed
By Victor Thorn
To get a firsthand account of how pensioners will be affected during upcoming legal proceedings, on July 24 this reporter contacted two Detroit bankruptcy attorneys and a financial planner. The first lawyer, John Hilla, a specialist in individual consumer bankruptcy, stated:
“Under the worst case scenario, pensioners will be classified as non-priority unsecured creditors. This means they’ll be paid last after everyone else. Under the best case scenario, they’ll be treated as priority creditors and receive full payment of what they’re owed.”
When asked what he expected under the worst case scenario, Hilla replied:
“They should expect to be paid less, and in reorganization that could mean getting nickels on the dollar.”
In terms of what caused this calamity, Hilla explained:
“There are no simple answers. You could blame the unions, Democrats, corruption and inefficiency. The truth is, we’ve seen a multi-decade flight of our tax base out of Detroit into the more affluent suburbs. When corporations high-tailed it, Detroit wasn’t left with many job opportunities.”
Bankruptcy attorney Marshall Schultz offered this input to this reporter:
“Since pensioners are the major creditors, they’re going to get hurt. Detroit is in a desperate state. Real estate taxes are going unpaid, and as a result there’s more vacant land in Detroit than the entire area of Manhattan. The city is upside down and there’s no money to pay our bills.”
In addition to pensioners, others likely to take a beating are those who purchased municipal bonds, loaned the city money, or companies that provided goods and services that remain unpaid.
As to the final outcome, Schultz surmised:
“It’s all a question of mathematics. The most important matter right now is trying to keep this entity together so we can revive the city. If we reduce the size of Detroit and start knocking down vacant buildings, it could provide a welcome environment for investment.”
Finally, this reporter contacted an economic planner that preferred his name be withheld from publication. As a career professional accustomed to managing cash flows, he relayed a bit of sage advice:
“Detroit is a lesson for everyone, individuals and governments alike, on how we handle our money. Putting off hard decisions for the next generation insures that real economic difficulties will follow.”
Straight Talk About Detroit’s Problems
• “The death of Detroit is not about the death of the auto industry. It’s about the racism of black America and the decline of black morals and civilization.”
By Victor Thorn
Imagine minor league versions of Reverend Al Sharpton, Jesse Jackson and Eric Holder. That’s whose been running Detroit for the past 50 years. Ever since a mass exodus of whites started fleeing Motown after the 1967 race riots, corrupt black politicians have been systematically turning this once proud blue-collar city into what political commentator Debbie Schlussel calls “an infected swamp.”
Considering Detroit’s 85% black population, in a July 19 article Schlussel wrote:
“The death of Detroit is not about the death of the auto industry. It’s about the racism of black America and the decline of black morals and civilization.”
Democratic mayors who’ve mastered the art of bribery have run Detroit for 51 straight years. On this note, Schlussel blames blacks themselves for creating the despair that surrounds them:
“[They] will continue to elect the same panoply of nut jobs, race merchants, criminals and loons. That will happen over and over again.”
Plagued by drug dealers, murderers, and a 90% illegitimate birthrate, whites will never return to Detroit if blacks remain in power. Even if Uncle Sam eradicated all their debts, whites won’t relocate to a city where blacks would reelect someone like former Mayor Kwame Kilpatrick. That is, if he weren’t already in prison for perjury and obstruction of justice.
If Detroit residents were honest with themselves, they’d burn in effigy Presidents George H.W. Bush and Bill Clinton as well as all the internationalist cronies for the passage of the North Atlantic Free Trade Agreement (NAFTA) in 1993.
Despite promises to boost employment, according to U.S. Census data, Michigan lost 48% of its manufacturing jobs from 2000 to 2010. That hit the city hard. As a result, when the good jobs left the region, most skilled workers took off with them in an attempt to find decent work elsewhere in America. Economist Robert Scott estimated that nearly 700,000 middle-class jobs have been “lost or displaced” due to NAFTA.
Presidential candidate Pat Buchanan summed it up best in his book Suicide of a Superpower:
“This is our reward for turning our backs on the economic nationalism of the men who made America, and embracing the free-trade ideology of economics and academics who never made anything. In early 2010 it was reported that Detroit, forge and furnace of the arsenal of democracy in World War II, was considering razing a fourth of the city and turning it into pastureland. Did that $1.2 trillion trade deficit we ran in autos and auto parts in the Bush 43 decade help to kill Detroit?”
Along with corporate vampires all too willing to outsource jobs from America’s rust belt, another finger of blame must be directed at federal bureaucrats. In particular, critics cite the Occupational Health and Safety Act (OSHA) and Environmental Protection Agency (EPA), both created in 1970 during President Richard Nixon’s administration.
The EPA dramatically caused energy costs to increase for Big Three automakers, especially during the initial Arab oil embargo. At the same time, OSHA regulations are seen as the first step in what became a trend of skyrocketing insurance premiums. OSHA did make Detroit factories safer, but it also increased the cost of doing business, thus opening the door for foreign competitors not burdened with such administrative costs.
Another factor that set the Motor City on its downward spiral can be traced to the incestuous relationship between Detroit’s “Democratic Machine” and public-sector unions. Essentially, unions poured millions of campaign contributions into the coffers of crooked politicians, who in turn kept signing retirement packages they had no possibility of honoring in the future.
This revolving door of union contributions and unrealistic promises continued for decades because it was in both party’s interests. Black mayors, councilmen and union bosses got filthy rich from this cozy arrangement, especially since they negotiated into law an edict where elected officials couldn’t lay off city workers, even as population numbers plummeted. Making matters worse, these same debauched politicians borrowed against their employee’s pension funds to secure more loans they’d never be able to repay.
Even today, amid bankruptcy and talk of a federal bailout, the mindset in this geographic area is still far removed from reality. On July 25, the Michigan Strategic Fund released a proposal that would force state taxpayers to pay for 60% of a new $450 million hockey arena in downtown Detroit. Outraged, citizen groups scoff at billionaire sports team owners’ bilking people that may lose up to 90% of their pensions.
Rochester, N.Y.: Town Refuses to Surrender
By Victor Thorn
Not all cities centered upon a single industry like Detroit are destined for economic disintegration during hard times. Take, for instance, Rochester, New York, home of film giant Kodak. In pre-digital days, this industry leader employed 62,000 workers. Today, that figure stands at less than 7,000. Obviously, Rochester suffered a major economic blow from these job losses.
But instead of plummeting into a financial abyss like the Motor City, city leaders reorganized and divested their resources. As Kodak’s fortunes declined, entrepreneurs created a business park out of its 1200-acre infrastructure. There, dozens of smaller companies set up shop in high-tech areas such as computerization, light industry, and medical device manufacturing.
Another factor that’s been extremely beneficial to Rochester was Kodak’s insistence on college-educated employees. Thus, when Kodak’s management failed to capitalize on changing technologies in the marketplace, their workers transitioned into new endeavors.
The point is clear: Rather than turning a blind eye to rampant illiteracy, peddlers pushing hard drugs, prostitution, and fatherless homes that produce generations of non-skilled workers, Rochester didn’t allow a culture of black ignorance to takeover. Instead, it attracted new businesses that allowed its citizens the virtue of honest employment.
Rochester still feels the pain of Kodak’s demise, especially in many urban locales. But unlike Detroit, which succumbed to the lowest form of racial degeneracy, Rochester is fighting to maintain its dignity and protect its pensioners.
Victor Thorn is a hard-hitting researcher, journalist and author of over 50 books.