Were Obama, Reid or Pelosi running Detroit, they would say it merely has a revenue problem, not a spending problem. Annual deficits in the hundreds of millions with unfunded liabilities of nearly $15 billion is much like our federal budget scenario. Unfortunately, there is no review board or emergency financial manager to step in and save America. Mayor Dave Bing has been attempting to avert the appointment of an emergency financial manager for several years. Each year the approach has been to issue even more long-term debt to solve cash crunch woes. Payday has arrived.
The findings of the review board are here – http://www.detroitnews.com/article/20130219/SPECIAL01/130219001/1408/LOCAL.
The numbers are staggering for a once booming metropolis. The 2013 cash deficit is expected to exceed $100 million by the end of June. The solutions proposed by the Mayor and City Council? One-time savings reforms rather than permanent reforms to avoid this situation again next year. Worse yet, the reforms only target non-union employees as the entrenched unions refuse to be part of the solution.
Absent the bond sales for long-term debt, the 2012 deficit would have ballooned from $326 to $936 million. Sounds familiar, doesn’t it? When our federal government outspends revenue, the Fed merely prints more money to mask the true picture of the deficit.
Addressing the unfunded pension liabilities of $14.9 billion isn’t even being discussed. $1.9 billion comes due within the next five years and no plan exists to pay it.
The problems are exacerbated by the inability of the review board to get a straight answer out of anyone. For instance, there are 2,030 employees in the police dept., yet there are wildly varying estimates of how many actually work a beat as opposed to paper pushers. Determining minimum staffing levels becomes virtually impossible.
Gov. Rick Snyder has 30 days to make a decision on appointing an emergency manager or proposing an alternative plan. It’s likely he’ll make the appointment recommendation. After that, the situation has become so dire that a municipal bankruptcy is the only realistic option. The City Council has a plethora of roadblocks in place to prevent any large scale gutting of municipal employees or other methods to cut costs leaving bankruptcy as the only viable solution.
The point of this post is to highlight the fact that no such option exists for the federal government. There is no oversight in the form of a review board or emergency manager to step in. While bankruptcy is technically an option for the federal government, devaluing the currency also exists. Neither are good and when we reach the breaking point, it will be a very hard fall. There are no safeguards short of the ballot box to stem the tide of an irresponsible, out-of-control Congress hell bent on crashing into the brick wall at top speed.
Detroit may get a second chance through the bankruptcy process, but if the City Council retains power it will reinstitute the same cradle to grave mentality that brought it here in the first place. Second chances are a part of American culture, but insanity by its common definition needs to be eradicated if we ever want to break this cycle of redistributing wealth until the dam bursts.