Detroit files for bankruptcy protection http://www.usatoday.com/story/news/nation/2013/07/18/detroit-bankruptcy-what-will-happen-next/2556605/
• If the judge authorizes the city to move forward with a Chapter 9 bankruptcy case, Orr would propose a plan of reorganization. This could take weeks, months or years. Bankruptcy court allows the city to restructure its operations and its balance sheet. This could involve budget cuts, layoffs, consolidation, the sale of assets, slashing union contracts, selling assets and dramatically reducing city debts, including outstanding bonds.
DETROIT (Reuters) - A Michigan judge on Friday ordered Detroit's state-appointed emergency manager to withdraw the federal bankruptcy petition he filed for the city on Thursday.
Ingham County Circuit Court Judge Rosemarie Aquilina's order said the 2012 Michigan law that allowed Governor Rick Snyder to approve the city's bankruptcy filing, the largest municipal bankruptcy filing ever in the United States, violated the Michigan Constitution.
The declaratory judgment came in lawsuits filed this month by Detroit pension funds, retirees and workers, which sought to prevent a bankruptcy filing that would ultimately impair retirement benefits in violation of constitutional protections for those benefits.
Gov. Rick Snyder explained his decision by citing statistics that have hobbled the city's operations:
• The city's unemployment rate has nearly tripled since 2000 and is more than double the national average.
• The homicide rate is at historically high levels, and the city has been named among America's most dangerous for more than 20 years.
• Detroiters wait an average of 58 minutes for police to respond, compared with the national average of 11 minutes.
• An estimated 40% of the city's street lights didn't work in the first quarter of 2013.
• Roughly 78,000 city structures have been abandoned.
The combination of lost auto industry jobs and rising crime rates prompted many middle-class whites and African Americans to flee Detroit over the past few decades. That exodus left behind an overwhelmingly poor and nearly 83% African-American population, making Detroit the nation's largest black-majority city.
Steve Malanga tells me that 15,000 city workers currently pay lifetime retirement-health-care costs for 22,000 retirees. It’s like financing a separate government. That one piece alone is about $5.5 billion.
And pension-fund accounting is as phony as a three-dollar bill. With a highly unrealistic 8 percent long-run return rate, the city government didn’t have to make any more contributions to the retirement fund. And apparently the 40 or so municipal unions persuaded the city government to actually float new pension-obligation bonds just to fund their own bloated pensions. (Many municipalities use this fiscal gimmick.)
All in, Detroit is running a $350 million deficit with a near $20 billion total-debt position. They pay themselves a living wage and then spend way more on schools per pupil than the national average. The result is one of the lowest student-performance rates in the country.
I’m not going to go into the economic wreckage that the United Auto Workers created at Ford, GM, and Chrysler. But the focus now should be on curbing the power and money of Detroit’s municipal public unions, who have lined their own pockets at taxpayer expense. Taking a cue from Wisconsin’s Walker, collective bargaining should be sharply cut if not eliminated. And hopefully a bankruptcy court will settle all the obligations at 5 to 10 cents on the dollar, as Detroit emergency manager Kevyn Orr tried to do but failed.
The UAW's havoc at the Big Three was two-sided, as with the USW to the steel industry: management didn't stand their ground, nor did they completely exercise forethought, no? To be sure, both of those unions have culpability in the sad state of affairs for their industries, but it took two to do that dance. A plague on both their houses.
Detroit's downward spiral is going to take a long time to arrest.
At the turn of the 20th century Detroit was a midsized industrial center with 285,000 citizens. In 1903 the founding of Ford Motor Company launched a new era in the city’s history, and by 1926 Detroit had grown to cover the nearly 140 sq. miles it occupies today. By 1930 the city contained nearly 1.6 million people making the Motor City the nation's fourth largest.
Growth slowed in the 30’s, however, and made only a slight recovery in the 40’s due to massive military production. In the 1950 census Detroit would reach its population peak of 1.849 million. However, from the 1950’s on Detroit began a steep population decline from which it has yet to recover.
That's right, people were fleeing Detroit in the 50's and early 60's. Why would some 250,000 people leave this idyllic union city years before the image changing 1967 riot? The answer is simply that Detroit was already a city on an economic and social decline coming out of the Second World War.
Social unrest had been taking hold in the city for some time. Once fashionable neighborhoods like Brush Park became rundown and poor. In 1943 Detroit was witness to a massive race riot; one that is often forgotten despite being far larger in scope than the infamous 1967 riot.
The seeds of Detroit’s failure were sown in the 30’s and 40’s. Auto unions gained power between 1937-1941, an event which was immediately followed by World War II. In the late 1940’s American factories dominated the world market as most of the foreign industrial powers had been destroyed in the war.
As soon as foreign manufacturing recovered in the 50's one sees that American industry immediately began to lose ground. The pace quickened in the 1970's and finally culminating in the auto bailouts of 2009.
Why did this happen? Simply because the restrictions placed on auto manufacturers made American cars uncompetetive in the world market. Indeed the unions did succeed in securing record high salaries for their members, but only at the cost of destroying the American manufacturing sector.
The truth is that Detroit’s success, its wealth, people, and grand architecture all existed before the Unions ever came to power and it is actually astonishing to see how quickly they affected the city’s industrial base.
Just looking at the dates when most of Detroit’s residential, industrial, and commercial structures were built reveal that the vast majority of the city’s buildings date from before the Great Depression. This should be a small surprise given that 85% of the city’s growth came before 1930. This was possible because men like Henry Ford were already paying record high wages to auto workers in 1914, and in doing so provided Detroit with one of the highest homeownership rates in the nation.
Again, all of this occured before the union takeovers.
At the end of the day the UAW needs to confront this fact. Detroit's population in 1940 at the beginning of union dominance was 1.623 million. Today the population stands at 700,000. Apart from growth resulting from the World War during the 1940's one finds that Detroit has spiraled downward since it became a union city.
Spot on, sir. For a take from a different angle, I suggest "And the Wolf Finally Came" by J. Hoerr. I had to read that book a few years ago. Sadly fascinating. It dealt with the steel industry death spiral, including the relationship between the USW and the UAW.
Detroit's downfall can be blamed on few factors such as globalization and liberalism.
This is a prime example of what happens when a viable middle class ceases to exist. There is a shift from a majority of productive workers to those dependent on welfare programs.
As US business lost their ability to compete against a stacked deck of cheap foreign labor business moved overseas or went out of business. I am not just talking about the auto industry either. In entering the global market the way that we did we ushered in industry standards with respect to wages and working conditions. Ironically many of the unions financed their own demise by giving to political campaigns that fostered both pro union and backdoor deals.
Then you have the liberal crutch that propped up these failing ideals. If the crutch was not there, trade policies and union contracts would have been rewritten to change the direction of business long ago. Instead the welfare mentality defer any real change or intervention until now ---- and it is too late.
Now we are at a place economically that we have more takers than producers. This is NOT limited to Detroit. All major cities have huge bureaucratic payrolls and shrinking revenues. So now what? Detroititice will be sweeping across this nation and all the big cities will not survive it.
Detroit files for bankruptcy protection
ReplyDeletehttp://www.usatoday.com/story/news/nation/2013/07/18/detroit-bankruptcy-what-will-happen-next/2556605/
• If the judge authorizes the city to move forward with a Chapter 9 bankruptcy case, Orr would propose a plan of reorganization. This could take weeks, months or years. Bankruptcy court allows the city to restructure its operations and its balance sheet. This could involve budget cuts, layoffs, consolidation, the sale of assets, slashing union contracts, selling assets and dramatically reducing city debts, including outstanding bonds.
DETROIT (Reuters) - A Michigan judge on Friday ordered Detroit's state-appointed emergency manager to withdraw the federal bankruptcy petition he filed for the city on Thursday.
ReplyDeleteIngham County Circuit Court Judge Rosemarie Aquilina's order said the 2012 Michigan law that allowed Governor Rick Snyder to approve the city's bankruptcy filing, the largest municipal bankruptcy filing ever in the United States, violated the Michigan Constitution.
The declaratory judgment came in lawsuits filed this month by Detroit pension funds, retirees and workers, which sought to prevent a bankruptcy filing that would ultimately impair retirement benefits in violation of constitutional protections for those benefits.
(Reporting by Karen Pierog; Editing by Dan Burns)
Gov. Rick Snyder explained his decision by citing statistics that have hobbled the city's operations:
ReplyDelete• The city's unemployment rate has nearly tripled since 2000 and is more than double the national average.
• The homicide rate is at historically high levels, and the city has been named among America's most dangerous for more than 20 years.
• Detroiters wait an average of 58 minutes for police to respond, compared with the national average of 11 minutes.
• An estimated 40% of the city's street lights didn't work in the first quarter of 2013.
• Roughly 78,000 city structures have been abandoned.
The combination of lost auto industry jobs and rising crime rates prompted many middle-class whites and African Americans to flee Detroit over the past few decades. That exodus left behind an overwhelmingly poor and nearly 83% African-American population, making Detroit the nation's largest black-majority city.
Steve Malanga tells me that 15,000 city workers currently pay lifetime retirement-health-care costs for 22,000 retirees. It’s like financing a separate government. That one piece alone is about $5.5 billion.
ReplyDeleteAnd pension-fund accounting is as phony as a three-dollar bill. With a highly unrealistic 8 percent long-run return rate, the city government didn’t have to make any more contributions to the retirement fund. And apparently the 40 or so municipal unions persuaded the city government to actually float new pension-obligation bonds just to fund their own bloated pensions. (Many municipalities use this fiscal gimmick.)
All in, Detroit is running a $350 million deficit with a near $20 billion total-debt position. They pay themselves a living wage and then spend way more on schools per pupil than the national average. The result is one of the lowest student-performance rates in the country.
I’m not going to go into the economic wreckage that the United Auto Workers created at Ford, GM, and Chrysler. But the focus now should be on curbing the power and money of Detroit’s municipal public unions, who have lined their own pockets at taxpayer expense. Taking a cue from Wisconsin’s Walker, collective bargaining should be sharply cut if not eliminated. And hopefully a bankruptcy court will settle all the obligations at 5 to 10 cents on the dollar, as Detroit emergency manager Kevyn Orr tried to do but failed.
http://www.nationalreview.com/article/353954/kemp-growth-plan-detroit-larry-kudlow
William,
DeleteThe UAW's havoc at the Big Three was two-sided, as with the USW to the steel industry: management didn't stand their ground, nor did they completely exercise forethought, no? To be sure, both of those unions have culpability in the sad state of affairs for their industries, but it took two to do that dance. A plague on both their houses.
Detroit's downward spiral is going to take a long time to arrest.
Jean
At the turn of the 20th century Detroit was a midsized industrial center with 285,000 citizens. In 1903 the founding of Ford Motor Company launched a new era in the city’s history, and by 1926 Detroit had grown to cover the nearly 140 sq. miles it occupies today. By 1930 the city contained nearly 1.6 million people making the Motor City the nation's fourth largest.
ReplyDeleteGrowth slowed in the 30’s, however, and made only a slight recovery in the 40’s due to massive military production. In the 1950 census Detroit would reach its population peak of 1.849 million. However, from the 1950’s on Detroit began a steep population decline from which it has yet to recover.
That's right, people were fleeing Detroit in the 50's and early 60's. Why would some 250,000 people leave this idyllic union city years before the image changing 1967 riot? The answer is simply that Detroit was already a city on an economic and social decline coming out of the Second World War.
Social unrest had been taking hold in the city for some time. Once fashionable neighborhoods like Brush Park became rundown and poor. In 1943 Detroit was witness to a massive race riot; one that is often forgotten despite being far larger in scope than the infamous 1967 riot.
The seeds of Detroit’s failure were sown in the 30’s and 40’s. Auto unions gained power between 1937-1941, an event which was immediately followed by World War II. In the late 1940’s American factories dominated the world market as most of the foreign industrial powers had been destroyed in the war.
As soon as foreign manufacturing recovered in the 50's one sees that American industry immediately began to lose ground. The pace quickened in the 1970's and finally culminating in the auto bailouts of 2009.
Why did this happen? Simply because the restrictions placed on auto manufacturers made American cars uncompetetive in the world market. Indeed the unions did succeed in securing record high salaries for their members, but only at the cost of destroying the American manufacturing sector.
The truth is that Detroit’s success, its wealth, people, and grand architecture all existed before the Unions ever came to power and it is actually astonishing to see how quickly they affected the city’s industrial base.
Just looking at the dates when most of Detroit’s residential, industrial, and commercial structures were built reveal that the vast majority of the city’s buildings date from before the Great Depression. This should be a small surprise given that 85% of the city’s growth came before 1930. This was possible because men like Henry Ford were already paying record high wages to auto workers in 1914, and in doing so provided Detroit with one of the highest homeownership rates in the nation.
Again, all of this occured before the union takeovers.
At the end of the day the UAW needs to confront this fact. Detroit's population in 1940 at the beginning of union dominance was 1.623 million. Today the population stands at 700,000. Apart from growth resulting from the World War during the 1940's one finds that Detroit has spiraled downward since it became a union city.
http://www.freedomworks.org/blog/rousseau/motor-city-blues-part-i-the-myth-of-union-detroit
William,
DeleteSpot on, sir. For a take from a different angle, I suggest "And the Wolf Finally Came" by J. Hoerr. I had to read that book a few years ago. Sadly fascinating. It dealt with the steel industry death spiral, including the relationship between the USW and the UAW.
Jean
Detroit's downfall can be blamed on few factors such as globalization and liberalism.
ReplyDeleteThis is a prime example of what happens when a viable middle class ceases to exist. There is a shift from a majority of productive workers to those dependent on welfare programs.
As US business lost their ability to compete against a stacked deck of cheap foreign labor business moved overseas or went out of business. I am not just talking about the auto industry either. In entering the global market the way that we did we ushered in industry standards with respect to wages and working conditions. Ironically many of the unions financed their own demise by giving to political campaigns that fostered both pro union and backdoor deals.
Then you have the liberal crutch that propped up these failing ideals. If the crutch was not there, trade policies and union contracts would have been rewritten to change the direction of business long ago. Instead the welfare mentality defer any real change or intervention until now ---- and it is too late.
Now we are at a place economically that we have more takers than producers. This is NOT limited to Detroit. All major cities have huge bureaucratic payrolls and shrinking revenues. So now what?
Detroititice will be sweeping across this nation and all the big cities will not survive it.
Detroit in the 1950's had 300,000 manufacturing jobs today there are 27,000.
ReplyDeletehttps://fbcdn-sphotos-d-a.akamaihd.net/hphotos-ak-frc1/q71/1001211_10151573017642971_972695262_n.jpg
ReplyDelete