Posted By LambChop
According to the U.S. Census Bureau, in 1960, the richest per capita city in America was Detroit. Today, Detroit became the largest city in U.S. history to file for bankruptcy. Why?
THE AUTO INDUSTRY, THE BAILOUT & NAFTA:
According to the U.S. 2010 Census data, Michigan lost 48% of all its manufacturing jobs from 2000 to 2010.
It’s true that 682,000 skilled jobs have been lost and displaced since the 1994 signing of NAFTA – many going to Mexico. But NAFTA did not cause the problem that American manufacturing companies had – the inability to compete in a global marketplace.
While NAFTA has been blamed for Detroit’s woes, the real problem with Detroit was the fact that it was a single industry town. The auto industry. Automakers were held hostage by the unions – unions who had political run over the city and state. Union (UAW) contracts added $2,000 per American car over foreign competitors’ cars like Toyota. Once the bottom fell out, brought on by Obama’s Great Recession, American automakers like General Motors and Chrysler turned to their government cronies for financial favors – like the massive auto bailout. Much was made of Mitt Romney’s NY Times op-ed in 2008 “Let Detroit Go Bankrupt,” but he was prophetic. Romney said, “If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.”
Automakers needed to restructure and the bailout allowed them to stay on their path to destruction with huge labor contracts and retirement pensions, inferior product, no investment in technology or research and inability to compete in the free trade environment with declining market shares. Instead they took the money and ran. Romney was right – except for the fact that the demise would not be overnight.
REGULATIONS - EPA, OSHA:
In 1970 the Occupational Health and Safety Act was passed and the Environmental Protection Agency was created. The unintended economic consequences of these 2 government entities devastated industrial cities like Detroit. OSHA opened the flood gates for workers to sue their companies for workplace injuries, increasing insurance premiums and forcing manufacturers to pay for massive expenses in order to comply with regs. The EPA standards also forced companies to spend more to comply, called for replacing functional equipment with new equipment and increased the cost of energy to operate manufacturing plants.
COST OF ENERGY:
The cost of energy has been driven sky high since the 1970s. OPEC’s price manipulations, the U.S. government raising taxes on oil and coal, and the Obama administration’s deliberate gridlock when it comes to drilling new fields (oil drilling permits down 36%) have driven up cost of energy. Manufacturers rely on cheap sustainable sources of energy and new regulations like lowering carbon fuel standards have driven up the cost to produce automobiles and to power the plants that build them.
Labor law prevented public officials from scaling back the cities’ workforce while need for services declined. Currently, both of the city’s pension funds have $9.2 billion in unfunded pension and retiree health care liabilities.
25% of its population base that paid taxes – left the city of Detroit. In 2012, Detroit had the highest rate of violent crime in the nation for a city larger than 200,000. About 40 percent of the city’s streetlights do not work. More than half of Detroit’s parks have closed since 2008.
Despite President Obama's claims in 2012, "We refused to let Detroity go bankrupt!" liberal policies, regulations and the bailout all contributed to the demise of this once great city.
Today 60% of all Detroit’s children are living in poverty; 50% of the population has been reported to be functionally illiterate; 33% of Detroit’s 140 square miles is vacant or derelict; 18% of the population is unemployed and 10.6% of Detroit’s 713,777 residents, according to the 2010 U.S. Census, considered themselves white.
Detroit's budget deficit is believed to be more than $380 million. Detroit's emergency manager Kevyn Orr has said long-term debt was more than $14 billion and could be between $17 billion and $20 billion.