by | ARTICLES, ECONOMY, OBAMA, POLITICS
Obamapologists have been pointing to the shrinking budget deficit as proof that the economy is heading in the right direction. There is a sense of desperation afoot to find something, anything, that can be positive news upon which Obama can rebuild his reputation. For the non-economists out there, a declining deficit does indeed sound indicative of a healthy economic rebound. However, the main reasons for this current shrinking deficit have absolutely nothing to do with Obama, nor do they affect the economy in the way it is being spun.
The first major reason for the deficit reduction has to do with Fannie Mae and Freddie Mac. These two government entities have given at least $140 billion, its “profit”, to the US Treasury so far in 2013. But this “profit“ was principally interest collected on mortgages which a) should have been earned by the private sector which the government took over by underbidding the private sector using taxpayer money, and b) by basically deciding that the private shareholders of Fannie and Freddie shouldn’t receive any part of the profit even though they had purchased – with their own money – substantial shares in the companies. These profits were required to be handed over to the US Treasury after the 2008 bailout conservatorship was amended with this change in 2012. Whether or not such action was legal is another question entirely.
The second large source of revenue was the frenzy of end-of-year tax paying in 2012. Remember the fight over the “Fiscal Cliff”? Because of the very substantial increase in individual tax rates for higher income earners, these individuals were able to accelerate 2013 income (including salary and bonuses) and dividends into 2012 to get the lower rate. Even more importantly, individuals that had gains on stock and real estate that they might not ordinarily have sold for years, all were dumped by the end of 2012 to get the lower rates. It should be noted that tax rates on dividends and capital gains for high income earners went up 59% – so much for Obama’s “the wealthy can pay just a little bit more”. The FY of the federal government runs October 1 to September 30, so those tax transactions, necessitating taxes to be paid by April 15, 2013, were recorded in the current fiscal year.
The Fannie/Freddie contribution and the end-of-the-year tax activity account for substantially all of the revenue increase and corresponding deficit reductions. They are one-shot deals, and are therefore not an indication of a rapidly growing economy.
Moreover, the most important thing to remember is that even with a lower deficit right now, Obama is still running huge annual deficits. Certainly no credit for deficit reduction should go to the Obama Administration, when total deficits still run over 4% of the GDP and are overwhelmingly higher than any of his predecessors in the history of our country (except during World War II). If true and lasting spending cuts, including entitlements, are not soon brought under control, we will be rapidly moving towards becoming Greece.
by | ARTICLES, ECONOMY, NEW YORK, POLITICS
De Blasio’s recent mayoral victory was a sad day for New Yorkers. Electing him was proof that the constituency in NYC is morally, philosophically, and educationally bankrupt. And if the mayor sticks to his positions that he declared as candidate De Blasio, NYC will be financially bankrupt as well.
A strong argument can be made that the entire election was a public service union push. For four years now, the public service unions have waiting to negotiate their contracts until Bloomberg was out of office. The time has come for the unions. De Blasio, from a position of patronage, will roll over and give the unions huge back-end and retroactive pay increases and benefits both undeserved and unaffordable. New York City could easily find itself in the same fiscal categories as Detroit and Chicago.
Why have the unions been willing to work without a contract for virtually all of the Bloomberg tenure? A little known clause of the anti-strike Taylor Law is the Triborough Amendment.This provision mandates that if a contract expires before a new contract is in place, the benefits of the expired contract continue, unchanged, until the new contract is finally negotiated. NYC is the only place in the country that has such a clause, which renders it difficult to negotiate anything from a position of austerity.
Bloomberg understood the ever-expanding costs of public service union wages and benefits, and sought to restrain them during the economic downturn. Over the past four years, the unions have steadfastly refused to engage in contract negotiations that would bring their costs in line.Why should they? They could continue to accrue the unaffordable and unreasonable benefits of the expired contract that they could have no hope of getting with Bloomberg under a new contract. Then they could help elect a new mayor who is philosophically aligned, financially naive, and seemingly irresponsible enough to give them what they could only dream of in a new contract.
De Blasio won the election by a huge majority, despite the fact that he is so far left as to be an avowed supporter of the likes of Cuba and the Sandinistas. He clearly espouses policies — such as higher taxes, more spending and regulation, attempts at government imposed income redistribution, and curtailment of police activity — which will ultimately hurt the poor and economically disadvantaged more than anyone. And if he tops it off with crony contracts with the public service unions, New Yorkers will have dug themselves a hole virtually impossible to get out of.
by | ARTICLES, OBAMA, OBAMACARE, POLITICS
Are you a genetic lottery winner? Too bad.
The legislative name for Obamacare is the Affordable Care Act. This name was chosen precisely to appeal to Americans to consider buying a health insurance plan from a government-run exchange. Who doesn’t like the idea of something that is “affordable”? By using that term, it suggested that the current system of health care was the opposite –“unafforable”. But the Affordable Care Act was merely a red herring for what the government really thought about the healthcare system — that it was discriminatory, and could be used as another vessel for wealth transfer.
Yesterday’s interview transcript between Chuck Todd and the Architect of Obamacare, Mr. Jonathan Gruber, M.I.T. should be screaming from every newspaper this morning. But there was hardly a blip on the radar screen. Real Clear Politics has the video. Mr. Gruber revealed the singular truth about the real reason our government created and passed Obamacare — it was not about an “affordable” new system; it was about a “discriminatory” old system, and the government “fix”. Here’s what Gruber described:
“We currently have a highly discriminatory system where if you’re sick, if you’ve been sick or [if] you’re going to get sick, you cannot get health insurance. The only way to end that discriminatory system is to bring everyone into the system and pay one fair price.
That means that the genetic winners, the lottery winners who’ve been paying an artificially low price because of this discrimination now will have to pay more in return. And that, by my estimate, is about four million people. In return, we’ll have a fixed system where over 30 million people will now for the first time be able to access fairly price and guaranteed health insurance“.
Where to start?
The most glaring and insulting concept in his statement is the idea that someone is a “genetic winner” and “a lottery winner” that has been “paying an artificially low price because of this discrimination”.
The idea of a “genetic winner” is incredibly chilling. Brave New world-ish even. It completely removes the idea of personal responsibility in the health equation. We are somehow only and entirely healthy or not because of superior genetics, and therefore those who are should be financially punished for it due to a government-imposed standard of “fairness”.
The next absurity goes hand-in-hand with that — the idea that people who “won” the “genetic lottery” are paying artificially low prices for insurance. By what standard is something “artificially low” (or not)? The government standard! Not the insurance market. The government tells us something is artificially low and therefore needs to be corrected. It is their justification to punish the “winners”, a form of reparation of to those who the government considers “genetic lottery losers”. Pay up! It’s not fair you have been paying too low of a price!
Gruber also describes in detail how the government has decided the system is discriminatory: “where if you’re sick, if you’ve been sick or [if] you’re going to get sick, you cannot get health insurance. At every point in time — present, past, and future — the system discriminates. If you might get sick in the future, you cannot have insurance now! Such a statement defies all logic. But it doesn’t matter. The groundwork is laid bare: our health care discriminates.
What is the solution? Gruber explains that the only way to level the playing field and be fair is to force the “genetic winners” to pay their fair share (sound familiar?).And finally, finally, Gruber tells us, “In return, we’ll have a fixed system where over 30 million people will now for the first time be able to access fairly price and guaranteed health insurance”.
A fixed system now. Because the government decided the system was “broken”. It was the fault of the genetic lottery winners and the artifically low prices who discriminated against those who did not have insurance. Are you a genetic lottery winner? The government finds you contemptible.
Of course, there was no distinction of the uninsured between those who could not get insurance or who chose not to have insurance either. The Uninsured were discriminated against. And that needed to be fixed — by the government. We’re here to help.
The Affordable Care Act is only about being affordable to some. It is revealed to be another giant wealth transfer. Take the genetic lottery winners, kick them off their freely chosen policies, put them on the more expensive Obamacare government exchanges, and subsidize those who have been discriminated against to make it fair for all.
Fairness is yet again the objective of, and gift from, the government — no matter the cost to our wallets or our dignity.
by | ARTICLES, OBAMA, OBAMACARE, QUICKLY NOTED
Last week, I reported that the whitehouse.gov website section pertaining to Obamacare still had the “if you like your plan, you can keep it” Promise. I checked out whitehouse.gov on November 6, a few days after Obama gave a speech during which he explained that the Promise actually had qualifiers.
Obama’s new Promise during that speech was: “Now, if you have or had one of these plans before the Affordable Care Act came into law and you really liked that plan, what we said was you can keep it if it hasn’t changed since the law passed”. This Animal Farm-esque change drew outcries from around the county.
Back to whitehouse.gov. On November 6, the “Health Reform” section on Obamacare included the very bold statement:
“For those Americans who already have health insurance, the only changes you will see under the law are new benefits, better protections from insurance company abuses, and more value for every dollar you spend on health care. If you like your plan you can keep it and you don’t have to change a thing due to the health care law”
And the screenshot from November 6:
Checking back a week later to see if whitehouse.gov has updated that section to include the new Promise made by Obama, an interesting thing occured ont the website. The same original Promise is still there. But the IT guys for whitehouse.gov did manage to edit that section by adding a new line after the original Promise. That line reads “The President addressed concerns from Americans who have received letters of policy cancellations or changes from their insurance companies in an interview with NBC News, watch the video or read a transcript”
Here is that screenshot of the same section, with the new line added:
Because the whitehouse.gov included a link to Obama’s interview and transcript, I clicked on it to see what Obama had to say about his Promise.
From the transcript:
“Well — first of all, I meant what I said. And we worked hard to try to make sure that we implemented it properly. But obviously, we didn’t do enough — a good enough job — and I regret that. We’re talking about 5% of the population — who are in what’s called the individual market. They’re out there buyin’ health insurance on their own.
A lot of these plans are subpar plans. And we put in a clause in the law that said if you had one of those plans, even if it was subpar — when the law was passed, you could keep it. But there’s enough churn in the market that folks since then have bought subpar plans. And now that may be all they can afford. So even though it only affects a small amount of the population, you know, it means a lot to them, obviously, when they get — this letter cancelled”…
and further…
“You know — I regret very much that — what we intended to do, which is to make sure that everybody is moving into better plans because they want ’em, as opposed to because they’re forced into it. That, you know, we weren’t as clear as we needed to be — in terms of the changes that were takin’ place. And I want to do everything we can to make sure that people are finding themselves in a good position — a better position than they were before this law happened”.
Obama regrets that “we weren’t as clear as we needed to be”, but still has the original Promise in plain text right on the whitehouse.gov website. It still says, clear as day,
“If you like your plan you can keep it and you don’t have to change a thing due to the health care law”
The same Promise he repeated previously at least 29 times.
What’s worse, not only is the original Promise still on the page mentioned above, it is also on ANOTHER page of the Obamacare section on whitehouse.gov. Head on over to the section on “Quality Affordable Health Care for All Americans, and you can see the text:
“For Americans with insurance coverage who like what they have, they can keep it. Nothing in this act or anywhere in the bill forces anyone to change the insurance they have, period”
Here’s that screenshot as well:
And at the bottom of the page when you scroll down, whitehouse.gov urges Americans to continue on to the page entitled “If You Like the Insurance You Have, Keep It“. That is the name of the actual page.
On that page, it boldly proclaims:
“If You Like the Insurance You Have, Keep It:
Nothing in the proposal forces anyone to change the insurance they have. Period.”
So whitehouse.gov continues to peddle the original Promise that Obama has to explain away. Whitehouse.gov can take the time to update their website to add the explanations, but can’t edit the Promise.
If Obama regrets not being clear as he said in the interview, why hasn’t the White House updated the Promise to the new explanation in order to be clear? How can the White House be “clear” when their own website says one thing in several places, and the President is running around explaining it in a different way? How is this transparent?
Despite the regrets Obama expressed in his latest remarks on the Promise, it is clear that the Obama does not want to be clear.
by | ARTICLES, OBAMA
The best thing you can say about the Obamacare legislation and recent rollout is that the president lied. He lied about “keeping your plan” and “keeping your doctor”. He lied about the cost savings. He lied to the American people to sell it.That is the best spin that can be put on what he said.
What’s worse? We now know — based on recently-surfaced memos — that all of his advisors and speech writers also knew that keeping your plan and doctor was not true. This is more heinous than just the President lying. In this event, the American President and his coterie willfully and deliberately deceived the American public in order to push forth a complex and expensive piece of controversial legislation on which Obama was to hang his legacy.
And what if Obama didn’t know? That is the most terrible scenario of all. That our President is surrounded by people who knowingly and unabashedly lied to him about an important bill. If they can lie about health care legislation to the President and to our citizens, what else have they lied about? Benghazi? The IRS? Fast and Furious? How much has the media and Congress aided and abetted the deception? How could the office of the President be reduce to a mere shell — and by Obama the Wunderkind, no less? And more incredibly, when the President did find out that he had been lied to by his most trusted advisors and speech writers he did nothing about it! Not one head rolled.
If, in fact, Obama expressly lied to the country about Obamacare,it is outrageous and reprehensible. But it is Obama’s best scenario. Because the other scenarios, and their implications for our country and for our Executive Branch, are frighteningly worse.
by | ARTICLES, OBAMA, OBAMACARE, POLITICS
Oopsies!
The White House website (whitehouse.gov) still shows the original “If you like your health plan, you can keep it” promise. See the text here on www.whitehouse.gov/healthreform/healthcare-overview:
Health Care that Works for Americans
On March 23, 2010, President Obama signed the Affordable Care Act into law, putting in place comprehensive reforms that improve access to affordable health coverage for everyone and protect consumers from abusive insurance company practices.
For those Americans who already have health insurance, the only changes you will see under the law are new benefits, better protections from insurance company abuses, and more value for every dollar you spend on health care. If you like your plan you can keep it and you don’t have to change a thing due to the health care law.
For the uninsured or those who don’t get their coverage through work, a key component of the Affordable Care Act will take effect on October 1, when the new Health Insurance Marketplace open for business, allowing millions of Americans to comparison shop for a variety of quality, affordable plans that best meet their health care needs”.
And the screenshot:
This is different than the speech he gave just a few days ago, where he gave qualifiers on the “if you like your plan, you can keep it.
PRESIDENT OBAMA: Now, if you have or had one of these plans before the Affordable Care Act came into law and you really liked that plan, what we said was you can keep it if it hasn’t changed since the law passed. So we wrote into the Affordable Care Act, you’re grandfathered in on that plan. But if the insurance company changes it, then what we’re saying is they’ve got to change it to a higher standard. They’ve got to make it better, they’ve got to improve the quality of the plan they are selling. That’s part of the promise that we made too. That’s why we went out of our way to make sure that the law allowed for grandfathering.
After the speech above, The Daily Caller reported that Obama made the original promise at least 29 times. Does this make 30?
Perhaps the same IT guys in charge of maintaining healthcare.gov are in charge of updating Whitehouse.gov.
UPDATE, NOV 7: Foxnews is showing another page of whitehouse.gov’s healthcare reform section, which also currently states this:
“For Americans with insurance coverage who like what they have, they can keep it. Nothing in this act or anywhere in the bill forces anyone to change the insurance they have, period.”
Too bad Obama doesn’t read his own website.
by | ARTICLES
Today marks 84 years since the Great Stock Market Crash of 1929, also known as Black Tuesday. This typically is considered the beginning event of the Great Depression that lasted some 10 years in the United States.
The crash itself did not cause the Depression, but rather it was an overcorrection of a stock market that was too high and too inflationary. The 1920s was a period of good and strong economic gain, but with an abundance of speculating market traders, it became unstable.
The real problem that followed was deflation. That was joined with credit problems, monetary problems, and a decrease in international trade. Additionally, Both Hoover and FDR intervened to help the economy back on track. The effects of those interventions have been hotly debated.
Many of Hoover’s policies — meant to be aid recover — did not help as intended. Smoot-Hawley comes to mind. So does his tax increases when many could least afford them.
The election of FDR took things to a whole new level. FDR’s New Deal vastly expanded the size and scope of government with relief and regulatory agencies. Some projects, such as the Civilian Conservation Corps, remain hallmarks of improvement during a bleak age. Others, such as the National Recovery Administration, contributed to the prolonging of the Depression.
The National Recovery Administration in particular slowed growth in the business sector. Many were reluctant to hire employees because prices were fixed and capital was scarce. But the crushing blow was dealt with FDR’s “undistributed profits tax”.
This tax which introduced in 1936, was considered a revenue raiser for the New Deal. In reality it was merely a tool intended to extract money from businesses and into the economy. Businesses now had to distribute their profits in either wages or dividends rather than savings or investment. This directly impeded a business’s ability to save capital or reinvest profits back into the business, which crippled small businesses in particular.
The tax was such an economic failure that it was reduced by 1938 and repealed a year later. But the Depression went into its bleakest hour at that time in 1937.
Deep and far-reaching government intervention combined with unbridled spending programs throughout the 1930s by FDR prolonged rather than helped the economy to recover from the Great Depression. And today five years after the mini-market crash of 2008, there are definitely parallels of the policies of that era — and our recovery is certainly sluggish at best. Remembering Black Tuesday and the era afterwards serves as a reminder that runaway spending and expanded government aren’t always the medicine needed for a better economy.
by | ARTICLES, BLOG, ECONOMY, OBAMA, POLITICS
In case you missed it, Harry Reid displayed the most incredible mind reading skills this past week during an interview on Nevada Public Radio.
As reported by Roll Call, the Senate Majority Leader explained that, “The only people who feel there shouldn’t be more coming in to the federal government from the rich people are the Republicans in the Congress,” He went on to declare that “Everybody else, including the rich people, are willing to pay more. They want to pay more.”
He also went on to announce that the only way there could be some sort of Congressional “grand bargain” would be under the conditions that the Republicans would have to agree to more tax revenue:
“They have their mind set on doing nothing, nothing more on revenue, and until they get off that kick, there’s not going to be a grand bargain on — there’s not going to be a small bargain,” Reid said. “We’re just going to have to do something to work our way through sequestration.”
For those who are short on memory, the Republicans agreed to tax increases on the wealthy immediately after we went over the “Fiscal Cliff” last January. Obama did not get his $250K threshold to raise taxes to 39.6% for “upper earners”, but he did get a $400K single/$450K married couple threshold. January 1, 2013 was the original sequestration deadline. With the Fiscal Cliff deal, the sequestration decision was booted again for two months.
Fast forward to the end of February with sequestration talks and the March 1 deadline looming. The White House and liberal media began discussing in earnest the possiblity of more taxes, especially after it was pointed out by Bob Woodward that sequestration did indeed originate with Obama.
After the Republicans didn’t blink on sequestration and the cuts went into play, Investors Daily revealed on March 1 that Obama’s “sequestration” plan was $1 Trillion in new revenue. That was followed up by Pelosi’s announcement that same afternoon that there would be “no sequestration deal without new taxes”. But sequestration stayed, much to the chagrin of the Democrats.
Here we are now, post-government shutdown. Obamacare is failing badly. Obamacare was supposed to be a source of revenue for the government over 10 years with its myriad of taxes — except that no one is signing up. The Democrats look bad, and the Congressional Dems are warming to the idea of a one-year delay, the very thing that many Republicans have been calling for ad nauseum.
What is Harry Reid to do? Why, talk about sequestration, of course. Let’s talk about how billions in cuts have been made to the government because the Republicans have “refused to compromise”. Let’s put the blame game back on them and off of the Democrats who voted hook, line, and sinker for Obamacare. Let’s stir the pot and talk about how tough sequestration is for everyone. Ergo, we need to fix the government budget with more revenue.
Pay attention folks. The Democrats are frustrated because of Obamacare right now. In the coming weeks, we’ll see renewed energetic playbook buzzwords talks of a “balanced approach”, a “compromise”, and a “grand bargain” approach to budget discussions…except that the only approach from the Democrats will be a firm call and firm stand for more revenue via tax increases.
Leviathan is wounded. And hungry. And he’s coming for your wallets.
by | ARTICLES, OBAMA, OBAMACARE
As each day passes, the various facets of Obamacare are getting implemented in order to be fully operational by January 1, 2014. But we are hearing about the difficulties in the implementation caused primarily by either 1) the website fiasco; 2) low number of enrollees; and 3) people wanting to pay the penalties in order to avoid having to pay for intentionally overpriced health “insurance”.
In order to achieve adequate and targeted enrollment in Obamacare those representing the Government have begun to be aggressive. They are choosing to use all methods at their disposal to pressure, cajole, and otherwise push people to “do the right thing” and buy the mandated insurance product. This began in earnest last spring, as the Health and Human Services Secretary Kathleen Sebelius was given millions at her disposal to dispatch “navigators” and “in-person assisters” to help enroll more Americans into Obamacare. But the very act of doing so may be rendering Obamacare unconstitutional.
It is worthwhile to remember that the only way in which the law of Obamacare was saved from being declared unconstitutional was the that that there is no penalty associated with Obamacare, which would have made it subject to the Commerce Clause. It was ruled to be a “tax” derived from not purchasing the mandated health coverage. In reaching his conclusion, Justice Roberts accepted the Administration’s argued position that there is absolutely no negative interference whatsoever on anyone opting to pay the “tax” rather than buy the product.
Therefore, any attempt by the administration or any of the implementing bodies to pressure, threaten or even imply some sort of wrongdoing by those choosing to not buy insurance would be clearly unconstitutional.
If those implementing Obamacare are properly following the Supreme Court’s mandate, they should be telling prospective insurance purchasers that they should be deciding for themselves whether they would be better off with the insurance or the penalty. We know this is not happening. At the macro level, governors have been hustled to implement the exchanges in their states. And at the individual level, Obamacare officials are pushing for more enrollees to ensure a steady flow of premiums paid by healthy patients in order to cover those who are high-risk and high-cost.
Just a few recent examples:
1) The LGBT Community created an Out2Enroll campaign to encourage LGBT to enroll in Obamacare after “the Obama administration called a meeting of LGBT leaders in mid-September. Nearly 200 from across the country met with the White House to talk about the potential impact of Obamacare. It also looked at what LGBT leaders could do to spread the word.”
2) Latinos with green cards were pushed to enroll in Obamacare at a recent forum marketed on the Get Covered America website. “Get Covered America is the nonprofit publicity and recruitment arm of “Enroll America,” which aims to ‘maximize the number of uninsured Americans who enroll in health coverage made available by the Affordable Care Act,’ according to its website”. Enroll America also has people going door-to-door with clipboards to sign people up, according to the Washington Post.
3) Hollywood celebrities teamed up with the White House to learn how to help shill for Obamacare. “Back in July, a group of Hollywood stars gathered at the White House to strategize a push for registration after the October 1 rollout of the Affordable Care Act. Among others, Amy Poehler, Jennifer Hudson, Kal Penn, and representatives for Oprah Winfrey, Alicia Keys, and the Funny or Die team offered their influence during a meeting with senior aide Valerie Jarrett and, briefly, President Obama himself”.
4) Government-funded Navigator Grants are setting up neighborhood centers for Obamacare enrollment. According to this story about a center with ties to former ACORN execs, “The government has given out $67 million in Navigator grants to help with the controversial rollout of ObamaCare. It was not clear if Local 100 got a grant of its own, but it has set up a help center with Southern United Neighborhoods, a charity founded in March 2010 with many former ACORN members, to enroll people in ObamaCare. Southern United Neighborhoods received a Navigator grant of $486,123”
5) The White House kicked off a 6 month ad campaign a week before the October 1 starting sign-up date. The objective of the ad blitz is “to encourage millions of Americans to sign up for health coverage under ‘Obamacare’ an effort in which the president and other political celebrities promote the law’s promise of subsidized health coverage”.
Are these government-backed and/or funded pushes to enroll in Obamacare violating the constitutionality of Obamacare with regard to negative interference?
The SCOTUS ruling hinged on the government not implying that people are doing anything wrong by not signing up. It is a tax that citizens are allowed to pay in lieu of enrollment. But with such a massive effort touting Obamacare, the government is directly interfering in the choice. There is no neutrality. It amounts to coercion, and creates the implication that by not enrolling, citizens are doing a bad thing. Does this contradict the Supreme Court decision?
by | ARTICLES, BLOG, BUSINESS, ECONOMY, GOVERNMENT, HYPOCRISY
Right before the government shutdown, Detroit received a pledge for a $320 million federal “aid package”. The Obama Administration wants to make it perfectly clear: this is not a bailout. That word is too toxic during this time of fiscal instability in Washington. This is relief. A stimulus. It is a hand-up, not a hand-out, and, as the NY Times reports, this will not be the only federal infusion that Detroit receives to get back on its feet.
Some questions immediately come to mind:
1) Various news agencies reported that the funds are being scraped together mainly from agencies such as TARP, FEMA, Homeland Security, and HUD. Who authorized this aid package?
2) Much of the funds are for projects that are similar to projects already funded by alternative sources, such as the Ford, Kresge, and Knight Foundations. The funds will not be used in anyway with regard to debt structuring. Why are federal funds duplicating projects already in motion?
3) Detroit already receives 71 federal grants for operation and it still couldn’t manage to avoid bankruptcy. Clearly, Detroit has been malfunctioning for years even with government intervention, so Why are we propping up this city even more?
4) What is to prevent other cities who are struggling financially for reasons to call for aid? After the aid to Detroit was announced, at least one Congressman, Jerry McNerney, went on the offensive. He wrote to the White House asking why aid was not extended to Stockton, California, a city which declared bankruptcy last year, “and suffers from many of the same problems as Detroit”. Will this type of federal aid package for cities become a slippery slope? Will it be a pick-and-chose/reward scenario? How about a carrot dangled to cities?
A recent WSJ article on the aid noted that with federal money comes strings. “Grants from the Transportation and Housing and Urban Development Departments will require the city to pay prevailing union wages, which will jack up costs. Prevailing wage is an economic compensation theory that requires municipalities to pay more-than-market wages. The end result of paying prevailing wages means that Detroit will get less with their our money. Even now, prevailing wage theory is hotly contested in NYC, a form of unionism for those workers who are non-unionized. Isn’t this type of overpayment what helped get Detroit into the mess it is in in the first place?
Furthermore, this cash fund may impact pension reforms that city manager Kevyn Orr is trying to accomplish. The pension managers insist that pensions are only underfunded by $634 million, while Orr is arguing closer to $3 billion. Part of pension restructuring and cost savings proposed by Orr were expected to be re-diverted toward blight abatement. With the arrival of this federal aid package — much of which is supposedly for the blight problem — you can expect that pensioners will argue that their pensions do not need, or need less of, the chopping block. That is a pity, as it undermines real pension reform so badly needed in Detroit.
What Kevyn Orr really needs to do to forge a path of prosperity in Detroit is to completely fund the pension system according to what the pension managers say they need ($634 million vs $3 billion), in exchange for complete government removal from the pension system; Impose a switch from a defined benefit model to a defined contribution model and be done with it. Let the pension heads grapple and manage their own funds now. Such a bold fiscal move would give Detriot a much more solid path to economic revitalization than any aid package can do.
There was no emergency that necessitated the use of federal funds being injected into the city of Detroit. No Katrina. No Sandy — only decades of fiscal irresponsibility, corruption, mismanagement. This “non-bailout” only undermines the task of this city, and potentially others, to make hard decisions about money, taxes, pensions, and budgets. It is a band-aid where a tourniquet (or maybe an amputation?) is needed. In a city rife with every kind of unimaginable fiduciary irresponsibility, the idea that the city of Detroit should be entitled to receive any more federal tax dollars is wholeheartedly repugnant.
