The chattering skulls will certainly be talking about Detroit, specifically about the bankruptcy filing. It is the largest municipal bankruptcy in our history. More important, it is viewed as a preview of coming attractions. Roughly half the states and hundreds of localities are technically insolvent. The money they raise through direct taxation is insufficient to cover their operating expenses. They get by through borrowing and transfers. Without state subsidies, for example, Baltimore would be bankrupt.
Kevin Williamson has a column up on it today. He dances around the elephant in the room, of course, but he does allude to it. What’s wrong with Detroit is it is full of blacks. The culture of corruption runs from the top all the way down to the bottom. This is not just a math problem. It is a moral problem. Detroit did not suddenly become corrupt. It started after the riots of the late 60’s. A city that was majority white became 80% black in 15 years. The whites fled taking their money, taxes and expertise with them.
On the numbers side, Karl Denninger has a post up on the math of the problem. Detroit owes $9 billion to health and pension funds. That number will keep going up every day as current workers accumulate benefits. That’s $10,000 for every man, woman and child currently in the city. Throw in the secured credit, net out those unable to work and it is not hard to see the problem. The city owes more than it can ever possibly pay, probably by a factor of three – at best. Everyone the city owes should expect thirty cents on the dollar.
Karl makes a larger point, one that will be with us for a long time. One generation cannot promise itself future money from the pockets of the next generation. It is an unenforceable contract between generations. The reason is you cannot force people to execute their contractual obligations, no matter how they entered into the contract. Even slavers understood this. The people living in Detroit today are unable and unwilling to pay the debts created by previous generations, so those debts will not be paid.
The same is true across the country where government has racked over $54 trillion in pension and health promises. That’s $180,000 for every person in the country. By comparison, Detroit looks great. There’s simply no way all of those promises can be met, especially with the demographics of the country changing. Will newly arrived foreigners agree to pay your pension payments? The answer is not just “no” it is “hell no.”
Again, we see the same old pattern as we see with all of our nation’s maladies. The seed was planted in the 1960’s. The generation that won the fight against fascism, threw in the towel twenty years later to make their kids happy. The selfish, resentful brats we call Boomers have rampaged through American culture like locusts, destroying everything in their path. In old age, they will be demanding the rest of us live in poverty so they can have cushy pensions and health plans.