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Aug 21 2013

Detroit and Blue State America

Carolyn

As a country, we’ve seen the city of Detroit pushed into bankruptcy as a result of over half a century of municipal mismanagement and corruption, the largest municipal bankruptcy in US history, at $18-20 billion. At one time it stood as the richest city, per capita, in the US, as well as the fourth largest in terms of population.

What we’ve seen over the decades since Detroit’s economic and population height is a long, sustained flight of capital. Individuals and businesses have made the rational choice to invest in cities and towns where business growth is encouraged through contractual freedom (right-to-work), low taxation and decreased regulation. When the entrepreneurs and businesses that can easily leave, do, what remains is a static workforce made up of mostly union workers and government employees, or rather taxpayer-subsidized union employees.

From December 2010:

The Census Bureau announced today that eight states will gain at least one Congressional seat. Texas will gain four seats and Florida will gain two. Arizona, Georgia, Nevada, South Carolina, Utah and Washington will gain one seat each. The biggest losers will be New York and Ohio – both will lose two seats – while Illinois, Iowa, Louisiana, Massachusetts, Michigan, Missouri, New Jersey, and Pennsylvania will lose one seat each.

The average top personal income tax rate among gainers is 116 percent lower than among losers. The total state and local tax burden is nearly one-third lower, as is per capita government spending. In eight of ten losers, workers can be forced to join a union as a condition of employment. In 7 of the 8 gainers, workers are given a choice whether to join or contribute financially to a union.

Detroit’s bankruptcy was preceeded by sixty years of rising taxes, generous government pension promises and a shrinking tax base. Additionally, non-government unions forced much of the industry in Detroit into a position where it was advantageous to build plants oversees in order to avoid unsustainable costs.

Most of those who had the means to leave, did. Of those who have chosen to stay, fewer than half (49.8 percent) are either working or looking for work, the lowest rate among major US cities.

Detroit also has far more city employees per resident than do most other similar sized cities and, for those making $50,000 or more, the 4th largest tax burden among the largest US cities. In fact, those taxes are going to pay for things such as $56,000 for a horseshoer in the Detroit Water & Sewer Department, despite the fact that it has been years since horses were used by the city. Not surprisingly, Wayne County has 520,000 citizens receiving food stamps, over 25 percent of its citizenry, presumably with most of those located within the city of just under 707,000.

Dynamism and entrepreneurship have virtually disappeared while government jobs, dying industry and welfare have remained. When those with the imagination and drive to create new jobs and new industries leave in search of more favorable conditions for taking risk, the jobs of the future follow them.

Detroit is left with the jobs and industries of the past, propped up by federal investment and municipal credit that is now wiped out.

Can anyone please explain how the present in Detroit (and Bell, CA and San Bernardino, CA and Stockton, CA and Jefferson County, AL, . . .) is any different from the future of all the cities and states which continue to follow the very policies that destroyed America’s once-great motor city?