"A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy."

Detroit's bankruptcy filing (PDF), in case anyone is interested.

Note that I leave the quote which makes up the post subject line unattributed. Some say that it is from Alexander Fraser Tytler, but there is doubt on the matter.

Last 5 posts by Clark

Comments

  1. Renee Jones says

    Yes, I have seen that quote, but that is NOT what happened. The corporations took over the government and THEY took the money, tricking the stupid, ignorant people into voting for it even as the system failed.

  2. says

    The citizens of Detroit voted themselves largess? So now Detroit is moving to a Dictatorship then a Monarch? There is going to be a king of Detroit?

    You realize non of this is or is going to happen, right?

  3. C. S. P. Schofield says

    In my paranoid dreams of Terrorism, it is Detroit that the nut bars manage to destroy. They could build just about anything, and nobody would catch them at it because the city's services have essentially collapsed. I figure a fuel-air bomb…nuclear strikes me as unlikely simply because the terrorists would poison themselves with the fuel long before they would finish.

  4. PLW says

    What sort of government is permanent? Is this the only way a Democracy can end? Is Detroit a Democracy? This quotation seems to not contain much useful information.

  5. jb says

    I knew this was a Clark post before reading the byline–snarkily generalizing from a first principle and snappy quote to support it, in a way that's satisfying but contradicted by the details.

    That is not what happened in Detroit. Detroit lost its industrial base and half its population for macroeconomic reasons, and therefore can't afford obligations that were perfectly sustainable in better times. Now it can afford no amount of largesse, however small.

  6. J says

    So, what happens now? I find the idea of city or state bankruptcy highly interesting, I didn't even know this was possible.

  7. Ken in NH says

    @jb

    I would argue that the obligations were never sustainable and, more importantly, were morally wrong. If, and only if, they had fully funded the liabilities at the time that they had struck those deals it would have been sustainable. Instead they agreed to have their children and children's children pay the bill for their promises. What makes this particularly pernicious though is that they promised to have future generations of private tax payers pay for lavish benefits other people. It was a wealth transfer, plain and simple. Or, in other words, theft.

    On the other hand, the real suckers in the deal are the beneficiaries and the bond holders. As the saying goes, if you owe the bank $10,000 and can't pay, you have a problem; but if you owe $10,000,000 then the bank has a problem.

  8. Dan says

    Democracies "always" collapse into monarchies? I can think of one example: Rome. The actual trend is the complete opposite.

    The UK has been getting slowly less autocratic since the 11th century. The French and American revolutions were over 200 years ago. In the past 100 years, nearly every monarchy in the world has given way to democracy. Democracy is a global pandemic and its spread is only accelerating (http://en.wikipedia.org/wiki/Polity_IV).

    Maybe there's no attribution for that quote because it's complete bullshit? And what's your point, anyway… (as previous commenters asked) what in the flying fuck does it have to do with Detroit?

  9. Ken in NH says

    @J

    In a pre-TARP/GM bail-out world, usually the bond holders get paid out first and the pensioners get whatever was left in the pension fund and no more. It might be that way as long as Congress stays out of it, but if Congress gets involved as they did with GM, then who knows.

  10. FSE says

    Every time I see that quote, I have to ask:

    Can you name three democracies that dissolved into dictatorship due to domestic spending?

  11. says

    @jb

    That is not what happened in Detroit. Detroit lost its industrial base and half its population for macroeconomic reasons, and therefore can't afford obligations that were perfectly sustainable in better times.

    You're right that Detroit lost its industrial base and half its population for macroeconomic reasons.

    What you miss is that "macroeconomic reasons" mostly boils down to "unchecked looter-style democracy".

    Also: Detroit's obligations today are not remotely similar to Detroit's obligations in, say, 1950: the better organized of the citizen's (community activists, police unions, firefighter unions, etc.) have done a masterful job of wringing every drop of cash out of the city.

  12. says

    @Riccardo Cabeza

    The citizens of Detroit voted themselves largess?

    Yes.

    So now Detroit is moving to a Dictatorship then a Monarch? There is going to be a king of Detroit?

    Did you know that neither "allusion" nor "metaphor" are in the dictionary? I'm serious. Go look.

  13. Luke says

    @Riccardo Cabeza –

    So now Detroit is moving to a Dictatorship then a Monarch? …You realize non of this is or is going to happen, right?

    So you don't think that the emergency manager is a step in that direction? How else would you describe him and the power that he has as an unelected official?

  14. jb says

    "I would argue that the obligations were never sustainable and, more importantly, were morally wrong. If, and only if, they had fully funded the liabilities at the time that they had struck those deals it would have been sustainable."

    Sustainable =/= Just. By your definition, no borrowing is ever sustainable, because of the definition of debt.

    However, you are right, as is Clark in his followup post, that the amount and nature of the liabilities also got out of hand.

    Nevertheless, a Detroit that featured car manufacturers as healthy and profitable as they were in the 1950s-60s could have handled the situation by renegotiating excessive benefits. The Detroit we have had to declare bankruptcy because it couldn't pay even reasonable benefits, and couldn't have done so even if it hadn't already been sucked dry by excessive ones.

    Clark goes on to say "What you miss is that "macroeconomic reasons" mostly boils down to "unchecked looter-style democracy"." That is not accurate either–what screwed Detroit was foreign competition for the auto market.

    I am not arguing that Detroit's public pensions weren't unreasonably generous, I am arguing that the troubles of the auto industry and ensuing population collapse rendered bankruptcy inevitable–the nature of the liabilities only hastened it–and that in the absence of the industry troubles the pensions would have been a survivable boondoggle at worst, but could not have themselves destroyed the city.

  15. says

    @jb:

    "I would argue that the obligations were never sustainable and, more importantly, were morally wrong. If, and only if, they had fully funded the liabilities at the time that they had struck those deals it would have been sustainable."

    Sustainable =/= Just.

    I think that's why he used the word "and" in between the phrases.

    However, you are right, as is Clark in his followup post, that the amount and nature of the liabilities also got out of hand.

    Which, you may recall, was what was implied by the post-title.

    I'm not arguing in this post that governments are wrong to have pensions. I'm not arguing that all obligations need to be prefunded.

    I'm merely arguing that when the ability of the recipients to vote funds for themselves outweighs the ability of the contributors to vote any sort of check on that spending, that problems result.

    Nevertheless, a Detroit that featured car manufacturers as healthy and profitable as they were in the 1950s-60s could have handled the situation by renegotiating excessive benefits.

    Except that there were absolutely no incentives for anyone involved to do so.

    Clark goes on to say "What you miss is that "macroeconomic reasons" mostly boils down to "unchecked looter-style democracy"." That is not accurate either–what screwed Detroit was foreign competition for the auto market.

    I'd be interested in seeing an argument to support that. Most every industry in the US faced much more foreign competition in 2000 than in 1960, yet Detroit seems to stand alone.

  16. Xenocles says

    Funny you should mention the French Revolution as a counterexample, Dan- the first one degenerated into terror pretty quickly and went from there to a monarchy bent on conquering Europe.

    Although for what it's worth I do personally prefer your longer posts, Clark.

  17. Munin says

    What I find staggering is not that democracy is not a stable system but the persistent belief that there are stable systems despite a human history's worth of evidence against it.

  18. says

    I have been observing the decline of Detroit since moving to southeastern Michigan in 1976. The level of corruption has gone up and up and up, the level of competence in city services has gone down and down and down. People kept saying "this can't go on." Every year, it kept going on. As we moved from administration to administration (with the notable exceptions of mayors Archer and Bing), the lack of disaster seemed to encourage more and more excess in and endless spiral (cf Mayor Kwame Kilpatrick, whose courtroom antics were until recently my benchmark for blatant douchbaggary).

    The end has come, at $0.10 on the dollar. I predict the bankruptcy case will set a lot of precedents, but the accompanying lawsuits will continue to exemplify blatant douchbaggary. I further predict they will make the bankruptcy worse, dragging it out over years. Sigh.

    There are placed in Detroit where you can buy houses for $1 and back taxes. They're teardowns, but it might be worth it. There are good people in Detroit, trying to do good things. Here and there they have succeeded. The surrounding suburbs are crowded and (mostly) successful small cities, bursting at the seams. When (if) Detroit gets its shit together, the inward burst will be incredible. I think there is a future for the city; it's too damned bad it has to hit bottom first.

  19. Mike says

    ■Detroit police chief gets 60% raise to $225,000.
    ■83 cents of every Detroit police and fire payroll dollar is spent on pensions
    ■Police and fireman can retire at age 40
    ■Other employees can retire at age 45
    ■private workers pay Detroit income tax, but government workers do not
    ■government pensions are inflation adjusted
    ■government workers get full health care in addition to pensions

    Maybe I'm missing something, but which of these is the majority voting itself largess?

  20. says

    @Xenocles:

    Although for what it's worth I do personally prefer your longer posts, Clark.

    As do I.

    I've got a longer one about sexual harassment, nerds, John Scalzi, and that whole mess percolating on the back burner.

    Life is busy right now. :-/

  21. Paul Baxter says

    I'm someone who grew up in the Detroit suburbs. My father went into the city every day for work. This doesn't mean my opinion is necessarily right, just that I've been interested and observant on the topic for a long time.

    I don't think the argument that macro-economic forces ruined Detroit is accurate at all. The focal point of the demise of the city is the aftermath of the civil rights movement. Detroit had acquired a large minority population, particularly during WWII, as people moved to seek factory and other work in a prosperous area. As often happens, there was considerable racial animosity. Unions often worked hard to preserve racially segregated workplaces.

    In this environment the civil rights movement turned especially violent in Detroit (as it did in other cities as well). The Nation of Islam group, as some of you no doubt know, started in Detroit. Minority voters along with those supporting civil rights voted in Mayor Coleman Young. While Young was not part of the violent wing of the civil rights movement, he did very little to attempt to forge peaceable relations between black and white Detroiters.

    Starting in the late 60s, white Detroit residents started leaving the city, and so far as I know never stopped leaving. Just anecdotally, I have spoken to people who were intimidated into selling their Detroit homes at that time. The mood around the city I think could best be described as vindictive. It was this attitude which created the "economic" forces reflected in Clark's posts above. Black residents felt that "it's our time now", an attitude which isn't generally conducive to fiscal restraint. That, combined with plenty of old fashioned corruption, led to the very long but quite steady decline of the city.

    I think it is probably worth comparing Detroit to Pittsburgh. Pittsburgh is another city which saw it's major industry hit hard times, but Pittsburgh, while perhaps in some decline, has not had the sort of wholesale collapse the Detroit has seen.

  22. Xenocles says

    "…sexual harassment, nerds, John Scalzi, and that whole mess…"

    No, long posts, not comment threads!

  23. James says

    Having lived in a Detroit suburb for several years (recently) it was amazing to watch what corruption and a misguided sense of entitlement did to a once amazing city. During the good years of the Big Autos, some clever city employee with the full backing of the UAW, decreed that if residents of Detroit working for the auto companies deserved great benefits than surely the city employees should get no less.

    While I don't think all unions are bad, the UAW sows the seeds of destruction wherever they roam.

  24. jb says

    "Nevertheless, a Detroit that featured car manufacturers as healthy and profitable as they were in the 1950s-60s could have handled the situation by renegotiating excessive benefits."

    "Except that there were absolutely no incentives for anyone involved to do so."

    I'm talking about in 2013. A healthy Detroit could have had a version of the conversation the country is having about social security & medicare, and decided to do what many other states and municipalities are doing and reduce the generosity of future public pension obligations, if not claw back past obligations. Instead, Detroit is not healthy and thus had to go bankrupt.

    "Clark goes on to say "What you miss is that "macroeconomic reasons" mostly boils down to "unchecked looter-style democracy"." That is not accurate either–what screwed Detroit was foreign competition for the auto market."

    "I'd be interested in seeing an argument to support that. Most every industry in the US faced much more foreign competition in 2000 than in 1960, yet Detroit seems to stand alone."

    That is veering into the technical details of the auto industry, an area in which I am not an expert. However, I'd argue that Detroit stands alone only because the auto industry was centralized in Detroit in 1960 in ways that few other industries were centralized anywhere. I have a lot of family in rural Illinois, and every town from Carbondale to Kankakee had a factory or two shut down between then and now–and sure enough, Illinois is bankrupt too. The only thing separating us from Detroit is that Chicagoland is doing fine. The globalization that sent the auto industry spiraling also hit all kinds of other places–it's the monoculture nature of Detroit's 1960 economy, and inability to change, that caused it to be the worst there.

  25. naught_for_naught says

    With all due respect to anyone sleeping in a tri-fold hat and matching jammys, but the only way that democracy leads to authoritarianism is if you vote in a government that you can't vote out. The financial condition of a depressed city has little, nay, nothing to do with it.

  26. says

    If Clark had actually read the bankruptcy filing, he would have seen the following: (1) meeting the basic obligations to its citizens requires more revenue devoted to services, not less; (2) Detroit cannot raise tax revenue to fix this, and cannot save the necessary revenue through reduced spending on basic services.

    This clearly does not sound like "voters voted themselves largesse." While the conservative/libertarian refrain about Detroit will always be to blame unions, etc., the fact is that unions already gave significant concessions.

    How about a different perspective?

    http://tv.msnbc.com/2013/03/12/why-detroit-is-broke-and-whos-being-asked-to-pay/

    Also, seems to me sovereign immunity would apply. Tell the creditors to stick it. Maybe they won't because the Republicans now in charge of the City through the Emergency Manager law want to repay their capitalist friends while sticking it to the little guy? Something to think about.

  27. Dan Weber says

    I'm not really sure you can say that Detroit voted itself largesse. There are cities where the public sector unions have captured control, but Detroit doesn't really fit that model. (And why would the public sector unions waste their time on Detroit? Willie Sutton can tell you why not.)

    For the right-leaning folks, there are more accurate ways to use Detroit as a fairy tale for your children:

    1. Repeatedly kicking the can down the road instead of facing the problems when they are small.

    2. Impossible-to-maintain private-sector union contracts can devastate a local economy. Things were agreed to at the time of the fat cows that could not be sustained. Industry and labor have both learned their lessons from this.

    3. Coleman Young. There's a lot of mistruth out there overstating his negative effect, but when help was needed he was like Nixon and the Jews, "they weren't going to vote for me so good riddance."

    I agree with the commenter who said that future benefits should be financed at the time they are earned. If you want to give someone a $100,000 a year pension, then buy it right now. If you need to borrow to buy that pension, then do so, but it should be explicit that you are borrowing money.

  28. Dan Weber says

    CAFE killed Detroit

    Industry loved CAFE. It was a way to practice protectionism against imports.

  29. says

    @Darryl

    If Clark had actually read the bankruptcy filing, he would have seen the following

    I'm utterly unimpressed by not just the lack of charity but the active attribution of ill-will and hypocrisy here.

    I read every single page of the filing before linking to it.

    This clearly does not sound like "voters voted themselves largesse."

    Oh, well. If the special pleading in a legal document tends to paint the debtor in a good light, then clearly that's the only possible interpretation of events.

    I mean, we learned that from Prenda, right – one always accepts people's descriptions of themselves and their situation uncritically?

    Also, seems to me sovereign immunity would apply.

    In the US sovereign immunity applies to the federal government and the state government, but not city governments.

    http://en.wikipedia.org/wiki/Sovereign_immunity_in_the_United_States#Local_governmental_immunity

    Counties and municipalities are not entitled to sovereign immunity. In Lincoln County v. Luning, 133 U.S. 529 (1890)…

  30. Dan Weber says

    If Detroit thinks it can get away with stiffing its creditors, more power to it. But that means it will essentially be unable to borrow any money for at least a decade. Can they really pull that off? And who would loan it the money it needs to get through bankruptcy?

    Bankruptcy is always a shit sandwich where everyone will need to take a bite. And this is the extra-long 90-foot hero sub. In the GM bailout one side had more people in power and their allies tended to get smaller bites. Here the other side is in power and something similar will happen.

  31. says

    Clark–You're right. The initial comment about not reading the filing was gratuitous and wrong. I am sorry.

    However, the information I quoted came from the Republican governor's approval of the bankruptcy filing. So, no, it is not some special pleading by the party (the City of Detroit).

    You are right about sovereign immunity. However, at least here in Texas, I am pretty sure every subdivision of the state still has official immunity unless waived. You are right, however, that sovereign immunity does not apply to subdivisions of the state.

  32. says

    @Darryl:

    Clark–You're right. The initial comment about not reading the filing was gratuitous and wrong. I am sorry.

    Thank you – I appreciate that!

    I often have bad data and often draw wrong conclusions, but I do strive to debate fairly.

    However, at least here in Texas, I am pretty sure every subdivision of the state still has official immunity unless waived.

    I do recall reading something in the last day or so about Michigan's state constitution having some bearing on the pensions and the bankruptcy, so we both agree on one thing: the legal landscape depends a lot on state peculiarities.

  33. says

    Dan Weber:

    CAFE killed Detroit

    Industry loved CAFE. It was a way to practice protectionism against imports.

    Also, CAFE didn't kill Japan's export business, so the thesis fails the sniff test.

  34. says

    "Sovereign" immunity only applies to the sovereign, or the state. "Official" immunity, or whatever other name it goes by, still applies to other subdivisions of the state. The point still stands–why not stiff the creditors? Why do the regular folk have to be the ones to get stiffed here?

  35. says

    Excessive largess on pensions/etc is certainly a part of the problem. IMHO two equally important parts were massive (usually corrupt) overspending on projects, and financing it all by debt rather than taxes. The latter half probably also counts as largess; one might think people got the spending they wanted on schools, infrastructure, etc, often without tax increases.

    The reality is more complex. Detroiters pay some of the highest school millage rates in the state, and have voted those rates themselves. In the long term this didn't help for a couple of reasons. One is that corrupt officials squandered that money rather than spending it on the schools. Another is that continued population loss meant even the voter-approved higher rates could no longer sustain the system. [[An aside: no, the population loss was not fleeing due to the property taxes. Property is dirt cheap, so the higher millage rates are largely offset by the lower values – end result being that Detroiter's out-of-pocket costs were much lower than the high tax rate would imply.]] In case it's a regional term, note also that 'millage' is X number of dollars paid per $1000 of property value. So the continued drops in property value mean that even high millage rates no longer bring in what they used to.

    A lot of people blamed the population loss in Detroit on "white flight." That was certainly true for a while. Two things changed, tho. One was that eventually whites became a small enough minority in the city that even large-scale flight didn't have much of an effect. In the last decade, the black middle class has also fled the city, IMHO largely due to the corruption and incompetence of the city, schools, etc. This further reduced the city income from property taxes, etc, exacerbating the debt spiral.

    There is some degree to which this could be considered largesse. There were three ways to fix things – increase taxes, cut more services, borrow money. More taxes are largely impossible due to the demographics of 2013 Detroit (insert blood from stone cliche here). Cutting services has actually been going on, but nowhere near at the rate needed. And politicians who had to choose between their revenue flow from graft vs. actually cutting things . . . well, they chose more debt. Largesse, yes, but most of the remaining city residents weren't benefitting from it.

  36. says

    @Steve Simmons

    Excessive largess on pensions/etc is certainly a part of the problem. IMHO two equally important parts were massive (usually corrupt) overspending on projects, and financing it all by debt rather than taxes.

    In fairness, Detroit couldn't finance by taxes; they were in the middle of a demographic death spiral. Raise tax rates, people leave. People leave, you need to increase the tax rate on those who stay.

    Lather, rinse, repeat.

  37. says

    The governor's approval letter points out that Detroit was already at the legal maximum tax rate, so. . . no raising tax rates.

  38. Mercury says

    I’ve noticed I’m turning into a Clark guy although Ken writes beautifully (plus much more often) and of course in a manner that wise-asses the world over can appreciate no mater what their stripes.

    Who cares who penned the above quote? – especially if you substitute “tyranny” for “monarchy” it’s very insightful and contradictory to the dubious received wisdom that democracy is the universal panacea for social disorder and underachievement. It’s annoying, misleading and dangerous when Woodrow Wilson, George Bush, Barak Obama or anyone else asserts that this is the case because it isn't. All by itself democracy is simply the proverbial two wolves and a sheep (multiculturalism!) voting on what’s for dinner.

    What makes/made the United States special and exceptional are constitutionally limited government, specific civil rights of the people against that government and a robust framework which protects private property, enforceable contracts, mostly free markets, a reasonably fair and functional judiciary and rule of law. Ironically in the this context, you’d much rather live in a monarchy that has these things than in a democracy that doesn’t (stay tuned).

    Part II of this quotation should contain a bit about how all government systems have a tendency to go into business for themselves and put their own welfare and ambitions ahead of those whom they are supposed to serve. Everyone from Thomas Jefferson to Leon Trotsky understood this in light of historical precedent which is where the emphasis on “limited government” came from in the Founding Fathers’ case and the fantasy of the state “melting away” in deference to the will of the proletariat in the communists’ case.

    Traditionally the Left has liked to freak out about all-powerful, mega-corporations and the Right about all-powerful, mega-government. The fact is when the two join forces (which they have now more than ever)…look out! The recent explosion of food stamps (for instance) benefits large corporations because it relives wage pressure for especially mega-corps AND it buys votes for even more government expansion from more people who suddenly find it hard to make ends meet without the state paternalism. This won’t end well.

  39. Shane says

    @jb

    That is not accurate either–what screwed Detroit was foreign competition for the auto market.

    No. What screwed Detriot was the people of Detriot. When Clarke said people I don't think that he was excluding the people that inhabit the companies of Detriot. In a Democracy it is the powerful (usually moneyed) groups that are almost always they ones that seize the machinations of the Democracy. It isn't the failure of those people (though see them as morally culpable) it is the failure of the system of government i.e. Democracy.

  40. Jeremy says

    Pensions are unsustainable given the increase in longetivity and the incestuous nature of the negotiations for government pensions. Democratic governments vote in more debt for new projects each election cycle, usually justified as "for the children," even in periods when tax revenue goes down.

    Given those two facts, I expect/hope for more bankruptcies in various levels of U.S. government. I prefer forced financial restructuring, the "sequestration" approach, to what our elected idiots might come up with.

    California's a great example of the kinds of absurdity that can come out of trying to achieve a political victory by "balancing" the budget. The word gymnastics performed here to avoid outright lying are amazing.

  41. says

    @Mercury

    I’ve noticed I’m turning into a Clark guy although Ken writes beautifully

    Thank you!

    Traditionally the Left has liked to freak out about all-powerful, mega-corporations and the Right about all-powerful, mega-government. The fact is when the two join forces (which they have now more than ever)…look out!

    Indeed.

    Culturally, I remain strongly a right-libertarian, but I am seeing more and more that both left and right libertarians are missing the big picture. The problem is when the powerful use the power they already have to amass more.

  42. granny weatherwax says

    There are 40% less people there now than in 1950. This city didn't vote itself into bankruptcy except maybe with its feet; the industrial base collapsed so most of the people actively looking for work left the city.

  43. Shane says

    @Jeremy

    California's a great example of the kinds of absurdity that can come out of trying to achieve a political victory by "balancing" the budget. The word gymnastics performed here to avoid outright lying are amazing.

    Amen

    I am amazed that a CA city didn't win the title that Detroit now so ignominiously holds.

  44. Paul Baxter says

    Just to piggyback on Steve Simmons, and clarify my earlier post, the problem was not "white flight", although that was an accurate depiction of the 1970s, but "people flight". If Detroit today had the same number of people it did in, say, 1970, it would still be a troubled city, but it wouldn't be the sort of catastrophe we see today.

  45. princessartemis says

    I am amazed that a CA city didn't win the title that Detroit now so ignominiously holds.

    Orange County, 1994. California is nearly twenty years ahead in that race!

  46. Mark - Lord of the Albino Squirrels says

    @MikeB

    "This is all fine and good but seriously, when do we get RoboCop now?"

    From what I hear, they just need to finish the bronzing and decide where to put him.

    http://www.avclub.com/articles/detroits-robocop-statue-is-almost-done-and-its-god,97725/

    Also, I thought Clark was doing a Heinlein week when I first saw the title – the quote is so similar to one of Heinlein's:

    "Democracy often works beautifully at first. But once a state extends the franchise to every warm body, be he producer or parasite, that day marks the beginning of the end of the state. For when the plebs discover that they can vote themselves bread and circuses without limit and that the productive members of the body politic cannot stop them, they will do so, until the state bleeds to death, or in its weakened condition the state succumbs to an invader—the barbarians enter Rome."

    Personally, I think both the premise of both quotes is a bit iffy. No government is permanent. That said, I think Heinlein's has the better description of how that scenario ends.

  47. Erwin says

    …this just sounds like the typical problem with bond assessment versus stock sales, plus unfunded obligations.

    (1) In terms of stability, I much prefer the notion of funding all obligations by some sort of financial instruments. A healthy (not that we have one) financial market will then balance interest rates/costs, et cetera in such a way that borrowing will become expensive if a city's finances become risky.

    (2) Assuming we were doing that, first bit of fiscal sanity, Detroit would still default on loans, and lenders would lose massive amounts of capital. But, that's just the free market at work.

    (3) Now, suppose that, instead of financing with bonds, Detroit were to sell stock? (Each entitling people to X% of civic revenues, probably before funding essential services, but with provisions for majority votes by stockholders to fund certain essential services. (to avoid having people leave en masse)) Then, even if 90% of Detroit residents move out, there'd be no default – just not a great return. Or, this might be insane.

    –Erwin

  48. says

    @Mercury – Fan club rules for both clubs allow membership in the other. Anyone that can read Clark's response and not be a fan has something wrong with them:

    Did you know that neither "allusion" nor "metaphor" are in the dictionary? I'm serious. Go look.

  49. hanmeng says

    Bastiat said it better: "L'État, c'est la grande fiction à travers laquelle tout le monde s'efforce de vivre aux dépens de tout le monde."

  50. Aaron Meyer says

    I've always preferred Heinlein's variant (not least because it's easily sourced):

    "A perfect democracy, a ‘warm body’ democracy in which every adult may vote and all votes count equally, has no internal feedback for self-correction. It depends solely on the wisdom and self-restraint of citizens… which is opposed by the folly and lack of self-restraint of other citizens. What is supposed to happen in a democracy is that each sovereign citizen will always vote in the public interest for the safety and welfare of all. But what does happen is that he votes his own self-interest as he sees it… which for the majority translates as ‘Bread and Circuses.’

    ‘Bread and Circuses’ is the cancer of democracy, the fatal disease for which there is no cure. Democracy often works beautifully at first. But once a state extends the franchise to every warm body, be he producer or parasite, that day marks the beginning of the end of the state. For when the plebs discover that they can vote themselves bread and circuses without limit and that the productive members of the body politic cannot stop them, they will do so, until the state bleeds to death, or in its weakened condition the state succumbs to an invader—the barbarians enter Rome.” – To Sail Beyond the Sunset pp. 226-227

  51. Tophe says

    The majority is voting largess to the corporations that are funding election campaigns.

  52. Gabriel says

    I had to spend some time in Detroit in a previous job. I knew the city was fucked on my first drive from airport to hotel, as I passed a string of boarded-up failed strip clubs.

    When a city's economy can no longer support strippers the end is nigh.

  53. whheydt says

    If I understand it correctly, if the bankruptcy filing is accepted by the court, then the court will appoint someone to–basically–run Detroit.

    Wouldn't that be a dictatorship?

  54. John H. says

    The reason Detroit's population collapsed?

    Negroes and Coloreds moved in, escaping the overtly segregationist and discriminatory South.

    That started a White Flight, and with that, things started going downhill a little at first, then all at once. When Kwame Kilpatrick became Mayor of Detroit, that was the last straw. At that point, a lot of people just gave up on Detroit.

  55. jb says

    To sum up/rephrase:

    An otherwise-well-run entity can survive a lot of bad decisions (see American foreign policy 1965-present), with no worse outcome than a lot of opportunity costs. The worse-run your entity is, the thinner the margin of error before you get disastrous consequences.

    Detroit's public sector pensions were a bad decision, but what did Detroit in was a series of poor decisions (economic monoculture, racial strife, bad management) that led to a demographic death spiral in which even a smaller pension mistake would have sunk them.

    So pointing at pensions and public largesse as the problem is like blaming the lack of lifeboats for the sinking of the Titanic–yes, they made it worse, but the ship had just rammed an iceberg so something terrible was going to happen anyway.

  56. says

    @Tophe

    The majority is voting largess to the corporations that are funding election campaigns.

    corporation – n – a legal entity that has been incorporated through a legislative or registration process established through legislation.

    union – n – a legal entity that has been incorporated through a legislative or registration process established through legislation.

    Yes, I agree with you.

  57. Mark says

    “Democracy is a poor system of government at best; the only thing that can honestly be said in its favor is that it is eight times as good as any other method the human race has ever tried.”

    –Robert A. Heinlein

    All the comments streams on the site today are merging together. ;-)

  58. Mark says

    Oh, heck here are two more from Heinlein:

    "Democracy can't work. Mathematicians, peasants, and animals, that's all there is — so democracy, a theory based on the assumption that mathematicians and peasants are equal, can never work. Wisdom is not additive; its maximum is that of the wisest man in a given group."

    "Democracy is based on the assumption that a million men are wiser than one man. How's that again? I missed something.
    Autocracy is based on the assumption that one man is wiser than a million men. Let's play that over again, too. Who decides?"

    His opinion sorta flopped about a bit… ;-)

  59. Mark - Lord of the Albino Squirrels says

    I thought the better quote – since it's about Detroit – might be this:

    "Riches leave."

    – Clarence Boddicker

  60. Gabriel says

    Actually, a thorough reading of Heinlein shows that his preferred system of government is getting the hell away from everyone else so you don't have to have one. Time and again he preaches the virtues of diaspora, and, having thought about it carefully, I'm at least somewhat convinced that no system of government can reliably protect and promote happiness and freedom when there is no frontier to move to as a fallback option.

  61. says

    @Paul Baxter:

    Unions often worked hard to preserve racially segregated workplaces.

    Hardly surprising. Unions started in the US in the aftermath of the Civil War, when freed slaves tried to get jobs and put downward pressure on "white men's work". Unions fought back and tried to get employers to boycott black labor.

    It was this attitude which created the "economic" forces reflected in Clark's posts above. Black residents felt that "it's our time now", an attitude which isn't generally conducive to fiscal restraint.

    In Boston there's a similar story, where the Irish celebrate the fact that they climbed the ladder the good old fashioned way: the used large numbers to elect officials, who then handed out patronage jobs.

    < blink >

    @jb:

    Clark: "Except that there were absolutely no incentives for anyone involved to do so."

    I'm talking about in 2013. A healthy Detroit could have had a version of the conversation the country is having about

    So:

    1) an alternate history where, for some reason, the forces of economics and politics haven't changed anything in 50 years?

    2) the "conversation" we're having about social security & medicare seems to be "Democraphic A has the votes, so demographic B is going to pay us!". I'd suggest that this is exactly the "conversation" that's going on in Detroit. Or was, up until this morning.

  62. says

    @Gabriel:

    Actually, a thorough reading of Heinlein shows that his preferred system of government is getting the hell away from everyone else so you don't have to have one.

    Farmer in the Sky is under-discussed when talking about the Heinlein canon.

  63. Orv says

    @Jeremy: The question is, what do we replace pensions with? The 401(k) system is not looking like a success, mostly because people on middle-class wages simply can't save the $1.5 million or so necessary to retire.

    To put it another way — individuals have, not surprisingly, failed to do with their 401(k)s what corporate investment experts were already failing to do with pension funds; generate enough investment income over the course of a career to pay for the worker's old age. I would argue this was intentional. The 401(k) system was purely a way of relieving companies of the responsibility for the workers they'd used up and thrown away; it was never about the welfare of workers at all.

  64. says

    @Orv

    The question is, what do we replace pensions with? The 401(k) system is not looking like a success, mostly because people on middle-class wages simply can't save the $1.5 million or so necessary to retire

    If middle class people can't save enough, when working from age 22 till age 65 and also living the lifestyles they choose, then we've over specified the problem:

    • level of productivity X
    • 40 years of work
    • 20 years of retirement
    • expensive middle-class lifestyle during working years
    • expensive middle-class lifestyle during retirement years

    The question of whether the money should be taken out of their wages before the employer hands them a paycheck (pension), in between the employer cutting the check and the employee cashing it (401(k)), or from the employee's own household budget is an implementation detail and a red herring.

    The problem is that middle class Americans of the boomer generation consumed far more than they produced. You can do that for one generation by loading the debt onto the next generation. You can't do it for two generations.

  65. Luke G says

    Re: Robocop. From what I've heard from a few Detroiter friends, there's problems figuring out where to put it. There are apparently a lot of people who really hate the idea of the statue and are threatening businesses or property owners with property destruction of wherever it ends up, because they see it as… something? Mocking the city? I don't know why but it makes me sad.

    All hearsay and conjecture of course, but it came from a relatively plausible source.

  66. Orv says

    @Clark: Level of productivity is actually part of the problem, in a way. Productivity has gone up amazingly in the last few decades, but working-class wages have gone down on average. Looked at economically, this is great, but socially it means that while we're producing more, fewer of us are employed doing it and those people are being paid less for doing more work. The benefits have accrued mostly to a relatively small group of people at the top.

    The only reason this isn't viewed as unsustainable is we've made it a matter of personal responsibility, i.e. if you're poor in your old age it's your fault for not planning better. The fact that you were essentially backed into that position because it resulted in higher numbers on an economist's chart is never discussed.

  67. says

    Also, may I note that I hate how the CSS in this blog displays

  68. bullet points.
  69. We'll be moving to a different/better theme soon(ish) anyhow. Meanwhile, lemme tweak that a bit.

    • uno
    • dos
    • tres
  70. Gabriel says

    > You can do that for one generation by loading the debt onto the next generation.

    More carefully phrased, you can do that for one generation by consuming saved capital produced earlier; the idea of pushing debt onto the next generation obscures the fact that you can't eat food from the future. The paper debt represents the missing capital which would have to be produced in order to restore the economy to its former level of productivity.

    Those future generations don't actually owe anyone anything (whom would they pay? The dead? Themselves?) but it's usually a good idea to build that capital back up if they want to have a sustainable economy; calling this state of affairs "debt" is needlessly confusing. It's debt in the same sense as an oxygen debt, but this is a nuance lost on most people discussing the topic.

  71. Luke G says

    @Orv

    My proposal was to modify the Robocop statue slightly and have him fist-bumping the fist. Too much?

  72. says

    @Clark There ya go. In future, feel free to whine about the CSS make styling recommendations in the private authors' forum we have consecrated for that purpose. ;)

  73. mojo says

    Here come de Judge!:

    The ongoing crisis in Detroit took another — and confusing — turn Friday after an Ingham County judge ruled the city's historic bankruptcy filing violates the state’s constitution and must be withdrawn.

    “I have some very serious concerns because there was this rush to bankruptcy court that didn’t have to occur and shouldn’t have occurred,” Judge Rosemarie Aquilina said Friday in a spate of orders arising from three separate lawsuits.

  74. mojo says

    More, via Ace:

    “It’s cheating, sir, and it’s cheating good people who work,” the judge told assistant Attorney General Brian Devlin. “It’s also not honoring the (United States) president, who took (Detroit’s auto companies) out of bankruptcy.”

    Aquilina said she would make sure President Obama got a copy of her order.

    “I know he’s watching this,” she said, predicting the president ultimately will have to take action to make sure existing pension commitments are honored.

  75. Lago says

    "The only reason this isn't viewed as unsustainable is we've made it a matter of personal responsibility, i.e. if you're poor in your old age it's your fault for not planning better. The fact that you were essentially backed into that position because it resulted in higher numbers on an economist's chart is never discussed."

    I can't stand to talk to anybody about the economy for this reason.

  76. barry says

    ..always to be followed by a dictatorship, then a monarchy.

    By "monarchy", I assume he means "worse dictatorship". Monarchies can be just as democratic as republics.

    This reminds me of those annoying people who say "the USA isn't a democracy, it's a republic". That's like saying "the sky isn't big, its blue". Different lines; bigness is independent of blueness, and the sky can be both.

    The monarchy/republic line is about the state, and is independent of the democracy/dictatorship line which is about the government. In the real world you get all four combinations;
    democratic-monarchies,
    dictatorial-monarchies,
    democratic-republics,
    dictatorial-republics.
    (if you throw in the economic capitalism/socialism continuum, you get eight, which I won't list)

    Usually government and state are distinct from each other. The head of government is a different person from the head of state. People vote for their government and call it democracy. The house of reps is "the government", not just "lawmakers".

    Giving the head of state political power seems to create problems. And apart from the USA, combining the head of state with the head of government is the model for dictatorial-republic. [stopping now before the Godwin invocation..]

  77. says

    I worked on the edges of the Auto Industry. A lot of what is posted here about the industry is wrong.

    1) CAFE had no real impact.
    2) The EPA rules had no real impact.

    In fact both CAFE and the EPA had huge benefits for the auto makers. I'm old enough to remember having to tune up my car once a month. I also remember how bad the fuel economy was, and how unreliable the old cars were.

    CAFE and the EPA smog rules improved automobiles.

    What hurt GM and Chrysler was management with Masters of Business Administration. Bean counters in other words.

    Everyone in the industry knew GM was going to go bankrupt ten years before it happened. We may not have known exactly when, but the company wasn't stable. Nor was Chrysler, for the same reasons. Both companies were unable to quickly adjust to a changing market. Neither company had done the planning to be ready for the changing market.

    This is a management issue.

    You know why Ford didn't go bankrupt? Because the managers at Ford were still CAR people, not MBA graduates. Ford had better cars. Ford was able to compete with the Japanese and Korean manufacturers far better than GM or Chrysler.

    Which doesn't mean Ford was perfect. No company is. Just think of the warranty issues Toyota has had. Or the management issues at Honda, which took a once great company, which produced great cars, and turned it into a company that produces junk.

    One of the things that has helped GM and Chrysler recover, is the new accent on engineering. They are producing cars that people want to buy now, instead of expensive cars that they could write loans for (yes, GMAC was one of GM's biggest problems).

    As to what happened to Detroit, again, a lot of it appears (from a thousand miles away) to be management issues. When you have politicians with no vision, your government suffers. You can try to blame the media for not calling out the idiots running the city, but the media reflects the citizens…

    Wayne

  78. jdgalt says

    Latin America in the 20th century is chock full of examples of what happens when voters and/or civil servants successfully demand more spending than their country's ability to borrow and/or tax can sustain.

    What happens can best be described as a vicious spiral. Those countries have tiny banking systems compared to ours, so the treasury exhausts domestic sources of credit very quickly even though it has the power to force them to lend to it. Then it looks overseas — and usually finds nothing available at all, because potential lenders and investors know perfectly well what's about to happen.

    Meanwhile taxes get pushed up and up, well past the hump on the Laffer curve. But civil servants and especially police still consider themselves underpaid, so they start demanding and getting bribes for everything. Pretty soon it becomes effectively impossible for any business to get all the permits it needs to operate. So it quits trying, operates off the books, bribes the cops regularly, and the economy starts looking like a permanent depression.

    Now huge numbers of people are out of work, so they demand welfare. And if they don't get it — or they do, but it won't buy enough to keep them fed and housed — they riot in the streets. Then the police go out in riot gear plus machine guns, and kick serious butt.

    The eventual result, almost everywhere, is a "democratic government" that is really a dictatorship, where the president has to (or feels he has to) declare emergencies every other week, and the only reliable source of funds for the government is the printing press, so there's inflation in the hundreds or thousands of percent. And not just the government but everybody living there is being economically stretched to the breaking point — so nobody can afford to reform the system (and both the police and the masses would riot if anybody tried).

    This is not an abstract lesson. This is where Obama's policies will lead very quickly if continued. And I believe he wants it to happen. The ultimate "moral" principle of the left and especially the green movement is that it's wrong for anybody to be richer than the third world.

    Be afraid. Then do something about it.

  79. Anony Mouse says

    From Clark's other recent post:

    "I swear, sometimes I think people don't even read the titles of the posts."

    Hmmmmmmmmmmm…

  80. Jeremy says

    @Orv

    The question is, what do we replace pensions with? The 401(k) system is not looking like a success…

    Oh no, you asked me that question.

    Ok, well, here goes…

    In the past few months, I've concluded that retirement… is bullshit. Retirement did not exist as a concept for all but the extremely wealthy until longetivity exceeded the 640k limit of Social Security. Put another way, our federal government, when it created social security, set an age limit that most people were not living to at the time, and now people routinely exceed that age, by 20, 30, even 40 years.

    What that has done is create an expectation of decades of not working at the end of a career for most people. This is a situation which never existed in the past, and I'm fairly certain is mathematically impossible for societies that are top-heavy on the age-distribution chart. The only way to sustain a retirement for all is for every family to be having 5 kids, and yes that means runaway overpopulation.

    I no longer expect to retire. I am no idiot, I'm still saving like crazy. I intend on leaving this career of mine at some point. But I do not expect to be able to stop working, ever. My goal has changed from trying to come up with enough money to not work, to one of trying to find a fantastic retirement job that allows some quiet comforts. That means something along the lines of highly skilled labor.

  81. Jeremy says

    @Wayne Borean

    In fact both CAFE and the EPA had huge benefits for the auto makers. I'm old enough to remember having to tune up my car once a month. I also remember how bad the fuel economy was, and how unreliable the old cars were.

    CAFE and the EPA smog rules improved automobiles.

    What you're really talking about is the introduction of computer controlled fuel injection, and the incremental improvements that have been made on it since, all the way to multiple O2 sensors along the exhaust route and direct port injection of pressurized fuel. I'm willing to believe that government regulation *may* have contributed to the earlier introduction of these advancements in internal combustion engines, but I see no reason to believe they would have never been introduced. Further, the current regulations actually forbid individuals from modifying their car systems legally (at least in California) to configurations that would be even more efficient.

    As to what happened to Detroit, again, a lot of it appears (from a thousand miles away) to be management issues.

    Oh, I agree there. Detroit had a horrible history of failing to predict their own market trends. In fact, they routinely fail to understand what market they're actually in. They sometimes think they're in the business of selling cars. Realistically they're in the personal transportation service industry. That means that however they can provide an individual with lifetime transportation for himself and his intended cargo with a minimum of cost, that's what they should be doing.

  82. Daniel Neely says

    @Paul Baxter
    "I think it is probably worth comparing Detroit to Pittsburgh. Pittsburgh is another city which saw it's major industry hit hard times, but Pittsburgh, while perhaps in some decline, has not had the sort of wholesale collapse the Detroit has seen."

    As someone who grew up outside of Pittsburgh it's not that nowhere in the area has suffered wholesale collapse; bu that the implosion is occurring in a number of small municipalities surrounding the city; not in Pittsburgh proper.

    Back in the glory days of Andrew Carnegie areas of 10 or 20 residential blocks of well paid workers and a steel mill were viable municipalities. Now with the mills gone and the residential areas full of poor people the towns are almost entirely dependent on county level services because their own tax bases are too small to fund anything. (Pa law makes combining municipalities virtually impossible in practice, so that's not a viable way out.)

    A number of ex-mill towns in the Mon valley (south of the city proper) are facing >40% non-occupancy rates in residential areas. Detroitesque death spirals and implosions are inevitable there, but because the individual communities are so small, unless they all go at the same time the string of bankruptcies are unlikely to gain any national coverage.

  83. Rich Rostrom says

    The "bread and circuses" syndrome was the fate of the Roman Republic, and thus occupies a huge place in history. But it's only one form of a more general problem.

    That problem is when the tax-and-spend machinery of the state is captured by recipients. They suck an increasing share of the society's income until the victim collapses.

    There are levels of capture: at lower levels, the plundering is limited. There is also the amount available – when there's a lot to go around, some plundering is acceptable.

    A case of the fiscal system captured by recipients:

    The ancien régime in France. The state apparatus was so overgrown with fat-salaried employees that the regular tax system generated no net revenue. The kings established a tax on officeholders (the paulette) so as to have some money to spend. Eventually the sheer deadweight of the parasites overwhelmed the system, leading to bankruptcy and the Revolution.

    In the cases of Detroit and various California cities, the capture was by employee unions. In Chicago, it's been cronies of the mayor (through the TIF system) as well as unions.

  84. I Was Anonymous says

    @Mike:

    Maybe I'm missing something, but which of these is the majority voting itself largess?

    It's the majority of the city council (or whatever the municipal government in Detroit is called) voting itself largess.

  85. I Was Anonymous says

    @Darryl,

    Maybe Ken can strike a deal on behalf of the City to pay its bondholders with ponies?

    Darn it!!! You beat me to it!!!

  86. InnocentBystander says

    First Clark say government workers don't pay city income tax. This is incorrect. City income tax is not assessed on city worker pension income. Until this year, both private and public pensions were exempt from state income tax. They started taxing pensions so that they could reduce business taxes around 70%. Police and Firefighters can retire at 40 but require 25 years of service meaning to retire unreduced, they'd have to start at age 15. The early retirement ages for firefighters and police also reflect the physical nature of their job. While some 65 year old men could carry a 200 lb man down a ladder, public officials recognize the danger and risks involved. Also remember the "generous pensions" are in lieu of social security. More importantly, compensation is compensation. A firefighter's compensation starts under $30k and averages less than what a McDonalds GM makes. Rather than singling out pensions, the real question is whether the total compensation package is excessive compared with wages of other firefighters or police. The answer is no. The normal employer cost of police and fire pensions is about 23% of wages. Since the city doesnt have to pay SS, the additional cost is about 17% in equivalent private sector wages. Rather than talk about "overly generous benefits" Its easier to compare by saying the wage and pension of a starting firefighter is the equivalent of $35,100. Not overly generous. Detroit only has 917 firefighter and about 1100 policemen. About half what equivalent sized cities have. (And those other cities don't have the highest murder rate and are not world renowned for devils night). This issue in Detroit is Revenue. Half the property in the city is delinquent on taxes. The average Income in Detroit is half the national average. Seattle is about the same size as Detroit they get about 4B a year in revenue. Detroit gets about 1.5 B. Detroit has almost twice as much area. Twice as many roads to repair, sewers to maintain, streets to patrol, etc. Every penny of Detroit's revenue could be allocated to the cost of tearing down abandoned buildings, leaving nothing to cover any other services. Is this a sign of government excess?

  87. InnocentBystander says

    Orv Writes "To put it another way — individuals have, not surprisingly, failed to do with their 401(k)s what corporate investment experts were already failing to do with pension funds; generate enough investment income over the course of a career to pay for the worker's old age. I would argue this was intentional. The 401(k) system was purely a way of relieving companies of the responsibility for the workers they'd used up and thrown away; it was never about the welfare of workers at all."

    Pensions are DEFERRED compensation. They are a part of employee pay funded by the employees labor, not a "largess" from the employer. Pensions were encouraged by public policy for a basic reason, they were a way of making sure that people saved for their retirement years rather than end up needing government assistance. We had employers forcing their employees to save for retirement. The advent of the 401k gave employees an opportunity to make massive cuts to employee pay in a way that most employees didn't understand. The companies took pensions which were actually 10-15 percent of an employees wages and replace it with a "employer match" of usually 3%. Did they give the employees a raise? No they kept the difference. The average person only puts about 25% of what they need for retirement in their 401k. Even if they were putting the actuarial equivalent of a pension, it still isnt enough. Studies show that even with equivalent contributions, people with a pension end up on government assistance at 1/10 the rate as those with a 401k. Companies have engineered a gigantic shift in retirement expenses from their employees to government welfare. The most ironic thing is that the conservatives are cheering.

  88. InnocentBystander says

    The geography and transportation infrastructure of Detroit meant there were no barriers to moving outside of the city. Racial tensions resulted from the desegregation of the city, the 67 riots, and the election of Mayor Young. Within 5-7 year virtually the entire white population of the city had left. The state didn't respond by supporting the city or discouraging white flight, but rather by making a massive investment in redundant suburban infrastructure. Businesses quickly followed the departing white middle class. Much of the industry that remained consisted of the older auto plant. Replacement plants were built out of state or in the suburbs. The cities older factories bore the brunt of the downsizing of the auto industry. Deprived of revenue and receiving no state support, the city responded by raising taxes to replace the lost revenue. The taxes were punitively high. Property millages were double or triple those in the suburbs. State and Local Income tax is 70% higher. This led to phase 2 of the exodus, black flight. African Americans with jobs fled to suburbs like Oak Park and Southfield. This left Detroit with a population of elderly or unemployed. Blaming the financial collapse of Detroit on overly generous compensation to its employees instead of on a lack of tax base, doesn't explain why every other city with similar levels of employee compensation haven't collapsed.

  89. InnocentBystander says

    Of the 50 largest cities in the US, Detroit police officer salaries ranked …… wait for it…. 50th!

  90. says

    @InnocentBystander

    Within 5-7 year virtually the entire white population of the city had left. The state didn't respond by supporting the city or discouraging white flight, but rather by making a massive investment in redundant suburban infrastructure.

    Why should the state have possibly tried to stop people from moving from where they wanted to move?

    Why should the state have possibly not supplied infrastructure to people where they choose to live?

    The state, I hear over and over, is just a word for "all of us".

    If the state serves the people, and not the other way around, why should the state do anything other than let people do what they want to do, and then give them the infrastructure that they pay taxes for?

  91. innocentbystander says

    Clark, I was describing the financial and social causes of Detroits financial collapse.. As opposed to the theory that Detroits ruin was caused by excessive police and fire wage expenses. Indeed, I could have explored the psychological origins and political of the complete abrogation of social responsibility to the poor, but I am sitting here 35 miles from downtown so I wasn't in a mood to pontificate hypocritically.

  92. InnocentBystander says

    Why should the state have possibly tried to stop people from moving from where they wanted to move?

    Why should the state have possibly not supplied infrastructure to people where they choose to live?"

    To address your questions: Part of the value of a Representative democracy is that our government has the ability to make decisions requiring a level of expertise lacked by the body politic in general. Likewise, Representatives can represent those without a voice in politics. In this case our posterity. There are too many specific problems associated with suburban sprawl and urban decay to enumerate in a blog post. However, simply stated the reason government shouldn't spend a grossly disproportionate amount of government resources on encouraging suburban sprawl while starving the central city of funds to renew and maintain itself is… Detroit. Pursuing policies that lead to a hollowed out racial segregated hell hole of grueling poverty and hopelessness is lousy public policy. As you pointed out, the state is "All of us", not just the chosen few who were successful at fleeing to safety.

  93. AlphaCentauri says

    For when the plebs discover that they can vote themselves bread and circuses without limit and that the productive members of the body politic cannot stop them, they will do so, until the state bleeds to death

    There are two possible ways to combat this. One is to take away their right to vote, which seems to be popular with voter ID laws and high incarceration rates. (Prisoners, even in states where they are allowed to vote after they have completed their sentences, are counted as permanent residents of the prisons during the census. Therefore, their home districts lose representatives at redistricting time, and the district that hosts the prison has extra respresentation without having to worry about any of those extra people voting — like the old slave states getting 2/3 of their non-voting slaves counted toward their representation, but worse.)

    The other option is to reduce the number of plebeians. The education funding system allows cities to collapse into decay as the schools lose funding and the tax paying parents flee to suburbs. That guarantees that the poor will stay poor and that businesses will have a steady supply of low-wage workers to clean their toilets.

    I don't suppose a lot of the people reading this blog are cleaning toilets. A lot of the people who do clean toilets would have to struggle for hours to read this page. I make a good salary, but if you wanted me to clean toilets all night, you'd have to pay me a whole lot more to change jobs. Educational disparities ensures there will always be people who don't have that choice and have to take crappy jobs for near minimum wage. All of us who can go home at night and return to clean offices without getting our own hands dirty benefit from that system. At least don't blame the victims for having the deck stacked in our favor.

  94. Random Encounter says

    Funny how little of the "largesse" ended up in the hands of the voters.

    The people allowed to have the reigns of tax dollars seem to have done the most picking up of largesse, so I suppose there is some truth to it anyway.

  95. jdgalt says

    @AlphaCentauri: I beg to differ. We've had desegregation and equal funding of the schools for 50+ years now. The only reason some races still get educated better than others is the Al Sharpton Attitude.

    But I agree that fewer plebes (or at least, fewer who will need the dole) is the best solution to the problem. And the way to get there is to end AFDC/TANF and the child-support-enforcement system that goes with it, which subsidizes women to have kids out of wedlock that they can't support themselves (and have no intention of trying to).

    A father is only morally responsible to support a child if he agreed to its creation — and having sex doesn't constitute that agreement, especially where women have "choice". That's what marriage is for, and always has been. Take away those women's free meal ticket at the expense of a guy she tricked, and the problem will go away.

  96. barry says

    Not allowing prisoners to vote might lead people to believe that voting is a privilege rather than a duty.

  97. Anony Mouse says

    The geography and transportation infrastructure of Detroit meant there were no barriers to moving outside of the city.

    The implications behind this statement are simply terrifying.

  98. AlphaCentauri says

    jdgalt, you're living in a whole different world. Having a baby is the most significant life achievement a lot of folks can hope for. It's not an accident, and no one is being tricked. The men are encouraging the women to get off birth control because they want to have children, too. They just don't always want more from fatherhood than the bragging rights.

    Waiting for marriage doesn't work out so well when the odds are high that the man you love will be murdered or incarcerated first, and a husband becomes a millstone around your neck if he gets on drugs or has to pay a lawyer. It's not just African American women having babies without waiting for a marriageable man to come along; it's a class issue. But the marriagiable female:male ratio in the African American community is so out of whack that a Black woman who prefers Black men and waits for marriage is likely to end up childless at 50. Women end up settling for men who don't deserve to be fathers, and a lot of men see no reason to meet any higher standard if plenty of women are throwing themselves at "trifling" men. So there is less pressure to grow up, more men involved in drugs, more murders and incarcerations, a vicious cycle.

    It has nothing to do with desegregation in the North. White people mostly live in different school districts. The city kids can't attend their schools, regardless of race. If you wouldn't allow your child to set foot in a school that people without choices are forced to send their children to, those kids are not getting the same chances at life that your kids do.

    States could make school funding a state-wide issue rather than based on local property values. But they don't.

  99. InnocentBystander says

    anony mouse writes: "The implications behind this statement are simply terrifying."

    We live 35 miles from downtown. It takes my wife just about 40 minutes to get to her office downtown every morning. While the city has lost 1.1 million residents, there are six or seven new subdivisions going up within a mile of where I live. The outward migration continues, checked only by more conservative mortgage lending practices. The virtually infinite supply of farmland available for construction will continue to be a major drag on brownfield redevelopment. The expansion outwards continues as the business grip on the city has weakened. There is now more prime office space in the suburbs than the city. All is not totally bleak. The downtown has been showing a bit of a resurgence. Crime in Downtown/Midtown is actually not that bad. It was depopulated as developers have systematically removed the low end housing options. A policy of companies paying their workers to move into the areas immediately surrounding their businesses has created a small "hip" safe zone. There was a news report recently about the police in Downtown taking the homeless and dumping them on the streets in the suburbs to clear the downtown area. They have even got an actual Chain grocery store, "Whole Foods" in midtown. Some people might question the value of paying and subsidizing a yuppie grocery chain to locate in a city where the natives can't afford to shop, but the optics at least, are great.

  100. Dan Weber says

    It's pretty typical to encounter people who, for every problem, the answer is "it's the fault of people in the other party." There have been a few in this thread.

    If it was just the leftist EPA/CAFE rules, then surely somewhere when the government was in the Democrats' hands, they would have helped out their union buddies.

    Same with blaming it all on management. Hey, the heads of the union knew things were in trouble, too. But everyone was on the gravy train heading for disaster. The bosses — both the supposed representatives of the capital, and the supposed representatives of the labor — made out fine when GM caught fire and sank into the swamp. It's a perfect example of the Principal-Agent problem.

    As for what to use instead of pensions, we need a kind of hybrid. People are grouped by birth cohort into pools, and the pools invest the money, and then pay out to all survivors starting at a certain age following a very set formula based on how much you put into the pool and when.

    This means that the retired are going to have to accept the risk of a down market. Yes, they need to. The group of retired people is simply too large for the rest of society to simply absorb their risks, especially because of the moral hazard once that group knows other people will cover them.

    One of the Nordic countries (I think Norway — I can look it up this evening) has a fully-funded retirement system for all its seniors. But it does not cover inflation. In order to solve the problem, they had to constrain it, and it also makes sure that the retired people care about the country's economy.

  101. InnocentBystander says

    AlphaCentari writes: States could make school funding a state-wide issue rather than based on local property values. But they don't.

    Michigan does fund schools equally and has since proposal A in 1994.
    I agree that having babies is a choice and that waiting for Marriage isn't realistic in our urban environment. Marriage just isn't a cultural norm in 2013 Detroit. However, Mr. Galt does have a point in that teenagers having babies is becoming a normal right of passage and is seen as a way of "becoming an adult and getting a crib of your own." Of course, the comment about the guy being a free meal ticket is absurdly wrong. In the urban ghetto teen world, the idea of work is not the norm among the "men". The youth unemployment rate is about 50% The jobs available are minimum wage and considered demeaning. Permanent homes are not the norm. They ask "Where you stay at?" not "Where do you live". The boys leach off of the girls, and the girls will throw themselves at any boy who spends money on them. We have insulated their decisions from consequences and so they continue to make bad decisions. Most urban teens have abandonment issues beyond the comprehension of those raised in and surrounded by nuclear families. A baby is their way of responding to those issues. If Mr. Galt had his way, we'd fail to support these stupid teenage decisions and a generation of incapable teenagers would watch their babies suffer, starve and die. They'd learn. I agree that his assessment of the problem is not meritless, I however disagree with his "solution".

  102. says

    Dan Weber:

    As for what to use instead of pensions, we need a kind of hybrid. People are grouped by birth cohort into pools, and the pools invest the money, and then pay out to all survivors starting at a certain age following a very set formula based on how much you put into the pool and when.

    If we can do this with pools of size one person, I'm all in favor.

  103. Daniel Taylor says

    @Clark: how much money does one need to retire effectively(R)? Is it possible for everyone to save that much (say R/2 for an average amount of savings)?

    I think people have a mental model of how things should be, but haven't actually applied math to that model to see if the results scale beyond the top 10% to 20% of the population.

  104. Richard says

    jdgalt wrote:

    This is not an abstract lesson. This is where Obama's policies will lead very quickly if continued. And I believe he wants it to happen. The ultimate "moral" principle of the left and especially the green movement is that it's wrong for anybody to be richer than the third world.

    You made some good arguments there. Pity you had to undermine them by painting Obama to be a self-hating American, who would prefer to have America become a third-world contry, suffused by riots and corruption, as opposed to having the USA be better than any other country.

    There are several ways to fix the American system. The liberal way would be to raise taxes enough to pay for the services being rendered (while leaving enough to repay current debts). The conservative way would be to cut services to the level where current taxes could pay for it (while leaving enough to repay current debts). A bipartisan way would be half from column A, half from column B.

    The problem is, fixing this issue will probably take a decade, and in the interim, plunge the economy (deeper) into recession. And after 4 years, someone else would come along, promise to undo all the "damage" and put things back the way they were, get elected, and do just that, sacrificing long-term stability for short-term prosperity and popularity. At that point, the party that had tried to fix things would be laughed out of the White House for three or four terms.

    So no one actually wants to do that – it would destroy their own party, empower their rivals, and probably wouldn't fix things in the long run, because it would all be undone after 4 years. And you'd need a supermajority (the kind the Democrats squandered in '08) to even try to start it.

  105. Dan Weber says

    If we can do this with pools of size one person, I'm all in favor.

    This is why it gets so incredibly depressing to negotiate anything with libertarians. You can't build a coalition if the response to every compromise that proposes a situation closer to your ideal is "no, not perfect enough."

    Individual people are very very bad at handling one specific risk during retirement: longevity risk. A person who will die in 5 years is much different than a person who will die in 40 years. Hence being in a pool of other works born around the same time.

    People in favor of a massive government safety net for the retired will point out, very correctly, that individual people cannot just absorb that risk. Libertarians need to take that ammunition away from them by proposing things that help deal with that risk. It's their best argument and it does you no good to hope it just goes away.

    Those pools aren't government run or anything. Just like someone might put their 401(k) money into a "Fidelity Freedom 2025" account, their employer would buy them shares in some fund for workers born in 1960. Then in 2025 it pays out (say) 3% of its assets to its living investors proportional to its shares, increasing in a formula that an actuary could write for you.

  106. InnocentBystander says

    As for what to use instead of pensions, we need a kind of hybrid. People are grouped by birth cohort into pools, and the pools invest the money, and then pay out to all survivors starting at a certain age following a very set formula based on how much you put into the pool and when.

    Oh, an annuity.

  107. different Jess says

    @Jeremy: I'm willing to believe that government regulation *may* have contributed to the earlier introduction of these advancements in internal combustion engines, but I see no reason to believe they would have never been introduced.

    If you'd like a reason to believe that, travel to any of the many nations in Asia that have no such laws, and look at the sky.

  108. Jeremy says

    @different Jess

    If you'd like a reason to believe that, travel to any of the many nations in Asia that have no such laws, and look at the sky.

    Most of that pollution you see in those developing nations is from unrestrained coal plant production, not internal combustion automobiles. Do us all a favor and go try to count the percentage of automobiles with carburetors in those nations, I'll bet it's a small percentage.

  109. Infrasound says

    I never thought I'd quote a Paul Verhoveon (sorry spelling) movie. But,

    "You get to be the mayor that cleaned up Detroit".

    Now i can't stop thinking about that violin player from the Save Detroit telethon playing Born to be wild whilst doing the splits. Robocop 2 is still supplying laughs 20 years on.

    Seriously though how much further into the red is DT than say the issues California faced a while back or is it different based on the fact it's a city not a state?

  110. Anony Mouse says

    "While the city has lost 1.1 million residents, there are six or seven new subdivisions going up within a mile of where I live. The outward migration continues, checked only by more conservative mortgage lending practices."

    Yes. The ship is sinking and people are leaving, as is their right. You can't blame them for Detroit imploding. If the city wasn't a hellhole, people wouldn't be leaving.

  111. Daniel Taylor says

    So, a brief application of Math:
    If *everyone* saves for retirement assuming they'll live retired for 20 years, and that they will need an income of $20,000/year due to having a paid-off house and non-existent work expenses, the average individual *cash* savings comes out to something on the order of $150,000/person (assuming average over everyone, including children). For 300 Million people in the USA alone that yields $45 Trillion in savings locked out of the liquid economy (investments involve a risk of loss, so are inappropriate for *responsible* retirement savings if you know that you have no fallback position).

    Of course, survival statistics and actuarial models mean that that much money doesn't need to be tied up to handle all current retirees at a reasonable level, but if we are talking about individual planning that is where the numbers lead.

  112. says

    @Daniel Taylor

    investments involve a risk of loss

    But everything is an investment. There is no such thing as savings that does not involve a risk of loss. You merely get to pick where on the risk/upside continuum you want to be.

    There is no boolean here.

    so are inappropriate for *responsible* retirement savings

    Nonsense.

    For 300 Million people in the USA alone that yields $45 Trillion in savings locked out of the liquid economy

    "Liquid" is again a continuum. Again: there is no boolean here.

    I can sell a share of stock in 30 seconds. I can sell a house in three months. I can sell my third generation family owned business in three years.

    The trick is to match your liquidity profile to your needed cash flow.

  113. Daniel Taylor says

    If you are going to absolutely rely on your savings it needs to be in a cash-equivalent form, or you need to over-save to account for loss.

    So instead of $45Trillion in cash-equivalents we'd be looking at $90Trillion in a mix of investments and cash-equivalents.

    Leaving aside that many people simply don't get paid enough to have any savings at all, that's a *lot* more money than needs to be dedicated to retirement planning if we use a group size significantly greater than "every man for himself".

  114. says

    @Daniel Taylor

    If you are going to absolutely rely on your savings it needs to be in a cash-equivalent form, or you need to over-save to account for loss.

    Again, you're arguing as if the only valid solution is a risk-free solution…and there IS. NO. SUCH. THING.

    Leaving aside that many people simply don't get paid enough to have any savings at all,

    Restated

    1) people choose not to save

    and/or

    2) Many or most people do not generate enough wealth in their lives to spend the last quarter of it on vacation

    I agree with both of these statements.

    For reference, M-2 money supply is around $11 Trillion

    You're comparing apples and desert sand on Mars. These two have nothing to do with each other.

  115. Daniel Taylor says

    As you say, there is no such thing as a risk-free solution.

    That is why we have such things as social safety nets and professionally managed pension plans (which aren't without risks themselves).

    As far as comparisons go, I think comparing the amount of assets to be dedicated to a particular purpose to the money supply is quite relevant for showing the scale of commitment required for a plan. Personal responsibility is all well and good if everyone can behave in a responsible manner and not break things.

    So, where in an ideal libertarian economy does the US (as a whole) put $45 Trillion dollars if everyone decides to be responsible?

  116. David W says

    @Daniel Taylor

    You're assuming a few too many things. Like, for instance, that all 300 million americans retire tomorrow, including the newborns. The smaller the fraction of retirees at any given moment, the smaller the savings needed to support them.

    But you're also talking past Clark. He's arguing that it doesn't really matter if a company, or the government, or an individual saves, the total savings need to be the same if retirement is going to be more than a temporary aberration. And since the total savings are the same – maximize liberty and correct incentives.

    Besides: why do you have to go it alone, if you're worried about over saving and want to die broke? Sign up with an insurance company for an annuity (or several companies to reduce risk). Or make an arrangement with someone younger, that you'll support them for twenty years, and then they'll support you in your old age (an archaic term for this is 'family'). Clark's objection is (I presume) entirely to 'therefore the government must do it, and you have to do it my way'.

  117. Dan Weber says

    InnocentBystander, indeed it is a lot like an annuity. For most people that should be the default of how their retirement money is invested.

    Daniel Taylor does have a point that every bank account deposit is both an asset and a debt. In order to retire, you are counting on other people buying the assets you are selling in order to live.

    (There are some ways around this. You could literally stockpile SPAM in your basement to last 50 years. Most retirement plans aren't built this way at all.)

    It's not a bad thing for money to be "locked away." As a simple exercise, after working for 40 years, I have accumulated capital, which I could then use to buy factory equipment that a factory uses to increase their output, paying me out of the increased production until the machine wears down. Maybe I can't sell the equipment for parts, but it's generating an income stream for me, and that's a good thing to have in retirement.

  118. Daniel Taylor says

    @David W, I'm assuming no such thing, and I ran the "go it alone" numbers because Clark suggested that was the ideal.

    Assumption 1: housing is in some way covered for retirees (paid off house, living with family, or otherwise settled) so they can live off half of an average salary on an average basis.
    Assumption 2: everyone is responsible for their own retirement income (group plan: size=1)
    Assumption 3: average retirement savings of $400K to cover 20 years out of the workforce at half an average salary.
    Assumption 4: everyone knows the rules and is participating on an individual basis in planning for their own future to the extent of putting aside savings that will let them have half their working wages per year after they retire.
    Assumption 5: forced retirement from decent paying professions (normal for most corporate positions).
    Assumption 6: retirement savings are a separate thing from "working reserves" that people should keep around for contingencies like temporary unemployment.

    Estimate 1: average retirement savings would be about 1/3 the level needed to retire, moving this number to 1/5 still leaves $24 Trillion in assets dedicated solely to retirement savings.

    — — —
    Group retirement plans of various sorts can take advantage of the fact that many people will not survive to or much past retirement, and can use that to account for the people who live far past retirement as well as lowering the total reserves they need to keep on hand.

    Individuals can't rely on statistics in their planning. They have to assume that they will be one of the survivors and plan accordingly. Even going to a group size of 2 allows the saving rate per individual to be cut dramatically, but that isn't the case that was proposed.

  119. InnocentBystander says

    Dan, the funny thing is that you are claiming to try an replace "pension plans" with a "hybrid" approach which is nothing more than a pension plan with a lot of flaws because your new scheme hasn't thought out the detail yet. As you respond to the problems you end up becoming more like a standard pension plan. A pension plan is nothing more than a scheme for sharing risk in retirement savings through a pooled investment. Everything else is plan detail.

  120. markm says

    For all those who blame the auto industry for Detroit's collapse, the auto industry is doing OK right now. It's just not doing so in Detroit, or anywhere that contributes to the economy of that city. I am an engineer at an electronics factory that is going flat-out 24×7 this summer making auto parts. We're manufacturing for both foreign and domestic cars: Hyundai, GM, Ford, Chrysler, Volkswagen, and Mercedes.

    We're in Grand Rapids, about 200 miles from Detroit. The first-tier auto suppliers that we work for are "in the Detroit area" – but they are all around 50 miles from Detroit itself. And that's how Detroit doomed itself. The auto industry began in Detroit and the immediate suburbs; for example Ford's Dearborn and River Rouge plants were both within 10 miles of Detroit, an easy commute for Detroit residents even by bus. But Detroit made itself a bad place for lower middle-class families. First the whites left, and then the black autoworkers followed them. Any factories that hadn't already moved out for lower taxes and lower crime would now need to follow the workers – but land cost too much in the inner ring of suburbs, so the new factories were dispersed much further away. A suburban workforce that owned automobiles made that possible – but it leaves anyone (except the super-rich) left in Detroit stuck with four choices: a commute of well over an hour, a government job, welfare, or a lousy low paid service job.

    Two of those categories live off the government. One barely makes enough to pay any taxes. And pretty soon the fourth category had either moved away, or shifted to one of the less stressful categories…

    So what I don't understand is, what the heck has Detroit lived on for the last two decades?

  121. Daniel Taylor says

    @InnocentBystander: I thought I was pretty explicit in saying exactly what you just did. I was pointing out the gross inefficiency involved in the "go it alone" approach to retirement planning, which would require more in savings and investment for that purpose alone than the economy can soak up without major distortions.

    Not to mention that thanks to over a century of efficiency increases we really need people to work less and somehow spread the results of the labor more fairly. I wouldn't be so arrogant to suppose that I know exactly how, of course, when I can see so many others have trod that ground before and every time have come up short on the solution.

  122. Dan Weber says

    I assume we are still being civil.

    Right now a pension places massive burden on the provider to assume all risks. If the market goes down, or people live longer, or some people live longer than others, or whatever happens, they have to assume that risk.

    And, in practice, it has been an impossible risk to bear. Almost every single non-government employer has either shed pensions or gone bankrupt. The only people still offering pensions have been governments because they can't go bankrupt. And some of them are going to test that proposition in the next 20 years.

    It's not "pensions, but just do them right." No one has done them right. It's probably not possible for an employer to assume all the risks of retirees for 30 years.

    I'm seeking to explicitly separate the different kinds of risk from each other. We can probably control for some of the risks because we're not trying to control for all of the risks.

    Payments should be made based on balances in the funds, which makes it impossible to go bankrupt. The result will be that most people will face slightly smaller payouts, and there could be small amounts of variation in the payout amounts based on the portfolio, but they will also see that coming a long way off. Unlike pensions being absorbed into PBGC, which leaves retirees facing two prospects: one chance of full payouts, another chance for significantly reduced payouts.

    There is still some risk for the retirees in this scenario, but there is no such thing as a risk-free life.

  123. InnocentBystander says

    Daniel : I thought I was pretty explicit in saying exactly what you just did.

    Me: And I thought I was pretty explicit in saying that I was replying to Dan not Daniel ;)

  124. InnocentBystander says

    Dan, the issues that have driven the shift away from pensions are cost cutting and volatility. Pension failure rate are and have been very low since the implementation of erisa. Insurance Annuities, which face identical market risks have a failure rate of virtually zero. Since closing a pension plan involves buying an annuity, the risk was obviously priced and affordable. or the insurance companies wouldn't be selling the product. You point isn't without merit, it is fair to say that Pensions force companies to be in the insurance business and they are not necessarily comfortable in that position. Pensions are designed by nature to last for generations. A large portion of their purpose is to smooth out market volatility. Our government, in its infinite wisdom, decided to set contributions according to instantaneous valuation of the assets (Yes, oversimplified I know) this means that poor stock performance or a movement in interest rates can change the required contributions by an order of magnitude. To make matters worse, since assets do poorly in a bad economy, they require the big contributions when the company can least afford them.

  125. R R Clark says

    Been reading for a while. Love the debates that get fostered here. I think what strikes me about the Detroit situation is — now that they have basically admitted defeat — everyone has suggestions as to what they ought to have been doing. Made in a vacuum, of course, because Detroit's responsible administrators (and there have been a few even since 67) have tried to right the ship.

    Detroit is an excellent example of what happens when everyone stops wondering what they can do for their city and starts exploring what their city can do for them. Democracy requires compromise, something that both political parties have forgotten. But they've also forgotten why democracy is great: it is because compromise is almost always the best choice. JFK posited a question of America 45 years ago. To me, the answer has always been as obvious as where the sun rises: make it better. You want to fix Detroit? Start with the obvious problem: half of the residents can't even read. They've never been exposed to Jefferson, to Paine, to Voltaire, to Emerson, nor to Thoreau. They don't know how they can become empowered to be their own change. To me, that is the most depressing of Detroit's truths: how easy it is to disenfranchise someone by denying them basic education.

  126. Daniel Taylor says

    @InnocentBystander: darn ambiguous naming scheme we've got here. Without the full alias you could easily have been referring to either or both of us.

    @Dan Weber: pensions are an outgrowth of mandatory retirement, which is one approach to the productivity problem I mentioned. The obvious problem with pension systems is they are an obligation made too far in advance of when it is due, so the temptation to not pay for services previously rendered is a grievous burden on the new management who may not even know most of a company's pensioners.

  127. InnocentBystander says

    Daniel Taylor (see the whole name, that wasn't as hard as I thought) "so the temptation to not pay for services previously rendered is a grievous burden on the new management who may not even know most of a company's pensioners."

    My wife tells the story of her largest client, the CEO had founded the company, very patriarchal . He used to say something along the lines of "As long as I'm in charge, We wont freeze the plan. I'm never going to have to turn on the tv and see one of my employees eating dog food". He was right, it wasn't until immediately after he retired that they froze the plan.

  128. InnocentBystander says

    Since thread is about Detroit's bankruptcy it is interesting to note that while the state refuses financial assistance to the city for their employees pensions, they came out with a new plan today.

    They are committing $284.5 million in city of Detroit property taxes to the construction of a new hockey Stadium for Billionaire Mike Ilitch.
    A cynic might even suggest it was a payoff to keep Denise Ilitch from running for Governor. I am more inclined to believe that the legislature is just more sympathetic to rich white suburbanites need to watch hockey than they are a poor minority bus drivers need for food and shelter.

  129. Palimpsest says

    "A democracy cannot exist as a permanent form of government"

    but
    "A monarchy cannot exist as a permanent form of government"
    "A tyranny cannot exist as a permanent form of government"
    "An empire cannot exist as a permanent form of government"
    "Anarchy cannot exist as a permanent form of government"
    "A theocracy cannot exist as a permanent form of government"

    Gee, maybe this could be generalized….

    ….