City of the future?

What's unfolding in Detroit is a cautionary tale for other major cities

They rebelled in Wisconsin for less.

Then again, they were rebelling against a Republican governor. Detroit’s Democratic Mayor Dave Bing is being given a
lot more leeway than Wisconsin’s Scott Walker was.

“The Democratic mayor,” writes the Wall Street Journal, “has slashed wages across the board by 10 percent; increased health premiums and co-pays; reduced current-worker pensions and suspended retirees’ 2.25 percent cost-of-living raises. ... The mayor has also floated raising the retirement age and moving new hires to 401(k)-style plans as the state did in 1997. He’s even put the nuclear option – freezing pensions for all workers – on the table.”

By comparison, the Wisconsin Rebellion was fought over nothing.

Then again, Detroit is in far worse shape, and is headed for bankruptcy – which would be a watershed event in American history, as the largest municipality to do so. The state has kept Detroit afloat thus far, but the city “may soon be cut off since council members last month rejected a contract for a legal firm to advise the mayor, a condition of further aid.” The reason? Unions don’t like the law firm that drafted the agreement.

Not surprisingly, but no less brazenly, some in Detroit are already looking to Uncle Sam – in other words, you – for a bailout.

In fact, one Detroit councilwoman seems to think that a bailout of Detroit ought to be a direct reward for helping re-elect Barack Obama.

“Our people in an overwhelming way supported the re-election of this president and there ought to be a quid pro quo and you ought to exercise leadership on that,” said Councilwoman JoAnn Watson. “After the election of Jimmy Carter, the honorable Coleman Alexander Young, he went to Washington, D.C., and came home with some bacon. That’s what you do.”

Wow. That’s what you do.

But that’s the shameless mindset today among some in American cities and states that have irresponsibly overspent their capacity to pay for it: They don’t just come asking for help; they expect and demand it.

“President Obama faces an impending crisis that is as bad, if not worse, than the national debt,” writes Michael J. Hicks, associate professor of economics at Ball State University. “I write, of course, about the potential for widespread bankruptcies of perhaps dozens of municipalities and the effective bankruptcy of at least three and as many as a dozen states.”

Some 28 cities have reached bankruptcy in the past two years, he notes, and hundreds may follow. States are also in trouble due to pension contracts executed on Fantasy Island.

Just wait until California comes knocking.

“In Chicago, New York and Los Angeles,” writes Hicks, “it will mean fiscal chaos that is outside of modern memory. This will lead to calls for federal interventions, which must be largely resisted.”

The professor is absolutely right. More responsible states and hamlets will be put on the spot to bail these others out, and that can’t happen. It’s wrong – taxation without representation, one could argue – and there just isn’t enough money to do it.

In Europe, industrious Germans and others have been financing lavish pensions and public benefits in cash-strapped Greece. They’re getting tired of it.

Is it the future you see?

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