Last week, Detroit became the largest city in American history to file for bankruptcy. And unfortunately Detroit is not alone. 36 municipalities have had to file bankruptcy in the last year – 4 in California alone.
So why did this happen?
Obviously the decline of the American auto industry over recent decades played an important role. But it’s much more than that.
Detroit’s middle-class has been fleeing the city in droves for years now, in large part to escape its high crime rate, particularly homicide. In fact, the city’s population has declined from a high of 1.8 million people to about 700,000 – fewer than half the people that once lived there. Taxes on the other hand have continued to climb over the years. And the school system is terrible, with embarrassingly low scores on national tests.
40% of the street lights are broken. One out of three ambulances are non-functional. 78,000 houses and buildings are abandoned.
Detroit is a strong union town – and Democrats have run everything for years. Public employees, with 40 separate unions going to bat for them, have been paid well, and promised generous pensions, despite the city’s financial downward spiral. Now, as a result of the bankruptcy filing, those promised pensions may not be worth last week’s losing lottery ticket.
Detroit’s total debt is estimated at $18.5 billion. Small potatoes compared to our U.S. national debt of nearly $17 trillion. Another way to look at these two numbers is, for every one dollar of debt Detroit owes, America owes $1,000.
So the logical question this raises is, “is our nation heading down the same fiscal road as Detroit?” Unfortunately, there’s a lot of evidence suggesting that that just might be the case.
Our nation’s $17 trillion debt is already having a negative effect on our economy and on the quality of our lives. Our federal income taxes are at higher levels than they have been historically, and 46 cents of every dollar Washington now spends has to be borrowed, much of it from China.
And speaking of taxes, we used to have the second highest corporate tax rate of any industrial nation on earth. Only Japan was higher. Well, not anymore. Japan lowered their corporate tax rate, and now we have THE highest corporate tax rate. This means American businesses are at a disadvantage, and are less competitive on the world stage. This results in American jobs lost, resulting in lower revenues going to Washington, leading to more national debt – a vicious cycle.
When American businesses aren’t competitive on the world market, it adversely impacts those companies’ ability to compete in international trade. Thus America had a $540 billion trade deficit last year alone.
Seniors and disabled Americans are assisted by Social Security, Medicare, and Medicaid. Social Security for decades took in more money each month than what it paid out in benefits. However, that changed in 2010, and now the so-called Social Security Trust Fund is on its way to becoming exhausted, and the Social Security Disability Fund is projected to run out of money in just three years.
Medicare is projected to be exhausted in 13 years. And Medicaid faces even more fiscal stress because Obamacare threatens its very viability.
And speaking of Obamacare, implementing this flawed program has been such a mess that President Obama was forced to delay the employer mandate portion of the program for a year. Since Obamacare’s passage, the average cost for a family to obtain health insurance has increased by more than $2,000. And in California, it’s estimated that insurance rates could go up by 146%!
Food stamp usage by Americans has almost doubled under President Obama – from 28 million when he took office to nearly 48 million now. And the Obama Administration’s Department of Agriculture has been involved in an aggressive campaign of going out and recruiting even more people to sign up for food stamps. You’ve just got to shake your head.
And if you’re a student, it’s getting tougher and tougher to bear the burden of not only a mediocre economy and limited job opportunities, but a crushing student loan burden. The total debt burden hanging over students in America is now over $1 trillion.
With all this bad news, is there any hope for the nation – or are we Detroit, just a little further down the road.
Well, I’m an optimist by nature, and though the current outlook across the board looks pretty bleak, I think we still have a chance. But only if we overhaul and simplify the tax code, dump Obamacare, reform the entitlement programs: Social Security, Medicare and Medicaid, and freeze or reduce the level of spending on virtually everything else, with the possible exception of national defense.
Adopting these measures would put our nation back on the path towards fiscal sanity, economic recovery, and prosperity.
Will it happen? Only time will tell.
