Tuesday, July 23, 2013






David Sirota Connects The Dots

The Daily Show's John Oliver on bankruptcy in Detroit (video, below):

But this bankruptcy still came as a surprise, especially since the city recently hired Kevin Orr as emergency manager to avoid this very situation... Yes, that does seem a little suspect. I mean, a bankruptcy lawyer that you hired suggests declaring bankruptcy. It's a little like hiring a demolitions expert to re-shingle your roof.

Not a surprise, especially because Michigan Public Act 4, under which the emergency manager was hired, gives the emergency manager widespread authority, including the right to sell off city assets and to renegotiate labor contracts.  But not, not oddly, to raise taxes.

Instead Detroit, as mandated by state law, cut taxes for both residents and non-residents, in return for which Lansing promised it revenue sharing.  The state did not keep up its end of the bargain.  Yet, that should not have mattered because, as we all know, cutting taxes revs up an economy, increases tax revenues, and puts smiles on the faces of children everywhere.   Alas, it did not turn out that way.

That has not stopped conservatives from blaming the declaration of bankruptcy on liberalism.  Blowhard-in-Chief Rush Limbaugh yesterday remarked Detroit is

the biggest city in the United States to ever go bankrupt.  And why?  Two things, that are actually under the same umbrella:  unions and unchecked liberalism have led to the bankruptcy of Detroit...

And now those very benefits have killed the city of their birth, the birth of the health care benefit.  I mean, the chickens have come home to roost, in the famous words of Reverend Wright.  Is that not something?  The city where health care benefits were created have been brought down, essentially, by health care benefits and pensions and unions.

That, of course, is (to use the technical term) balderdash.  We all understand the impact of the decline of the American automobile industry on the fortunes of Michigan's largest city, once the bastion of the American middle class which is so loathed by Limbaugh and some fellow conservatives.  Less well understood is the role of "free" trade upon the auto industry.David Sirota explains

Detroit isn’t just any old city — it happens to be the biggest population center in the state hit the hardest by the right’s corporate-written trade agenda. Indeed, according to the Economic Policy Institute, the state lost more jobs than any other from NAFTA (43,600, or 1 percent of its total job base) and lost another 79,500 jobs thanks to the China PNTR deal. And that’s just two of many such trade pacts. Add to this the city’s disproportionate reliance on American auto companies which made a series of horrific business decisions, and Detroit is a microcosmic cautionary tale about what happens when large corporations are allowed to write macro economic policy and dictate the economic future of an entire city.

If told, this cautionary tale would likely spark a discussion about revising current trade deals, regulations, public investment and industrial policy in general. That is, it would spark precisely the discussion that the conservative movement and the corporations that fund politicians don’t want America to have. So the right works to make sure that discussion is short circuited by a narrative that focuses the Detroit story primarily on taxes and public pensions.

Money can be found by those who want to find it.  The same state government which appointed an emergency manager it expected to declare bankruptcy set up the Detroit Development Authority, which is tapping $283 million in property tax funds to help finance a new arena for the National Hockey League's Detroit Red Wings.  Sirota describes

... a straightforward conservative formula: the right blames state and municipal budget problems exclusively on public employees’ retirement benefits, often underfunding those public pensions for years. The money raided from those pension funds is then used to enact expensive tax cuts and corporate welfare programs. After years of robbing those pension funds to pay for such giveaways, a crisis inevitably hits, and workers’ pension benefits are blamed — and then slashed. Meanwhile, the massive tax cuts and corporate subsidies are preserved, because we are led to believe they had nothing to do with the crisis. Ultimately, the extra monies taken from retirees are then often plowed into even more tax cuts and more corporate subsidies.

We’ve seen this trick in states all over America lately.

Yes, yes we have.  Sirota mentions Rhode Island and Kentucky, though regrettably, not New Jersey, in which MSNBC's favorite governor and GOP presidential hopeful Chris Christie has raised the tactic to an art form.

There have been, obviously, other factors in Detroit's decline.  The 1967 racial riot, white flight, inept and corrupt local politicians, and sprawl have all played major roles. Still, as Sirota notes, the failure to consider "current trade deals, regulations, public investment and industrial policy in general... plays into the right’s push to enact ever more regressive tax cuts, protect endless corporate welfare and legislate new reductions in workers’ guaranteed pensions."   And that, he recognizes, is no accident.




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