The further to the left or the right you move, the more your lens on life distorts.

Sunday, July 21, 2013


Four the past five years, I've argued that the problems faced by many European countries—low GDP, high unemployment, low productivity, significant entitlement burden, and a lack of any real effort to correct these problems—were a harbinger of our future in the United States, if we continue on the road to bigger government, uncontrolled entitlements (including disastrous new ones like Obamacare), and a debt burden that approaches 100 percent of GDP. Our current 'leadership' insists that our problem is that we haven't spent enough and that income redistribution via higher taxes will solve our ills. In essence that is the blue social model, and it is demonstrably flawed (think: Greece, Portugal, Spain). But that's Europe and we're different, right?

Now the first glaring failure of the blue social model in the USA has made front page news. Detroit, MI has declared Chapter 9 bankruptcy. Walter Russel Mead summarizes:
Detroit’s situation seems almost unprecedented, and it’s not clear how the city can best respond to it. The unions’ biggest problem is that Detroit simply cannot pay their pension claims without destroying city services. Detroit doesn’t have the money to provide even minimal services to its current population while paying off the large numbers of retired workers, many of whom hail from times when the city was larger and richer.

Because there is no money, there is no solution that gives the unions the relief they seek. Total obedience to the state constitutional mandate might not be possible, and that’s a problem. The government can pass a law saying that everyone has a constitutional right to a free trip to the moon, but if it doesn’t build the spacecraft that can get you there the right is void.
Stated even more succinctly, the money has run out and many of the citizens who provided the money have left the city. For the past 60 years, Detroit has been run by Democrats who applied the blue social model. Working with both public and private sector unions whose membership repeatedly elected them, Democratic city leaders agreed to fiscally irresponsible entitlements, programs, and projects. As taxes rose to fund these irresponsible agreements, people and businesses who shoulder the burden of the taxes required to pay for them left the city. Municipal debt rose. Population fell from 2 million in the mid-1960s to 700,000 today. As the tax base shrunk, the number of people who demanded public assistance and those who demanded public pensions grew dramatically. The math simply wasn't sustainable.

As Glen Reynolds says, "Something that can’t go on forever, won’t. Debts that can’t be repaid, won’t be. Promises that can’t be kept, won’t be."

You'd think that Barack Obama and his supporters would soberly consider Detroit's situation and re-evaluate their headlong rush to put our entire country in the same dire straits. That won't happen. You'd think the Democrats would soberly consider Detroit's situation and stop class warfare rhetoric and obstruction of entitlement reform. That won't happen either. The false promises will continue, spending will grow unabated, and everything will be fine, until it won't.