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Detroit - From Mo-town To Ghost-town

US Economy

Date : 12/11/2020

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Francis

Uploaded by : Francis
Uploaded on : 12/11/2020
Subject : Economics

Detroit From Mo-town to Ghost-town

The trumpeting of a US recovery obscures what is really happening in the USA, particularly at state and city level, writes Frank

What s Goin On Marvin Gaye

Those of us old enough to remember the great Tamla Mo-town sound which would include most of the Chartist editorial board can only wonder at what s happened to Motor City, as it was fondly and appropriately named. For Detroit, Michigan, one time hub of the US automobile industry, home of General Motors (GM), Ford and Chrysler, with one time population of 2 million has become a wasteland population now reduced to 700,000, where an estimated 50,000 feral dogs room the streets since there are no dog-catchers anymore. Crime is rampant of course since police numbers and budgets have been pared back, and street lighting is of a third world order. Moreover, other types of social services involving health, and education have also come under the swingeing austerity programmes taking place in Detroit and at City and state levels across the Union.

The city has debts of $18 billion and has been officially declared bankrupt. There has been no help for the city from the Federal Government hardly surprising since Washington is on the hook for $17.4 trillion itself and that s just public debt. Add in private debt and other unfunded liabilities Medicaid, Medicare and Social Security - and Americas cities and state debts, and the total is now thought to be estimated at a cool $75 trillion. Interesting to note that during Detroit s travails the US government apparently found $50 billion to bail-out the bankrupt General Motors. This perhaps speaks volumes about the Obama government s priorities.

Bankruptcy will mean the city will now have to make even more draconian cuts in public expenditure in order to balance the books. Public sector health provision and pensions has become the number 1 target for cuts. Detroit s liabilities include $5.7 billion for municipal workers health care costs, and $4.5 billion for their pensions.

On 3 December 2013 a Federal judge ruled that bankrupt Detroit may cut retirement benefits for its workforce. This of course sets a very dangerous precedent and can only make matters worse. As has been the case in Europe and the UK, austerity is akin to applying leeches to an anaemic patient.

In addition, other cash-strapped cities and states across the un ion may now be emboldened to take the same action. The practise has now spread to the state of Illinois where the legislature has voted for a $160 billion restructuring programme (read cuts).

These decisions coming after efforts to curb public employee power in states such Wisconsin (where workers have lost even their bargaining rights) Indiana and Michigan, will undoubtedly encourage other municipalities to act likewise and leave workers more vulnerable. Retirees are already seeing reduced benefits in cities such as Central Falls, Rhode Island, where a judge last year approved cutting pensions to help it emerge from insolvency. In California where Stockton, a city of nearly 300,000 people recently became bankrupt San Jose Mayor, Chuck Reed, is leading the push for an initiative that would let cities cut benefits already promised to employees. Thus the policy and its ramifications stretch much further across the US.

The policy of downgrading pay and conditions of the working people presupposed the elimination of the US Labour movement. This has been pretty well accomplished. The percentage of unionised workers, private and public stood at 11% in 2012, down from 20% in 1983. And of this 11% most are in the public sector that, however heroic, seem to be performing a re-enactment of Custer s last stand. Political and industrial cleansing has effectively taken place in the private sector and now is being repeated in the public sector.

This is all taking place against a back-drop of increasing levels of municipal debt across the US. The municipal debt level among cities and states has now reached $3 trillion dollars (see below).

2013:Q2:

3,006.45

2013:Q1:

2,998.25

2012:Q4:

2,980.00

2012:Q3:

3,008.87


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