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Slouching Toward Bankruptcy

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Photo Credit: Tax Credits

Photo Credit: Tax Credits

In November 2004, President George W. Bush was re-elected after campaigning on personal accounts for Social Security. It was unfair, he argued at the time, to make a generation of young people pay into a system that’s going broke. Bush’s plan promised to make the program solvent, allow younger workers the option to earn a better return by investing part of their Social Security taxes in personal retirement accounts, while maintaining the status quo for current retirees.

Republicans held substantial majorities in both houses of Congress, including 55 senators. Yet there would be no Social Security reform.

Opinions vary about why that was. Writing in Forbes in 2011, Peter Ferrara, one of the strongest advocates for Social Security privatization, argued that the proposal failed because “Bush’s White House staff in charge of the Social Security reform effort never understood the politics or policy of personal accounts, and proved ineducable on the subject.” On the other side of the issue, William Galston, a senior fellow at the Brookings Institution, argued in 2007 that “President Bush overestimated the amount of political capital he had banked.”

In his memoir Decision Points, Bush blames the failure on the “rigid Democratic opposition” and the lack of “strong Republican backing to get a Social Security bill through Congress.” He also recognizes that he bears some responsibility himself. Bush suggests, for instance, that he might have made some progress with centrist Democrats had he not personally campaigned against Democratic incumbents in 2002 and 2004. He also thinks that if in 2005 he had started with immigration reform rather than Social Security, he could have passed both and the country would be a better place for it.

Since the Bush debacle, Republicans have not had the courage to rally behind a plan to reform Social Security. But while the political will may not exist, the 77-year-old system remains in serious need of a makeover.

Read more from this story HERE.

Bankrupt Detroit Still Going Forward With $444 Million Hockey Arena

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Photo Credit: Getty ImagesDetroit’s financial crisis hasn’t derailed the city’s plans to spend more than $400 million in Michigan taxpayer funds on a new hockey arena for the Red Wings.

Advocates of the arena say it’s the kind of economic development needed to attract both people and private investment dollars into downtown Detroit. It’s an argument that has convinced Michigan Gov. Rick Snyder and Kevyn Orr, the emergency manager he appointed to oversee the city’s finances, to stick with the plan. Orr said Detroit’s bankruptcy filing won’t halt the arena plans.

“I know there’s a lot of emotional concern about should we be spending the money,” said Orr. “But frankly that’s part of the economic development. We need jobs. If it is as productive as it’s supposed to be, that’s going to be a boon to the city.”

But critics say the project won’t have enough economic impact to justify the cost, and that it’s the wrong spending priority for a city facing dire economic conditions.

Detroit city services are already stretched extremely thin. On average, police take about an hour to respond to calls for help, and 40% of street lights are shut off to save money.

Read more from this story HERE.

Charles Krauthammer Takes On Sally Kohn: Detroit is Not A GOP Failure, ‘It’s Been Run by The Democrats for 60 Years’ (+video)

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Photo Credit: YouTubeBy Jason Howerton. Charles Krauthammer hit back at liberal pundit Sally Kohn after she claimed conservatives will “try to use Detroit falsely as an example to push more austerity.” Kohn’s comments fall in line with those of a number of liberal and progressive commentators who are seemingly attempting to pin Detroit’s collapse on GOP policies, despite the fact that the city has been run by Democrats and progressives for decades.

That’s the point that Krauthammer hammered home.

Read more from this story HERE.

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Photo Credit: ReutersDetroit bankruptcy raises concerns about other US cites under huge retiree debt

By Fox News. The recent bankruptcy filing in Detroit is raising red flags about other major U.S. cities also dealing with billions in under-funded retiree benefits, prompting the question — who might be next?

Just last week, Chicago’s credit rating was downgraded as a result of its $19 billion in under-funded pension liabilities.

Moody’s Investors Service called the liabilities “very large and growing” and warned that Chicago, the country’s third-largest city, faces a “tremendous strain’’ in trying to meet future funding requirements and public safety demands.

A similar scenario, though decades in the making, largely doomed Detroit, whose average police response time has grown to more than 50 minutes.

And like Michigan, which appears in no position to bail out Detroit, Illinois is dealing with its own $97 billion pension shortfall. Read more from this story HERE.

Detroit Finally Runs Out of Other People’s Money

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Photo Credit: Irish Central Bob Beckel, one of the lefties in the Fox News stable of political pundits, has slowly and grudgingly evolved to accept a harsh reality-Utopian, liberal, social engineering doesn’t always work.

Shockingly on the popular Fox news show “The Five,” Beckel admitted that well intentioned social welfare programs instigated during the 60’s, have created generations of dependent welfare families. The head of household is big daddy government; the real fathers are nowhere to be found.

Welcome to reality Mr. Beckel, you are a perfect example of how long it takes for sunshine to penetrate concrete. In your case is it too soon old and too late smart?

Beckel has been intertwined in shaping left wing social welfare policy using terms such as “social justice” during a long career as a political consultant. He was even the campaign chairman of the failed 1984 Walter Mondale presidential run.

When liberals like Beckel start to see the light at the end of their tunnel, they are just scraping the surface and aren’t quite realizing that light is a speeding train heading their way, fueled on bloated runaway government programs…from social welfare to corporate welfare and every entitlement program in between.

But let’s not expect overnight miracles out of folks who have invested their entire life in a failed ideology. Beckels admission is an important step in his path to his/our recovery; we must measure in terms of progress, not expect perfection.

So it was no surprise as Detroit announced it was filing for bankruptcy, Bob Beckels knee jerk reaction, was a call for the federal government to bail them out of their 18 billion dollar debt. Detroit has been spending 100 million more per year than it takes in. Beckel and people like him default to the bail out in order to avoid the inevitable crash of socialism vs. economic reality…..

Perhaps this hits too close to home for him, since Detroit is the epitome of union control, one party rule that fosters corruption…. and the bottomless pit of every social welfare program dreamed up by utopians in Washington DC, since the 1960’s.

Even Joe Biden was uncharacteristically tongue tied and not able to give a coherent answer when asked about Detroit’s announced bankruptcy; he momentarily had the deer caught in the headlights look as cameras focused in on him….Because this flies in the face of every finger pointing speech he lectured us about how the Obama administrations policies work.

Unfortunately, the failed economic model that Detroit represents is not unique to American cities and states AND our out of control federal government.

Their day of reckoning will come as bondholders refuse to finance debt that just covers operating expenses of bloated/corrupt and inefficient governments. These same governments maintain untenable union contracts with benefits…..Many cities/states pay one active workforce and three retired workforces with lifetime benefits not dreamed of in the private sector.

As Margaret Thatcher once said “The problem with socialism is that you eventually run out of other people’s money.”

That harsh reality comes when investors no longer want to buy your debt at artificially low interest rates and then problems get compounded when investors don’t want to buy your debt, no matter what the interest rate.

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Ed Farnan is the conservative columnist at IrishCentral, where he has been writing on the need for energy independence, strong self defense, secure borders, 2nd amendment, smaller government and many other issues. His articles appear in many publications throughout the USA and world. He has been a guest on Fox News and a regular guest on radio stations in the US and Europe.

Detroit Surrenders As If It Had Been Invaded

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Photo Credit: Ann MillspaughBy the time Detroit declared bankruptcy, Americans were so inured to the throbbing dirge of Motown’s Greatest Hits — 40% of its street lamps don’t work; 210 of its 317 public parks have been closed; it takes an hour for police to respond to a 911 call; only a third of its ambulances are drivable; one-third of the city has been abandoned; the local realtor offers houses on sale for a buck and still finds no takers — Americans were so inured that the formal confirmation of a great city’s downfall was greeted with little more than a fatalistic shrug.

But it shouldn’t be. To achieve this level of devastation, you usually have to be invaded by a foreign power. In the War of 1812, when Detroit was taken by a remarkably small number of British troops without a shot being fired, Michigan’s Gov. Hull was said to have been panicked into surrender after drinking heavily.

Two centuries later, after an almighty 50-year bender, the city surrendered to itself.

The tunnel from Windsor, Ontario, to Detroit is now a border between First World and Third World — or, if you prefer, developed world and post-developed world.

To any American time-transported from the mid-20th century, the city’s implosion would be incredible. Were he to compare photographs of today’s Hiroshima with today’s Detroit, he would assume Japan won the Second World War after nuking Michigan. Detroit was the industrial powerhouse of America, the Arsenal of Democracy, and in 1960 the city with the highest per capita income in the land.

Read more from this story HERE.

Largest Municipal Bankruptcy in History on Hold: Judge Says it’s Illegal (+video)

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Photo Credit: Dale G. YoungBy Gary Heinlein. Ruling the governor and Detroit’s emergency manager violated the state constitution, an Ingham County Circuit judge ordered Friday that Detroit’s federal bankruptcy filing be withdrawn.

“It’s absolutely needed,” said Judge Rosemary Aquilina, observing she hopes Gov. Rick Snyder “reads certain sections of the (Michigan) constitution and reconsiders his actions.”

The judge said state law guards against retirement benefits being “diminished,” but there will be no such protection in federal bankruptcy court.

State-level legal skirmishing over the Chapter 9 bankruptcy effort by Snyder and Detroit Emergency Manager Kevyn Orr now will quickly move to the Michigan Court of Appeals. Read more from this story HERE.

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Photo Credit: Fox Confusion in Detroit as judge challenges legality of bankruptcy

By Fox News.The ongoing crisis in Detroit took another — and confusing — turn Friday after an Ingham County judge ruled the city’s historic bankruptcy filing violates the state’s constitution and must be withdrawn.

“I have some very serious concerns because there was this rush to bankruptcy court that didn’t have to occur and shouldn’t have occurred,” Judge Rosemarie Aquilina said Friday in a spate of orders arising from three separate lawsuits.

There was no immediate response from Detroit Emergency Manger Kevyn Orr, who filed the bankruptcy document Thursday, and no indication if city officials planned to take any action in response to Aquilina’s ruling.

Aquilina said Michigan’s constitution prohibits actions that will lessen the pension benefits of public employees, including those in the city of Detroit. She added that Gov. Rick Snyder and Orr overstepped their authority and violated state law by proceeding with the bankruptcy filing because they knew the outcome could affect benefits to thousands of Detroit residents. Read more from this story HERE.

Largest City in History of US Files for Bankruptcy (+video)

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Flashback: Obama boasted in 2012: ‘We refused to let Detroit go bankrupt’

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Photo Credit: J.D. PooleyLargest City in History of US Files for Bankruptcy

By Dominic Rushe. Sinking under huge debts and decades of mismanagement, Detroit formally filed for bankruptcy on Thursday, becoming the biggest US city ever to take such a drastic measure.

Kevyn Orr, Detroit’s emergency manager, took the decision after failing to broker a deal between the city’s bondholders and its pension funds.

The filing sets a new record for municipal bankruptcies and dwarfs the previous record filings by Jefferson County, Alabama, and Stockton, California. No other city of Detroit’s size has ever gone bust.

Orr and the city’s creditors and pensioners will now begin a fraught legal consultation period while a court determines whether the city is eligible for “chapter 9” bankruptcy protection for its $18.5bn debts and liabilities.

In a letter posted with the filing, the Michigan governor Richard Snyder confirmed he had received Orr’s request to start the bankruptcy proceedings. He said it was “clear that the financial emergency in Detroit cannot be successfully addressed outside of such a filing, and it is the only reasonable alternative that is available.”

Here’s the Governor’s explanation:

Read more from this story HERE.

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W.H. says Obama monitoring Detroit bankruptcy

By Reid J. Epstein. President Barack Obama is monitoring Detroit’s municipal bankruptcy, a White House spokeswoman said Thursday, but has not committed any federal help for the beleaguered city.

“The president and members of the president’s senior team continue to closely monitor the situation in Detroit,” spokeswoman Amy Brundage said Thursday. “While leaders on the ground in Michigan and the city’s creditors understand that they must find a solution to Detroit’s serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America’s great cities.”

The tepid reaction Thursday comes after saving the Detroit auto industry was a central feature of Obama’s re-election campaign – when Democrats savaged Republican Mitt Romney for a New York Times op-ed headlined “Let Detroit Go Bankrupt.” Read more from this story HERE.

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Related: Municipality Selling Off Museum Artifacts to Reduce Crushing Debt

By Rick Leventhal, Kathleen Foster. An East Coast city that’s been sitting on a Wild West gold mine is finally cashing in on the loot.

Harrisburg, Pennsylvania’s state capital, is auctioning off thousands of antique artifacts this week, hoping the sale will help pull the city out of debt.

Back in 1980, the citizens of Harrisburg elected Stephen Reed as mayor. He envisioned the city as a tourist destination, filled with museums, including one showcasing Harrisburg’s one-time claim to fame as the gateway to the West. He spent more than $8 million on roughly 10,000 pieces, including antique guns, old horse-drawn wagons, “Wyatt Earp’s Days of the Week Shaving Set,” Jesse James and Billy The Kid wanted posters and sheriff’s badges. The city built one museum, but went broke before it could build three more, as the mayor intended.

“He went about it in ways that were not exactly according to rules,” said Arlen Ettinger, President of Guernsey’s, the New York City-based auction house the city hired to sell the items.

“He took city monies to acquire things that he thought would look well in museums, and he was a great fan of the old West.” Read more from this story HERE.

Judge Denies American Airlines' CEO's $20M Severance – For Now

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Photo Credit: Getty

A federal bankruptcy judge denied American Airlines’ plan to give its CEO a $20 million severance package, saying bankruptcy law prevents such rich “golden parachutes.”

But the airline says it will continue to push for CEO Tom Horton to get the payoff. And the judge left the door open to reconsider the request in future, or for the company to approve the windfall for Horton once its merger with US Airways (LCC, Fortune 500) is complete.

Horton is losing his CEO position when American and US Airways merge, which is expected to take place later this year. US Airways CEO Doug Parker, who pushed for the deal that Horton initially opposed, will get the corner office instead, although Horton will hold the position as non-executive chairman for a year.

Horton became CEO the day American parent AMR (AAMRQ, Fortune 500) filed for bankruptcy in November 2011, having served as president of the Dallas-based airline before then.

The $20 million payday, which would be half in cash and half in stock in the new merged airline, was opposed by the bankruptcy court trustee, who is appointed to protect the interests of creditors in the case.

Read more from this story HERE.

Judge: California City's Bankruptcy Given the Green Light

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Photo Credit: Justin Sullivan

A federal judge ruled Monday that Stockton is eligible for bankruptcy protection, over the objection of creditors who argued the city could come up with more money.

U.S. Bankruptcy Judge Christopher Klein said Stockton can move forward with a plan to reorganize debt. He twice stated that the creditors had acted in bad faith and had refused to pay their share of the costs for negotiations.

“The creditors got a big black eye today,” said Karol Denniston, an attorney who helped draft the legislation that guided Stockton’s mandated mediation before filing for bankruptcy protection. “Now the stage is set for the real dogfight.”

In late June, Stockton became the nation’s largest city to fail financially. At that time, all eyes were on the port city of 300,000 as experts warned the action could set off a string of similar filings among cash-strapped municipalities. Since then, a half-dozen cities have filed for Chapter 9 protection under the U.S. Bankruptcy Code, including the city of San Bernardino.

During the 90-day mediation period, Stockton’s creditors refused to negotiate unless the city cut payments to the state pension plan, CalPERS.

Read more from this story HERE.

Cash-strapped Camden, New Jersey Disbanding its Police Force

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Photo credit: conner395

Crime-ridden Camden, New Jersey – often referred to as the most dangerous city in the United States—is getting rid of its police department.

In the latest example of a cash-strapped municipality taking drastic measures to deal with swollen public sector liabilities and shrinking budgets, the city plans to disband its 460-member police department and replace it with a non-union “Metro Division” of the Camden County Police. Backers of the plan say it will save millions of dollars for taxpayers while ensuring public safety, but police unions say it is simply a way to get out of collective bargaining with the men and women in blue.

“This is definitely a form of union-busting,” Camden Fraternal Order of Police President John Williamson told FoxNews.com. “This method is unproven and untested, to put your faith in an agency that doesn’t even [yet] exist.”

Camden County Mayor Dana Redd has said layoffs of the city’s police force will begin by the end of the month. Only 49 percent of current city police officers will be transferred to the new county division, whose members will begin a four- to five-month training program.

Joseph Eisenhardt, president of the Camden County Police Chiefs Association, stated “There is a crisis, but this is not the solution. It’s a disaster waiting to happen.”

Read more from this story HERE.