Detroit Goes Down (and not in a good way)

A new report is telling us Detroit is goin' down, to bankruptcy that is. No surprise here with the worst unemployment rate in the nation.

Mayor Dave Bing and the City Council must reduce the size of government and slash the city's budget deficit to stave off bankruptcy or state receivership, according to a report released Monday.

Without draconian cuts and changes aimed at downsizing government, the city could end up with a "possible" general fund deficit between $446 million and $466 million to its $1.6 billion budget.

"Detroit city government must be restructured," according to the report from the Citizens Research Council of Michigan, a nonprofit that has studied Detroit finances for decades. "The new structure must reflect both the reduced tax base and the limited ability of state government to provide shared revenues."

The report, titled "The Fiscal Condition of the City of Detroit," was prepared at the request of Business Leaders for Michigan, a statewide coalition.

The 60-plus page report outlines much of what officials know: The city's dramatic population loss, high unemployment and other ills have had adverse effects on the city. And now government must respond in a dramatic way to downsize and make sound budget choices, the report argues.

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Detroit, China and Kandahar

This article dovetails with a comment I posted yesterday (“NDD more arrogant but not different” under “Your Fired then…”) wherein I noted that the “happy talk” about the economy is based on jobs data that does not reflect the reality of the working class. In short, if things are so good in the economy why is the news so bad?

However, I note that this Detroit article, while not mentioning China, has a link to a “China Currency manipulation” piece. I take the implication to be that Detroit’s problem is the China exchange rate. This 'blame China' meme is getting much publicity in an election year that no politician wants to be blamed for our economic mess.

Interestingly, there is no talk about the correlation between the declines of American cities while the Defense Department is building cities all around the world. See for example, Tom Engelhardt’s article “US War-Fighting Numbers to Knock Your Socks Off” over at “Antiwar.com”. One quote that I love:
“…our troops carry not just packs on their backs, but a total, transplantable society right down to the PXs, massage parlors, food courts, and miniature golf courses. At Kandahar Air Base in Afghanistan, there was until recently a "boardwalk" that typically included a "Burger King, a Subway sandwich shop, three cafes, several general stores, a Cold Mountain Creamery, [and an] Oakley sunglasses outlet."

No politician or economic bloggers (especially pro-labor) I know off find militarily budget correlates and the declining US economy significant. Rather, China with a GDP one third of the US and not remotely near us in technological capability (including manufacturing) is the “Big Bad Wolf”. Accordingly, the people of Detroit and other cities will come to hate China and agree to increase the military budget to defend against China. Interestingly, I've seen news reports that China is cutting its defense budget.

I’m no economist, but I know I can’t buy a bridge.

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China currency manipulation

The reason you are seeing so much pounding on the Yuan at the moment is a series of research papers showed in the Yuan was correctly valued, it could wipe out the U.S. trade deficit with China by itself, which is pretty amazing actually. ~80% of the non-oil U.S. trade deficit is with China, so that's a huge number and why all of the focus.

They also keep buying U.S. Treasuries to assist in their currency manipulation.

Then, it's because there is legislation in Congress which has broad bi-partisan support to label China a currency manipulator (they are and then some). Because it's so impossible to get this (or past) governments to take any action, I think what you are seeing is political momentum to finally take some.

So, this is not a "blame", it's a by the numbers event. but there are a host of other issues around trade but believe this or not (and I wrote these up about a year ago), it is an astounding event that China's currency manipulation has on the U.S. trade deficit, a very surprising biggest number of them all.

On foreign aid, I completely agree! Right now Geithner is in India, probably trading away U.S. jobs and all that is mentioned is how India needs U.S. investment, $1 trillion.

I am like "Good God"! It's America who needs $1 trillion in U.S. investment! We need our entire infrastructure rebuilt, we need new factories, we need R&D centers, we need jobs, we need modern power grids and on and on!

So, yeah, they have no problems being "socialist" and "Keynesian" in other nations, yet when it comes to doing something about our own...gee wiz, we can't get it.

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increase the military budget to fight China?

I'm a protectionist to the hilt but, no way.

Now if you wanted to shift to fighting China the funds used to fight Israel's wars and meddle in the Mideast on behalf of the oiligarchs, I'm with you.

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