Questions and Observations

Free Markets, Free People

Why is Detroit bankrupt?

Well there are a lot of contributing reasons, but Brad Plumer hits on the major one:

Detroit is sagging under decades of bad governance. “The city’s operations have become dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption,” Orr wrote in May. “Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st-century government.” (Detroit has been a one-party city run by Democrats since 1962.)

Now I didn’t write that or suggest that.  In fact, it comes from Ezra Klein’s “Wonk Blog” in the WaPo.  Some things just can’t be denied or spun.  Detroit is and has been the exemplar of the blue model city for decades.  And this is the result.

Of course, Detroit isn’t the only blue city in dire straits.  It’s simply the one in the worst shape of all.  It has literally imploded.  It’s population dropped as people fled the exploding crime and high taxes.  78,000 buildings have been abandoned or have become blighted. Unemployment is rampant.  And, uncooperative unions and huge pension debt doomed any recovery.

Over the past few months, Orr has tried to convince the city’s various creditors, including the city’s unions and pension boards, to take far less than they were owed in order to restructure the city’s finances (in some cases, pennies on the dollar). But he was unsuccessful, so now the city is filing for bankruptcy protection.

So now they’re all at the mercy of the bankruptcy court, assuming the Obama Administration’s misnamed “Department of Justice” doesn’t try to take a hand in the restructuring as it did in the auto bankruptcy proceedings.

Looking back at the first cite,  Kevyn Orr, the city’s temporary emergency manager makes an interesting point – he claims it is time to move government into the 21st century.  Doing so would also include much less power for unions and much less generous payouts for pensions, if a city is to have a chance at fiscal solvency.  Not that Detroit is going to get there easily:

“But city retirees, facing the prospect of sharply reduced benefits whether in bankruptcy or under Detroit’s restructuring proposal, think they stand squarely on the moral high ground because despite the poverty of many current and retired members, they have already offered big concessions.”

You can stand on the highest “moral ground” you can find, but reality says if there’s no money, it really doesn’t matter, does it?

That is, of course, unless the fed tries to involve itself in the mess and subsidize pensions and unions – something not at all far fetched. 

Detroit is the canary in the coal mine of blue model governance.  How many other cities will fold before it is finally kicked to the curb?

~McQ

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Economic Statistics for 18 Jul 13

Here are today’s statistics on the state of the economy:

Initial jobless claims fell 24,000 to 334,000. The 4-week average fell 5175 to 346,000, while continuing claims rose 91,000 to 3.114 million.

The Bloomberg Consumer Comfort Index fell a point to -28.4 in the latest week.

The Philadelphia Fed Survey rose more than 7 points to 19.8, the strongest rate of monthly growth in the Mid-Atlantic region since March 2011.

The Conference Board’s index of Leading Indicators remained unchanged for June.

The Fed reports that M2 money supply fell by $-8.8 billion in the latest week.

The Fed’s balance sheet expanded $33.8 billion last week, while Reserve Bank credit rose $21.3 billion. Total assets were $3.538 trillion.

~
Dale Franks
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IRS scandal cover-up begins to unravel

The IRS scandal took on new impetus today with a interesting revelation:

Top IRS officials in Washington, D.C. planned and oversaw the agency’s improper targeting of conservative groups, according to the 72-year old retiring IRS lawyer who will testify Thursday before the House Oversight Committee.

Retiring IRS lawyer Carter C. Hull implicated the IRS Chief Counsel’s office, headed by Obama appointee William J. Wilkins, and Lois Lerner, the embattled head of the IRS’ exempt organizations office, in the IRS targeting scandal and made clear that the targeting started in Washington, according to leaked interviews that Hull granted to the Oversight Committee in advance of Thursday’s hearing.

Treasury Inspector General J. Russell George will return to Republican chairman Darrell Issa’s committee Thursday along with two central characters in the IRS saga: Hull and Cincinnati-based IRS employee Elizabeth Hofacre, who previously gave Hull’s name to congressional investigators, fingering him as her Washington-based supervisor.

Yup, the rats are deserting the sinking ship.  They are certainly not willing to go down with it and so they’re naming names.  And contrary to all the claims previously, it seems that Washington D.C. was indeed involved and not just a “couple of rogue agents in Cincinnati” as we were told in the beginning.

It’s usually never the crime itself that hangs politicians, but the attempted (and ham-fisted) cover-up.  And that’s precisely what this is beginning to look like.  As for being “ham-fisted”, is there anything this administration does that isn’t ham-fisted?

~McQ

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Economic Statistics for 17 Jul 13

Here are today’s statistics on the state of the economy:

The MBA reports that mortgage applications fell -2.6% last week, with purchases up 1.0% but re-fis down -4.0%.

Housing starts pulled back sharply in June, down -9.9% to an annualized 0.836 million.

The Fed’s Beige Book reports that overall economic activity continued to increase at a "modest to moderate pace" in the latest reporting period.

~
Dale Franks
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Did Republicans cave to avoid the “nuclear option” in the Senate?

Jonathan Chait certainly thinks so:

Unlike the last time Democrats threatened to change the Senate rules, and backed down without winning anything, this time they won something important: They broke Senate Republicans’ ability to hold presidential appointments hostage. It’s a total victory for the Democrats.

In fact, Chait says the bottom line is this:

Democrats had proposed to change the Senate’s rules to prevent filibusters on executive branch nominations (but not to ban filibusters of legislation or judicial nominees). They’ve won.

However:

Republicans got one face-saving concession: Democrats have to pick new names for the NLRB. This became an issue because Obama tried to execute an end-run around Congress by appointing them to their positions when Congress was functionally, though not technically, in recess, and was struck down by the Republican-controlled D.C. circuit court.

You can obviously tell which side Chait comes down on if you didn’t know before.   The D.C. circuit court struck it down not because it is “Republican-controlled” but because the appointments were Constitutionally illegal. By the way, so did the Third circuit court.

But it leaves us with a very interesting question.  If the Democrats agreed to have two new appointments made to the NLRB, aren’t they at least tacitly admitting the current two appointments are illegal?  And if so, what does that make any rulings the current NLRB made during that time it was illegally constituted?  Common sense says those rulings should be invalidated, don’t you think?  And that’s what Cablevision is still asking.  It was one of the companies this illegally constituted board issued a ruling against:

“The role of Congress is to ensure a balanced NLRB and the Obama Administration bypassed Congress in order to stack the NLRB in favor of Big Labor. Two different federal courts — the D.C. Circuit and the Third Circuit — have established that the NLRB is illegally constituted and has no authority to take action. The NLRB continues to ignore these rulings, and we ask the Supreme Court to compel the NLRB to immediately halt its unlawful proceedings against Cablevision.”

Will anyone address this?  Will anyone actually take action to annul these rulings from an illegally constituted board? Or, as usual, will we see it ignored, the injustice shrugged off and the usual lack of accountability further enshrined in our political culture?

~McQ

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Economic Statistics for 16 Jul 13

Here are today’s statistics on the state of the economy:

In weekly retail sales, ICSC-Goldman reports a -1.1% weekly sales drop, with year-over-year sales up only 1.7%. Redbook reports year-over-year sales dropped from 3.8% last week to 3.0% this week.

The Consumer Price Index rose a sharp 0.5% in June, but a more moderate 0.2% ex-food and -energy. On a year-over-year basis, the CPI is up 1.8%, with the core rate up 1.6%.

Despite heavier US buying of foreign securities, net capital outflows were $-27.2 billion, the fourth consecutive capital outflow.

The Fed reports that industrial production rose 0.3% in June, while factory capacity utilization rose 0.2% to 77.8%.

The Housing Market Index continues a bubble-like surge, rising 5 points to 57 in July, the highest since 2006. The index has jumped 16 points since April, and the reason for the sharp rise is not clear.

~
Dale Franks
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The Zimmerman case in a nutshell

And William Saletan Slate articulates it:

The problem at the core of this case wasn’t race or guns. The problem was assumption, misperception, and overreaction. And that cycle hasn’t ended with the verdict. It has escalated.

I almost joined the frenzy. Yesterday I was going to write that Zimmerman pursued Martin against police instructions and illustrated the perils of racial profiling. But I hadn’t followed the case in detail. So I sat down and watched the closing arguments: nearly seven hours of video in which the prosecution and defense went point by point through the evidence as it had been hashed out at the trial. Based on what I learned from the videos, I did some further reading.

It turned out I had been wrong about many things. The initial portrait of Zimmerman as a racist wasn’t just exaggerated. It was completely unsubstantiated. It’s a case study in how the same kind of bias that causes racism can cause unwarranted allegations of racism. Some of the people Zimmerman had reported as suspicious were black men, so he was a racist. Members of his family seemed racist, so he was a racist. Everybody knew he was a racist, so his recorded words were misheard as racial slurs, proving again that he was a racist.

His summary is very on point.  This entire shameful episode has been both media and politically driven.  It has never been about justice.  Never.  It has been an attempt at a high-tech lynching, based on rumor, innuendo, false reporting, political pressure and misrepresentation.

Shameful doesn’t even begin to describe it.  And now, as Saletan points out, the same groups who caused this travesty to reach the point of a trial, have now doubled down on getting George Zimmerman in other ways despite an outright acquittal on all charges related to the killing of Trayvon Martin. 

Saletan makes the point that the case was more about a series of mistakes leading to a confrontation that should have never happened and, on Martin’s side an attack that was unwarranted.  As hard as the usual suspects have tried to make it about race and racism, their attempts have failed at every turn.  The facts simply don’t support the premise at all. 

And the overreaction continues as ill-informed groups riot (more to grab a TV at Wal-Mart in some cases than to protest the verdict) egged on by a media who has all but excused rioters for their action by subtly sending the message that the Zimmerman acquittal justifies their actions.

Meanwhile, the overreactive beat goes on:

The grievance industrial complex is pushing the Department of Justice to prosecute Zimmerman for bias-motivated killing, based on evidence that didn’t even support a conviction for unpremeditated killing.

Truly amazing but not surprising. 

We can only hope that someday sanity will again prevail in this great nation of ours.

~McQ

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Unions on Obamacare: "This vision has come back to haunt us"

File this under "Cry Me A River". Union bigwigs James Hoffa, Joseph Hansen, and Donald "D" Taylor have written a strongly worded note to Harry Reid and Nancy Pelosi begging them to reform the Affordable Care Act—Obamacare—that the unions so strongly supported.

When you and the President sought our support for the Affordable Care Act (ACA), you pledged that if we liked the health plans we have now, we could keep them. Sadly, that promise is under threat. Right now, unless you and the Obama Administration enact an equitable fix, the ACA will shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class.

Yes. It will. Many of us said it would. Repeatedly. But the Unions were big-time supporters of it. Now they are whining about the very things we predicted before the law was passed.

We have been strong supporters of the notion that all Americans should have access to quality, affordable health care. We have also been strong supporters of you. In campaign after campaign we have put boots on the ground, gone door-to-door to get out the vote, run phone banks and raised money to secure this vision.

Now this vision has come back to haunt us.

Ah ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha! Woo hoo hoo hoo hoo hoo! Ah, Whew! Huh. Oh. Ho. Ho ho. Ho ho ho ho. Oh ho ho ho ho ho ho ho ho ho ho ho ho ho ho ho ho ho ho ho ho ho ho ho! Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha!

(Rubbing my thumb against my fingertips.) You know what this is? It’s the world’s smallest string quartet playing "My heart cries for you", you dolts. You poltroons. You microcephalic dunces.

You guys are so stupid, I honestly don’t know why you don’t just fall down more.

On behalf of the millions of working men and women we represent and the families they support, we can no longer stand silent in the face of elements of the Affordable Care Act that will destroy the very health and wellbeing of our members along with millions of other hardworking Americans.

We believe that there are common-sense corrections that can be made within the existing statute that will allow our members to continue to keep their current health plans and benefits just as you and the President pledged.

Good luck with that, Stupids. You wanted Obamacare. You campaigned for it. So, you deserve to get it. Good and hard.

I hope your members thank you for selling them down the river with your support of Obamacare by dragging you naked and screaming out of your offices for a good tar and feathering. I’ve never wanted to see some union thuggery more in my life than I do right now, directed at you.

I now truly understand the German concept of schedenfreude. Indeed, I embrace it.

~
Dale Franks
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Economic Statistics for 15 Jul 13

Here are today’s statistics on the state of the economy:

June retail sales were disappointing, with a 0.4% increase overall, but no increase ex-autos, and a -0.1% drop when gas and autos are excluded.

The Empire State Manufacturing Survey rose from 7.84 to 9.46 in July, as NY manufacturing activity continued to pick up.

Business inventories grew a slight 0.1% in May, but the stock to sales ratio fell to 1.29.  Inventory growth has now been flat for two years.

~
Dale Franks
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