Yesterday the city of Detroit filed Chapter 9 bankruptcy in the largest municipal bankruptcy in history.
Detroit has very few options moving forward. I’d like to discuss a couple.
Detroit is the best example ever of a failed new socialist model. Sooner or later, as we can see from its situation, debts have to be repaid by someone – either the borrower or lender.
You can’t keep buying votes, labor peace, etc., without facing the consequences. As I’m writing this, the city still incurs a $380 million deficit every year with total debt of $17-20 billion.
How can that possibly be right? Who besides other government agencies would buy their bankrupt, never-to-be-paid bonds? Michigan has been bailing out Detroit for years, thus delaying the day of reckoning while hoping for a federal bailout. But that only goes to Wall Street and its corporations.
If Detroit would do a few things, I would wager that within five years it would be one of the most dynamic cities in the world:
- Discharge all debts the courts will permit, including all pension and retirement funds for all public employees.
- Disclaim all union contracts in bankruptcy.
- Completely repeal all regulations and all restrictions on work – i.e. no minimum wage, hire and fire anyone you want for any reason you want.
- Reduce government to only the size necessary to provide courts, public safety, police, fire, etc.
- No public assistance, at least for a 5-year period.
- No income tax and no property tax. Instead, implement a small sales tax for public services.
- No business licenses and no business taxes.
People would flock there from all over the world for the manufacturing that would spring up, as it would be much, much cheaper to manufacture in Detroit with negotiated labor rates and no overseas shipping.
These are real options for Detroit, but it would take the city reaching its lowest possible point, I think, before anyone would consider something so drastic.
Perhaps, based on this recent news, they’re already there.
Call today to speak with a bankruptcy attorney in the Memphis Area.
(Photo: Mike Russell)