Last week Detroit became the largest city in American history to declare bankruptcy. Last year, five
California cities, burdened by an upsurge in illegal Mexican residents, also declared bankruptcy. In
Detroit's case the road to bankruptcy began fifty years ago when Blacks started burning down their five year old public housing projects in order to voice their disdain for Lyndon Johnson's Great Society programs. The explosive Black crime rates drove White tax-paying, law-abiding residents out of the city and into the suburbs and elsewhere. The flight of Whites from Detroit cleared the way for Blacks to take control of city and county government. And, as the years passed, these corrupt Black leaders pilfered from public funds to pad their own bank accounts and those of their conspirators. Soon one Black mayor after another was caught, sent to prison, only to have the Black populace elect another crook to run the place.
We all looked on as Detroit sank into third world status. We smirked at how badly liberal Blacks proved to be as "leaders". Same thing with the bankruptcies out in California; we all said, what the hell, if these illegal loving Californians want to commit financial suicide, let them have at it.
Here's the problem with that. These municipal bankruptcies end up affecting everyone of us.
When a city needs additional funding they sit down with investment bankers and execute municipal bond transactions which, according to a municipality's credit rating, how they have managed their finances in the past, determines the rate of interest on these bonds. Once the bonds are set up, a farmer in Iowa, a real estate agent in North Dakota, a waitress in Texas and a million other Americans invest in these municipal bond funds through their money market or investment accounts. And why not? Municipal bonds were considered one of the safest investments for Grandma because, for more than a century, cities were run by responsible leaders who knew a municipal bankruptcy would destroy their community.
That is no longer the case. For the last few decades our municipal political leaders have begun to institute a system of "bribes" with city and county employees; they hike the salaries and benefits of these public workers to astronomical levels in order to curry political favor and retain their office. The average cop or firefighter today is paid over $200,000 a year in pay and benefits. Ironically Michelle Obama loves to talk about being raised by a "poor" water plant supervisor father in Chicago, when in fact her father made over $100,000 a year just to read water meters.
All of this incestuous corruption between politician and public unions was fine as long as government could just keep raising the property taxes of its citizens to pay for the graft. However, in Detroit's case, and in the municipal bankruptcies in California, Blacks and illegals don't pay property taxes so that, when the taxpaying citizens flee, the tax base crumbles. And, as with Detroit, once America's fifth largest city, is now peopled by Blacks drawing a welfare check and shitting in their own diaper with their graffiti and their record crime rates.
So why should you worry? Here's why. Municipal Bond guru Meredith Whitney created a panic on Wall Street a couple of years ago when she predicted that hundreds of cities are headed toward bankruptcy. She cites the large deficits and unpaid and underfunded retirement benefits for public worker unions, more than a trillion dollars at last count.
Again, what does this have to do with you? Well, again, for more than a century, cities were run efficiently and municipal bond rates were relatively low; a city needing to float a municipal bond to rebuild their sewer systems, or refurbish their downtown district, to build a performing arts building could do so at rates as low as 2%. However, with the ever increasing number of cities and counties in financial trouble those rates have risen to six or eight or ten percent!
And who pays for that bond interest? You do! You pay it in your property taxes and in your local sales taxes. And even if your city is being run responsibly, the "bad names" elsewhere are sure to drive your property and sales tax higher as cities float new bonds to finance public works!
In Detroit's case, the bankruptcy plan they are presenting would protect those Cadillac quality retirement benefits for active and retired public union workers. However, the Detroit guru managing the bankruptcies would severely cut back on city services and has no plan to pay back the millions of investors who bought a small part of those municipal bonds. So you can just imagine how eager an investor is going to be in municipal bonds in the future....unless the interest rates are high enough to justify the risk!
So, when you see your city hiking the local sales tax rates, when you see them raising your property taxes even higher, you can thank Detroit and all those California illegal Mexican havens for their corrupt and horrible management of public funds.