Relevant and even prescient commentary on news, politics and the economy.

The Tragedy of Detroit

by Tom aka Rusty Rustbelt

The Tragedy of Detroit

One of the great highlights of my life was my first visit to Detroit in 1962. I fell in love with the metropolis and of course the Detroit Tigers.

This week the governor of Michigan will appoint an emergency financial manager for Detroit, if anyone will take the job. Even the left-leaning Detroit Free Press is on board with a takeover. The alternative would be a Chapter 9 bankruptcy filing.

Detroit has probably been bankrupt for a long time, but no one really knows. The City of Detroit, the Detroit Water and Sewer department, the Detroit pension plans, and the Wayne County government are all a mess. About sixty square miles of the city have been largely abandoned.

Detroit has been hit hard by economic deterioration and middle class flight (more than just white flight), but the core problem in Detroit is four decades of gross mismanagement and rampant corruption.
Both the Bush and Obama administrations have attacked the corruption, and to Obama’s credit he redoubled the efforts to put Detroit officials and cronies in prison where they belong.

Why were huge obvious problems allowed to fester until Detroit is ready to collapse?

Political correctness and race politics. Even as Detroit is on the brink, race baiting is in full throat. And attempts to blame the GOP, although I can’t find any elected Republicans in major Detroit offices for at least two decades.

The people living in Detroit will continue to suffer for a long, long time.

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by Tom aka Rusty Rustbelt
Security 101
This week I visited my grandsons’ elementary school four times, three times through the front door and once through a side door. I immediately had the run of the entire building if I so desired. The only line of defense was the receptionist, who gave me a wave because she knows “Papa Tom.”
The most basic security premise is to limit access and to screen anyone entering. This may not stop a lunatic, but it could buy time for a response. Lock the doors during school hours.
Despite the current tragedy, elementary school is a very safe place, except for the heartbreaking exception when it is not.
PS: many churches are now upgrading security measures – who would have thought it necessary?

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The Unemployment Tax Dilemma

by Tom aka Rusty Rustbelt

The Unemployment Tax Dilemma
When the economy is doing well employers pay both state and federal (backup system) unemployment taxes. The rates tend to be reasonable and are levied only on a portion of wages.

During recessions the employers who keep workers on are in effect penalized because all rates will likely go up somewhat. Many states also use an experience rate, so the businesses shedding jobs will be paying a higher rate in the future.

In the “great recession,” now dragging into a fifth year, the employers still in business are seeing accelerating rates, thus creating a penalty on employment (varies by state).

The system is designed for a “regular recession” and not for a “great recession.” How do we do this so we don’t penalize hiring? Ideas welcome.

FYI: http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=541

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Real Estate Insanity…working off the excess inventory?

by Tom aka Rusty Rustbelt Real Estate Insanity So my son and me are thinking about buying a duplex in Ohio and fixing it up this summer. He would live in half and we would rent the other side. Given the number of foreclosures this should be an easy deal, right? Wrong. The realtors tell me no one will finance the properties, not even the banks that own them. Why? It seems many of the banks did not get around to assigning “asset managers” for a year or two, which means the water pipes froze in the winter, burst in the spring and destroyed the interior of the properties. Even when asset managers were promptly assigned, many were incompetent and/or corrupt. So there are many thousands of properties with reasonable looking exteriors but with ruined interiors. Even with sweat equity labor the fix up costs will be very high. This will eventually be fixed with bulldozers.

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