In the best of times, Detroit was a vibrant, prosperous city. It is now the worst of times. Detroit, with a 70 percent vacancy rate and an extreme rate of violent crime, is faced with 20,000 municipal retirees, 100,000 creditors, 10,000 employees and 48 unions. The city faces the inability to meet its obligation to creditors and retirees.
A 50-year alliance with the public sector unions and the Democratic Party has led to economic instability and social decline.
Moody’s has Portland on its radar for a possible credit downgrade (“Who’s next? Detroit Bankruptcy Causes Concern for Other U.S. Cities, Fox News, July 23). The policies of each city parallel each other in many respects.
As the most populous cities go, so go their states.
Both Michigan and Oregon face unfunded liabilities due to union/Democratic control. As stated, Detroit’s recipients of public sector entitlements may now face the reality of partial payment of health and retirement benefits. How long before Oregon’s entitlement recipients face default on promises made to them?
Both states are encumbered with populations dependent on public assistance. The failed automobile industry is the result of legislators meeting the ever increasing demands of unions. Our lost timber industry is the result of legislators meeting the demands of extreme environmentalists. In addition, both Portland and Detroit have attracted a large population of undocumented immigrants. The result is a culture of welfare dependency in both states creating a heavy burden on infrastructure, and health and educational services.
As welfare demands grow, governments raise taxes, putting heavier burdens on private taxpayers and businesses. This leads to a foundering economy. As a result, businesses and citizens vote with their feet, shrinking the tax base. The loss of a taxpaying, job-hiring population causes further unemployment. This happened in Detroit. On its current path, Oregon will soon face the same dilemma.
Stephen Moore (“Rich States, Poor States” by Arthur Laffer, Stephen Moore and Jonathan Williams) recommends these solutions:
1. Using resources
2. Trimming the budget
3. Reducing taxes
4. Pension reforms
5. Becoming a right-to-work state
Following Michigan’s economic collapse and the loss of manufacturing union power, a Republican governor and Republican Legislature have been elected. In response to a fleeing population of manufacturers, business and private taxpayers, Michigan has become the 24th right-to-work state. In the near future, Oregon may envy Michigan’s decision to create an environment that encourages jobs rather social programs and entitlements.
Both states have a history of ignoring the problems of unsustainable health and retirement benefits for public workers. In Oregon, Sen. Tim Knopp had past success with public retirement reform during his term as a state representative. Rep. Jason Conger had the support of educators for The School Savings Act during the 2011-2012 session. In 2013, Republicans working for serious, bipartisan reform, were handed SB822 by the Democrats. This partisan bill caps PERS cost of living adjustments and delays payments of $350 million of the cost of PERS debt in 2013-2015. This does little to address a $14 billion PERS unfunded liability!
In an effort to reach a “grand bargain,” Gov. John Kitzhaber, true to form, is proposing to attach a raise in taxes to any plan for reform. He must not understand that eventually the government will run out of other people’s money.
When Oregon’s Democratic leadership opts for political expediency rather than responsibility, I say, “Welcome to Detroit!”