Dan Calabrese Look out, Cleveland, Pittsburgh and Raleigh. You could be next. After touting the outcome of his decision (actually George W. Bush regrettably got the ball rolling) to bail out the Big Three, President Obama told the nation on Wednesday night that it doesn’t have to end there! “What’s happening in Detroit can happen in other industries,” Obama beamed. “It can happen in Cleveland and Pittsburgh and Raleigh.” Leaving aside for a second that he also declared “no bailouts, no handouts and no copouts” (we will leave that aside because he certainly did not mean it), let’s consider what is happening in Detroit – and whether this is really what we want to see on a widespread basis across the nation. To wit: To this day, the federal government owns 33 percent of General Motors. Chrysler, which is still not profitable, just added 2,100 new employees anyway. GM, which fell far short of its goal of selling 10,000 Chevy Volts in 2011, is still proceeding with plans to boost production of the vehicle to 60,000 a year, and promising to add shifts to the plant in Hamtramck for that purpose. All of the Big Three have promised the UAW that they will fulfill commitments to massive new hiring, signing bonuses, inflation protection and investments in plant upgrades – in spite of the fact that they continue to face competition from foreign transplants with much lower labor costs. These are not good business practices. These are political business practices. They are undertaken because politicians who bail out companies want to show, as quickly as possible, that they were wise in doing so. No method of showing this is more effective than touting new hiring and plant expansions, so we get lots of both. The problem, of course, is that the Big Three came into their existential crisis precisely because their overhead and legacy costs got out of control. Between their wage levels, benefit packages, plant operation costs and retiree health care burdens, it became impossible for the Big Three to avoid losing money even if they sold every car in their inventory. When Obama boasts that he got management and labor to “settle their differences,” well . . . yeah, but not every agreement reflects an understanding of fiscal reality such that the parties can move forward prosperously. The UAW made short-term concessions and let it be known that it would be looking for make-goods at the earliest opportunity. And it got them in the form of the signing bonuses and other attractions that made media and politicians cheer – more jobs! good-paying jobs! – but also reflected an institutional failure to understand that without cost control, you cannot long sustain the profitability that is only a very recent development in Detroit. The larger problem, of course, is that Obama propped up this very way of thinking by bailing GM and Chrysler out. Rescued companies who truly understood what they had done to themselves would have downsized, dramatically cut their labor costs and focused on generating more revenue from less capacity. The last thing they would be doing is opening and/or expanding plants so soon after having their lives saved from the crushing weight of their old overhead costs. If fundamental thinking in the domestic auto industry does not change, the Big Three will be back before the federal government the next time the economy tanks, credit tightens or people just figure out that their products aren’t really worth what they’re asking for them. Had GM and Chrysler gone under, we are told, they would have taken suppliers down with them and 9 million jobs would have been lost. This is garbage. To the extent that a market existed for some of their brands, other companies would have purchased the plants, purchased the brand names and kept a portion of the operations running. Suppliers would still have had their customers. The industry would have been smaller – which it needed and still needs to be – but the predicted Armageddon would not have occurred. Because Barack Obama and almost every Michigan politician – regardless of party – did not understand that, we have a domestic auto industry that remains bloated and is making decisions to expand its cost structure so as to vindicate these same politicians. And this can happen in Cleveland, Pittsburgh and Raleigh too, can it? Friends in those cities: Run. © 2012 North Star Writers Group

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Fantastic: Obama would like to replicate Detroit’s foibles elsewhere

Dan Calabrese Newt Gingrich may be a jerk, but his broadside against CNN’s John King in last week’s South Carolina debate was on target for more reasons than even he probably realizes. I do not have any sympathy for Gingrich when it comes to his past marital infidelity. While no one knows the whole story of his marriage to former wife Marianne, we know enough just from what he’s admitted to fairly conclude that he was a pretty bad husband. Maybe she was a bad wife too – I don’t know – but she’s not running for president. That said, King’s decision to open the debate with a question about Gingrich’s personal life was deplorable – not because it was hurtful to Gingrich, but because it was a complete waste of time in a forum that could be useful to the voters if only someone would have the nerve to kick the media out of it. These are not debates. They are joint press conferences in which self-aggrandizing journalists pretending to be “moderators” ask questions with no purpose other than to provoke drama and force mistakes. There is almost nothing voters can learn from these events that will help them decide which candidate would make the best president. There are several reasons for this, chief among them being the fact that members of the media are allowed to participate at all. The problem with the media moderators is not that they carry their liberal bias into the debate, although many do. The problem is that the moderators are so focused on asking “the tough questions” that they can’t create an atmosphere that allows for substantive discussion of issues. There is a difference between a tough question and a question that allows you to learn something useful. If I want to know Gingrich’s response to what his ex-wife said about him, I can look it up myself. If I want to know what Rick Santorum would say to a gay person sitting across from him – wait, I don’t. If Rick Santorum were to become president, there is nothing he would do in the execution of his duties that would be even remotely related to such a thing. Other members of the media, including Neil Cavuto of rival Fox News, defended King’s question to Gingrich on the grounds that if he hadn’t asked it, he would have been criticized for “ignoring the elephant in the room.” Well. Yeah. But who brought the elephant into the room? The media did. They’re the ones who decided to put an interview with Gingrich’s ex-wife on prime time television. They’re the ones who wrote and talked obsessively about it for days on end. And they’re the ones who would have criticized John King if he had used that time for, say, a broader discussion of entitlement reform instead. Media create scandal. Media hype scandal. Media ask about scandal in debates for fear of criticism from other media. Meanwhile, the national debt tops GDP. Another reason the debates are so useless is that you can’t have a serious discussion of issues in a series of three-minute statements and one-minute rebuttals. The nation would be better served by a free-flowing discussion among the candidates in which the only questions are those they ask each other. If they choose to waste the voters’ time talking about campaign ads, tax returns or whatever, at least the voters can judge the candidates accordingly. But by getting rid of the time limits and the pious, preening moderators, we could create an atmosphere for real, substantive discussion about what the nation needs, and about who is most capable of achieving it. Of course, one of the biggest problems with the debates is that there are simply too damn many of them. They have become little more than a marathon of performance art, in which a candidate’s only real objective is to get through them without saying anything that sounds stupid. I’d rather listen to a candidate’s stump speech, or read position papers that he actually had time to think about, than watch him try to maneuver his way through the latest live prime-time game show. John King deserved the thrashing he took, not because he was mean to Newt Gingrich, but because he became the latest media hack to turn what should be a serious forum into a colossal waste of time. © 2012 North Star Writers Group

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John King’s stupid question about Newt the jerk husband

Dan Calabrese Today’s big news in Michigan is that we have a governor whose speeches lack both flair and specifics. Not only that, but in assessing the state’s condition, he denied Michigan residents a happy buzz by presenting as many remaining problems as signs of progress. And to top it all off, he seems entirely unconcerned about improving his rhetorical skills, or about using his words to inspire. That’s the kind of governor we now have. Excellent. Maybe Rick Snyder knew before he delivered his State of the State address last night that the press corps would deride him for all of the above, and simply didn’t care. Maybe he remains so clueless about the realities of political discourse that he didn’t see the yawns and eye-rolls coming. I’d say Michigan wins either way. Chief executives who understand leadership and results know a few things. One is that you assess problems, develop solutions and roll out the solutions when they’re ready to be implemented. The fact that the calendar requires you to give a progress report/political speech on January 18 does not mean it’s a good idea to cram in the specifics of every initiative you might take by that date. Snyder did his job last night by laying out where the state has made progress – unemployment down, budget balanced, tax code reformed – and by making it clear that we still need to address serious problems like crime and road funding. He did not concern himself with whether he deserves credit or blame for anything. That is not important. He treated the State of the State address as just that – an opportunity to lay out to the people of Michigan where we stand on things. He has four years to govern – three remaining. It will not be important in the long run whether he offered specifics in a speech on January 18 of his second year in office. It only matters that he chooses the right initiatives and effectively implements them during his term in office. Conventional wisdom concerning these speeches is that governors (and presidents) are supposed to a) say how wonderful everything is and take credit for all of it; b) roll out a whole bunch of new initiatives designed to please every conceivable political constituency; c) deliver lots of applause lines; and especially d) impress political journalists and analysts by doing A, B and C. The problem with following this formula is that it has nothing to do with actual results. Most political journalists wouldn’t know substance if it smacked them in the face. What impresses them is skillful manipulation of “optics” and the like. So a rhetorical strategy designed to avoid criticism from Bill Ballenger or the Skubick crew – if successful – serves only to turn the buzz of the moment in your favor. It appears that Snyder is quite inept at gaining the approval of these people, which is not a bad thing considering that just last week they thought the biggest story in the state was which Republicans were calling which Democrats “hookers.” (And yes, Susan, it would be just as irrelevant if the name-calling was aimed in the other direction.) Snyder may be boring, but not nearly as much so as this state’s establishment press corps, who think Snyder’s job is to entertain them. These people ought to do us all a favor and become sportswriters or theater critics, as these jobs allow you to focus on races and optics without having to understand difficult concepts like the substantive results of executive leadership in governance. In his first year in office, Snyder took bold and mostly correct action with respects to things like spending, taxes and the state’s economic development strategy. I expect that in his second year he will take similarly bold action with respect to crime, infrastructure and other priorities he discussed last night. I don’t care how dynamic he is when he talks about it, and I don’t care if he has specifics ready for a speech he has to give on an arbitrarily selected night. He just needs to get it done. © 2012 North Star Writers Group

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Snyder’s wonderful failure to impress the commentariat

Dan Calabrese You have to give Michigan Democrats credit for boldness. Proposing a state-funded foundation grant to pay the tuition of every student who comes out of Michigan’s K-12 system (or a percentage if they only spent part of their K-12 years here) is hardly a milquetoast proposal. Democrats believe in public money going to public institutions, so it’s hard to imagine a proposal that makes more sense than this from their perspective. It would surely boost enrollment at all the state’s public universities, and would save the universities the trouble of coaxing the tuition money out of private individuals’ bank accounts. So it’s hard to find fault with the idea if you buy this line of logic: A more highly educated workforce keeps job-creating companies here, and easier access to higher education keeps those workers in the state and ready to work. Then again: Lots of workers means lots of jobs? Let’s deconstruct this proposal a little, since you don’t have to peel off many layers to see the problem with the assumptions behind it, as well as the claims Democrats make for how it will be funded – and that’s where we’ll start. According to the press release touting the “Michigan 2020” plan, the state could pay for this $9,575-per-student-per-year grant by “eliminating the ineffective tax loopholes that are carved out by special interest lobbyists, as well as cutting costs within the thousands of contracts that the state currently administers.” Oh my. They’ve found a new way to say “waste, fraud and abuse,” the elimination of which is supposed to pay for every new expenditure on Earth (at least government Earth). The next attempt to eliminate such inefficiencies will follow thousands upon thousands that have come before it. The next one that succeeds will be the first. But the Democrats claim that they’re going to find $3.5 billion in savings through this process, so let’s assume for the sake of argument that this is what they expect the program to cost. Now, the next government giveaway of free money that costs what its architects expected to cost will – you guessed it – be the first. But if they’re right, this still represents an increase of nearly 7 percent in the state’s overall budget. The Democrats have a lot of faith that the closure of these loopholes is going to generate that extra $3.5 billion. Of course sometimes politicians’ projections are overly optimistic. Sometimes politicians promise to eliminate special favors only to go back and grant more of them anyway. Remember when the state faced perpetual budget crises because it routinely came up short by $2 billion or so of the funds it needed to operate? So, $3.5 billion. You’re pretty sure you’re going to raise that by eliminating waste, fraud and abuse, or however you said it. Good luck with that. But there’s a bigger question here: If the state sends kids to college with their tuition already paid, and as a result, a lot more of them go, is that a good thing? Here are the six-year graduation rates of some of the state’s top universities: University of Michigan, 89.4 percent; Michigan State University, 77.1 percent; Wayne State University, 31.7 percent; Western Michigan University, 54.1 percent; Central Michigan University, 57.2 percent; Eastern Michigan University, 39.7 percent. I could probably list more, but you get the idea. Not every kid who enrolls in college earns a degree. And remember, these are percentages under the current system, which means these are the kids who have skin in the game. I’ve written before – and a lot of you don’t like it – that college is not a good fit for every kid. Some kids are a better fit for unskilled labor, and they’d be better off saving themselves the time and the cost and getting about the business of joining the labor force and making some money. Other kids can learn a particular skill and start earning money using it, without spending four years hanging out at the diag or whatever they call it. If you went to college, you probably had friends there – I know I did – who probably shouldn’t have been there in the first place. They went because they didn’t have any other plan, or because their parents really wanted them to. Or – let’s be honest – to party. But college for them didn’t really fit any plausible career strategy, and they eventually flamed out without earning a degree. That means that all the time and money they invested in the pursuit of one was wasted. They spent a lot of money, and they delayed their entry into the work force, without anything to show for it. If the Democrats’ Michigan 2020 plan is enacted, you’re going to see a lot more kids like that enrolling at Michigan universities. These kids would be better off getting some kind of job, even a low-paying one, rather than going to school full-time in pursuit of a degree they probably will never get, and which they wouldn’t put to good use if they did get it. If Michigan wants to make college education more accessible to those who should be pursuing it, it should start by wringing the institutions of the many costs that have nothing to do with preparing students for careers. If tuition is too expensive for ordinary people to afford it, it should be made less so – not subsidized by taxpayers, especially since we know that only perpetuates the universities’ high-cost structure, while driving enrollment by kids who will turn out to be a bad investment by the state. Democrats deserve one cheer for boldness on this one. But none for understanding how to address the real problem. © 2012 North Star Writers Group

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Democrats’ plan to pay Michigan students’ college tuition: Bold and wrong

Dan Calabrese It’s hard to believe Michigan voters would be so stupid as to legalize marijuana, as they may be asked to do via a ballot initiative later this year. But their track record is not encouraging. You’d have to be stoned to believe that Michigan’s law permitting “medical marijuana” has been a success since voters passed it in 2008. Most communities (with the unsurprising exception of Ann Arbor) are doing anything they can to avoid being stuck with “dispensaries” within their boundaries. Studies show that most “patients” are not elderly cancer sufferers, but 20-somethings claiming non-disprovable conditions like “chronic pain.” And of course, “compassion clubs” have formed where the “patients” get together and take their “medicine” en masse. Yeah. Just like people on Lipitor. It’s obvious now to all but the determinedly delusional that this entire exercise was nothing more than a way for stoners to party with a note from their doctor. And now, pot fans are essentially admitting as much by coming forward with another initiative – this time to legalize marijuana entirely, without conditions, for anyone over 21. The argument, of course, is that marijuana laws are “not working” because people still smoke pot, which is a standard that would render every law ever passed ineffective. But more specifically, the potheads argue that by legalizing the evil weed, we could deny drug dealers the profits, mainstream the sale of the drug, regulate it and tax it. Just imagine the disappointed drug dealers, kissing their cash goodbye as 21-and-over stoners stream by the thousands into Walgreens to buy pot along with their Doritos, paying their taxes like good doobies (yeah, I meant to do that) and heading out into the sunshine as upstanding citizens. There’s only one problem. That is not what would happen. Since 2004, I have led a drug-prevention group for teens and pre-teens, who are pretty honest with me once they learn that they can trust me. No one starts smoking pot when they’re 21. These days, the more likely age at which kids try it for the first time is 13 or so. In your typical middle school, most kids know exactly how to get it if they want it. In your typical high school, every kid knows where to get it. If you think the dealers who supply these kids with pot would go out of business in the event marijuana is legalized, you’re an idiot. Here’s how it would really work: Instead of having to grow their own (meaning an investment in indoor growing lamps and other hydroponic supplies), many of these dealers will simply buy in mass quantities from local establishments. They will then turn around and re-sell the pot in and around middle schools and high schools. Their costs will likely be less than they are now, so they can lower the price for the kids making the buys and still increase their profits. Other dealers will continue to grow their own or obtain it from other illegal sources to get around likely state restrictions on potency, as they will recognize the opportunity in serving the market for the “good stuff,” which will be quite distinct from the lame, government-approved pot, which is how the serious partiers will see it. If marijuana is legalized, you will have more kids smoking pot and more profits for illegal distributors. That is guaranteed. Legalization will simply provide a more trouble-free method by which the distributors can obtain their stash. Assuming the petitioners get enough signatures to get their proposal on the ballot, you will hear a lot about alcohol. They will argue that alcohol is more harmful and causes more societal damage, and because of this, it makes no sense that alcohol is legal but marijuana is not. I am the last person who will ever defend alcohol. It is an extremely destructive force in society. And the fact that this is true completely negates the pot-smokers’ argument. Whatever the problems with Prohibition back in the day, you can’t argue that society today has a handle on the problems caused by alcohol. Between the many incidents of drunk-driving, widespread alcoholism and a myriad of other problems, alcohol destroys people and families on a massive scale. This is the only thing the pot people have right. And it is the very reason we do not need to mainstream yet another mind-altering drug, which will have its own entirely different destructive effects on individuals, families and society. Marijuana laws surely are not working – for marijuana-smokers. But that is not the problem of the rest of us. If they think it’s so important to alter their brain chemistry, so as to avoid dealing with the realities of life, that they are willing to risk a trip to jail and a fine – well, they have chosen their priorities. Not well, mind you, but that’s no surprise considering the likely condition of their brains. The scenario they paint, however, of an efficient system of legal production and distribution, with consenting adults buying, paying taxes and obeying the law, is a complete fantasy. It’s every bit as big a lie as the one Michigan voters bought in 2008 when they voted to legalize “medical marijuana.” Hopefully they’ve learned a thing or two since then, and won’t compound their mistake now. © 2012 North Star Writers Group

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If Michigan voters are stupid enough to legalize marijuana, here’s what will really happen

Dan Calabrese My left-leaning colleague and friend Eric Baerren (I think it’s OK to call the editor of Michigan Liberal “left-leaning”) came out over the weekend with a blog post that excoriates Republicans for attacks on unions – specifically in Michigan with respect to education, but also nationally with respect to most everything. That’s pretty standard given Eric’s point of view, so there’s no sense trading big-picture talking points on the pros and cons of unions. But there was one point he made that I found pretty intriguing, and worth exploring. He put it thusly: By the way, there’s a word that’s missing in all this … Finland. Anyone who’s followed education issues very closely has heard it, and it’s not because it’s some wacky bit of geography no one can find on a globe anymore. It’s a nation that has produced a super-effective education system. They’ve done it not by beating up their teachers or by privatizing it under the auspices of “choice” or by turning it into a consumer product where children are treated like customers, but by investing in it and treating teachers like respected professionals. I have no idea what education in Finland is like. If it’s as good as Eric says, maybe my son should go to the University of Helsinki in seven years or so. But it’s worth considering that last line of his – “treating teachers like respected professionals.” Presumably this suggests that we need to not only pay them well, but from the perspective of union supporters, that we need to stop scapegoating them. Eric makes a good point when he says that you’re in for trouble when you shove reforms down the unwilling throats of the very people you then hope will implement the reforms effectively. But what does it really mean to treat people like respected professionals? True, respected professionals tend to make good money and get treated pretty well. But there’s another side to that coin. Respected professionals are expected to perform at a high level, and when they don’t, they have to answer to someone. If one’s lack of performance is serious enough, you may soon find yourself as an ex-respected professional. Unionized teachers are not really held accountable for measurable performance. Indeed, their unions have typically resisted proposals that would do so on the grounds that they would be “arbitrary,” which to some degree all supervisory management is in professional settings. I suspect many of those who want to see education reformed would love the idea of treating teachers like respected professionals, some aspects of which would include: Respected professionals can be paid more based on the merit of their performance, or less if their merit is lacking. Respected professionals can be promoted if they earn it, or fired if that’s what they earn. Respected professionals can negotiate their own employment agreements with their employers if they want to. Respected professionals understand that their compensation is related to the fiscal health of the organization that employs them, and to trends in the larger professional market. If one organization’s employees are being compensated at a much higher rate than comparable professionals elsewhere, the organization had better be making some serious bank, and the highly compensated employees had better be responsible for it. Otherwise, you’ve got an unsustainable system that won’t survive long. Most importantly, respected professionals don’t demand protection from “unfairness” in the evaluation process. They understand that they need to constantly make the case for themselves with the quality of their performance, and they confidently do so. This is what life is like for respected professionals. It’s not bad at all, and I suspect most of the teachers I’ve met would welcome such an environment and would thrive in it. I’m not so sure about the Michigan Education Association, which fights every attempt to make merit part of the equation, preferring the existing system that is based entirely on seniority and makes firing even the most incompetent teachers an exceedingly difficult process. Teachers who want to accept the standards expected of respected professionals would be most welcome. I bet most of them would embrace the idea. And I bet no one would fight it harder than their own union. © 2012 North Star Writers Group

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Treat Michigan teachers like respected professionals? Oh yes indeed!

Dan Calabrese The news that Michigan will likely end this year with a budget surplus of between $800 million and $1 billion is a mild surprise. But this isn’t: Constituencies across the state are responding to the news by making a predictable suggestion about what to do with the money. “Give it to us!” Sigh. No one ever said an entire state changes the way it thinks all at once. As The Detroit News reported on Wednesday, the AARP wants the money returned to senior pension-recipients, who figure we should just go back to the system by which Michigan was one of only three states that had an income tax but exempted pension income from it. Michigan municipalities want the money sent to them in the form of revenue-sharing payments like we used to have in the old days. This is just what one reporter came up with in an afternoon’s worth of reporting. Surely every other interest group in the state is preparing to make a claim on the loot. And not to be outdone, the other side of the political spectrum is represented by knee-jerker Leon Drolet of the Michigan Taxpayers Alliance, who wants the money returned directly back to taxpayers. Sure. This makes sense. If a state that struggles year in and year out to balance its budget, and remains mired in one of the worst economic environments in the nation, actually runs a surplus for once . . . but all means, give that surplus cash away immediately. Or you could consider a few things. First, as critics of Rick Snyder are quick to point out, the governor’s policies were not fully in effect throughout the entire year, so you can’t entirely credit those new policies for the surplus. This means there’s no guarantee we’ve permanently put ourselves in the black going forward. It’s nice to do it once, but as of now, it’s only once. Second, to the extent that Snyder’s policies did help to produce the surplus, how much sense does it make to immediately roll back the impacts of those policies? None. Pensions are now subject to the income tax just like other income. Sorry if pension-recipients don’t like it, but it makes no sense to immediately return them to Exemptionville and send the message that we didn’t really mean it when we changed the tax code. We meant it. Get used to it. Budget accordingly. Third, some are crediting the “resurgence” of the domestic auto industry as a primary generator of the state’s boost in revenue. To the extent that this is true, it represents a huge red flag that calls for serious fiscal caution. The Big Three stopped bleeding cash and generated modest profits this year largely because credit was a little easier to get, and because there was pent-up demand from all the people who needed new cars in 2009 and 2010 but simply couldn’t buy them then. The Big Three have responded to the better news of 2011 as they usually do, by once again boosting their costs as if there’s a guarantee that their profits have returned forever. Those who do long-term fiscal planning for the State of Michigan would be wise not to make the same assumption. A one-time surplus is lovely, and the decision as to how you use the money is ridiculously easy. You use it to further stabilize the state’s fiscal situation – whether that means you pay down debts, sock it away for a contingency, etc. – and then you wait to see if you can run surpluses on a consistent basis. If you do, then, and only then, do you make other changes. You can’t tell that to the constituencies across the state who want what they want and want it now, but listening to them is how Michigan got itself so fiscally mangled in the first place. Surely we’re not going to start enabling them again. © 2012 North Star Writers Group

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Michigan runs a surplus . . . great! Now quit grabbing at the money!

Dan Calabrese We’ve been here before, haven’t we? Just three years ago. The biggest factor that drove General Motors into bankruptcy wasn’t its slumping sales. It was the fact that GM was on the hook for lifetime health benefits for more than 100,000 retirees. That’s more people than you’ve got on your entire payroll. They’re not doing anything for you at all, but every time they go to the doctor – and they’re old, so they go a lot – it’s on your dime. Maybe you’re not paying the bills directly, but you’re paying the insurance premiums. Any way you look at it, it’s a recipe for financial collapse. But you’ll recall that promises of lifetime health benefits were very popular for large institutions to make in the 1980s. That’s when Ford and Chrysler negotiated deals with the UAW that were almost as generous as GM’s. The entire industry, in those days, set the stage for the near-death experience it went through in 2008 and 2009. So no one should be surprised by what the Detroit News reported today about the biggest financial millstone around Detroit’s neck. The city has more than 20,000 retirees – as opposed to 12,300 current employees – who are still enjoying lifetime health benefits from the city. For those who retired in 1984 or earlier, the city has to pay 90 percent of coverage. On an annual basis, this sucks up $300 million, or 25 percent, of the city’s $1.2 billion general fund. And you can add another $157.3 million, or 6.3 percent of the city’s total operating budget, that goes to other fringe benefits for retirees. Look, the point here is not to bash retirees, nor to claim that they don’t deserve a decent retirement. It’s simply to point out that financial commitments that stretch way out into the future are easy to make when the future is a long ways off. Eventually, you do end up having to pay for these promises. Or, if you’re Detroit (or GM or Chrysler), you have to admit that you can’t, and that you never should have made the promises in the first place. And you end up scrambling, with time and money running out, to come up with a new financial structure so as to stave off disaster. Retiree benefits are not the only reason Detroit is in so much trouble, but we are now discovering that it is one of the biggest and most intractable. It’s hard to shed legacy costs because they represent promises made long ago, often to people who have little recourse if you break the promises now. But if there is no money with which to keep the promises, there is no money. But Detroit shouldn’t feel too badly about this! The entire country has done exactly the same thing, and doesn’t have a plan to fix it either. Unfunded entitlement obligations to Social Security, Medicare and Medicaid now top $59 trillion, and no one has the slightest idea where that money is going to come from – probably because there isn’t that much money in the entire world, which means it’s not going to come from anywhere. It’s nice to make promises! And it seems easy at the time you do it. Too bad you so often end up breaking the promises and bankrupting yourself in the process. Like GM and Chrysler. Like Detroit. Like Greece. Like the United States of America. Oh. Wait. That last one hasn’t happened. Yet. © 2012 North Star Writers Group

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Big promises bankrupt Detroit, but hey, it’s not alone!