Detroit or Dallas: Part 2
Want a sneak preview of the Democrats' vision for America?
Take a look at Detroit.
What if someone were to propose an idea to you for an investment or a suggested step you should take in your career, would you ask if the idea has been put in practice anywhere else? Of course you would. Now, if the person making the proposal were to admit that the idea really hasn’t worked out that well where it was recently tried, would you be more likely or less likely to follow the suggestion? You know the answer.
Why should it be any different on important matters concerning our economy?
That’s where the nation finds itself in this year’s election: The Democrats are making plenty of proposals these days; We need to examine what’s happened when the proposals have been tried out.
The Democratic presidential candidates are competing for the nomination by trying to outdo each other in proposing extremely liberal “solutions” for “change.” However, you should know that most of the policies and programs offered by both Democratic presidential contenders have in fact been proposed and considered by the Democratic-controlled House of Representatives.
There is virtually no difference between what Senators Obama and Clinton have suggested in their campaigns and what the Democratic members of Congress, led by Nancy Pelosi, have already passed in the U.S. House.
So if there’s anything that concerns you about the leftward direction that both Senators Obama and Clinton say they will take the nation, you should be equally alarmed that those very same ideas are being passed almost weekly in the U.S. House. As in the presidential campaign with the proposals suggested by the two Democratic candidates, the extreme consequences inherent in legislation passed by the House are rarely discussed by the national news media.
But rather than complain about what is, or is not, covered by the mainstream media, I would rather call attention to a real-life example of what happens to an economy when the actual policies and programs advocated by the Democrats are put in place.
An example of the policies proposed by the Democrats would be Detroit.
If this example sounds unfair, consider the following common characteristics of how Senators Obama and Clinton want to change our country and how Detroit is now experiencing many of the key planks offered up by the Democrats.
- To meet the income needs of able-bodied individuals who need help, Detroit has significantly increased public spending on government programs over the past several decades, raising taxes to pay for those initiatives, just as Senators Obama and Clinton want to do nationally.
- To reward national labor unions for their political support, elected officials have given labor unions wide latitude in state law and public employee contract negotiations. Workplace rules and compensation structures have been forfeited to labor union bosses, who have the upper hand in every collective bargaining situation, thanks to the powers ceded to them years ago by the Michigan Legislature and local politicians. Senators Obama and Clinton are in favor of a radical change in the nation’s labor laws, effectively putting the rest of the country on par with Michigan as far as labor union powers are concerned. Their AFL-CIO-backed legislation would allow labor unions to organize private companies without having to hold secret-ballot elections among employees.
- A professional class of elected and appointed office holders dominates Michigan and especially Detroit. This elite group of Democratic operatives conduct themselves largely unchecked by any opposition, controlling all levels of government except for Republicans enjoying a slim majority in the State Senate. Competing ideas to the prevailing attitudes and opinions of the Democratic establishment – especially in Detroit - are consequently dismissed out of hand. An outcome of this monopoly of acceptable opinion is an extreme form of political correctness and open hostility to any idea that challenges the elite and their cronies, such as charter schools or anything resembling school choice. On education, both Senators Obama and Clinton are in lock-step alignment with the teacher unions, automatically rejecting any reform that comes close to “school choice.”
What will happen if policies long in force in Michigan and Detroit are taken nationwide by Senators Obama and Clinton? Let’s see what happened in Detroit.
Due to overpromising their constituents with liberal social programs created in the past several decades, Michigan and Detroit have been facing severe budget deficits. State lawmakers and Detroit’s city council know they can’t raise taxes any more. They are at their limit. Any more of an increase in taxes and they’ll jeopardize more private-sector employment in the state. (New Jersey and its Governor recently came to the same conclusion, opting for massive budget cuts instead of new taxes to balance that state’s budget.) In effect, Michigan and Detroit are where the Democrats want to take us nationally: Raising taxes to their maximum level.
And for all of the government programs built up in the last 40 years, commensurate with the “War on Poverty”, and all of the taxes to pay for those programs, what does Detroit have to show for those “investments” made unabated since the late 1960s? Despite these programs, Detroit finds itself today with the largest poverty rate of any city in America: More than 28.5 percent of its residents live at or below the official poverty line of income in the U.S.
To pay for these programs, how high did Michigan and Detroit have to raise their taxes?
On top of their property and sales taxes (which are middle-of-the road when compared to other states), Michigan slaps a high personal income tax rate of 4.35 percent on all its residents, while Detroit adds another 2.5 percent. So for the privilege of living in Detroit, residents have to pay an additional 7 percent out of their paychecks - on top of what they pay the federal government for personal income tax and Social Security.
If you work in Detroit but reside elsewhere, you pay Detroit a “non-resident” tax equal to 1.25 percent. Also, corporate employers located in Detroit pay the city an additional 1 percent of their income in taxes to the city - above what they pay otherwise in federal corporate income taxes.
How is this tax structure working out for Detroit and all of Michigan? Not so good. For starters, you know you’re at the limit in taxing your citizens if tax revenue is on the decline, despite the high rates, and that’s exactly where Michigan and Detroit find themselves these days. It’s the primary reason why officials on the state and city levels know that they’ll only risk further damage to their economy if they were to raise taxes even more.
For the entire state, tax revenues declined by 1.3 percent year-on-year from 2006 to 2007. Tax receipts from corporations declined by a whopping 7.6 percent over the same period, reflecting reduced business activity at a time when the rest of the nation experienced economic growth. Likewise, revenue from sales taxes fell by 2.7 percent. Personal income tax revenue did increase in 2007 by 3 percent, but that one bright spot may vanish as the state battles what is probably its biggest nemesis: Residents moving out the state.