It Finally Happened

“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” — Thomas Sowell

Before I begin this blog I want to share a video that was done by Steven Crowder of PJTV in December of 2009. In the video Crowder takes you on a tour of the motor city and shows what has and is happening to the once great manufacturing center of the world.

And there is another video from the Reason Foundation address the issues causing the demise of Detroit.

In my search of YouTube videos about Detroit I found several hundred that would have be suitable for this article, but you can do that on your own by simply typing “Detroit in Ruins” in the search field.

In December 2010 I posted an article about the “Vanishing Detroit” in which I wrote about the history and potential demise of the motor city. In the concluding paragraphs of the article I state:

“This is a condition not limited to Detroit. Cities such as Oakland, St. Louis, Cleveland, and many others are approaching the same precipice of economic bankruptcy. With the massive costs for welfare and social services, shrinking tax base, poor schools, unfunded liabilities for public service workers pensions, teachers unions with the protection of underperforming teachers and increasing demands for higher wages and guaranteed pensions and a political class that panders for votes we are approaching a time in our history when cities are beginning to fail.

Until now cities have been relying on funds from state and the federal government to bails them out of their financial woes. With states experiencing the same malaise and the rising deficits of the federal budgets money for these cities are no longer going to be available. Perhaps the time has come for these cities to realize the mess they are in and declare bankruptcy rewrite their public service and teacher union contracts and tighten their belts in all areas of spending so they can survive. No more promises, no more pandering to special interest groups and no more fountains and stadiums unless they are totally financed with private money.”

Most rational economists and rational thinking people have been predicting the demise and eventual bankruptcy of Detroit for years. Now it has become official and no amount of state or, God forbid, federal funds can solve the problem.

Last week Governor Rick Snyder filed for Chapter 9 bankruptcy for the city of Detroit. The once leader of American industry has now joined the junk heap as a third world city. Chapter 9, Title 11 of the United States Code is a chapter of the United States Bankruptcy Code, available exclusively to municipalities that assists them in the restructuring of debts..

Why did this happen and will it happen to other American cities?

Michigan Gov. Rick Snyder and the bankruptcy specialist he appointed to fix Detroit’s unprecedented financial problems put the blame Sunday squarely on the city and defended their decision to file for Chapter 9.

The Republican governor said Detroit created the problems and stood steadfast behind his decision to file Thursday for bankruptcy, with the city roughly $19 billion in debt.

“This is a tragic, difficult decision, but a right one,” he told CBS' "Face the Nation." “It’s not about just more money, it’s about accountable government.”

He said corruption and city leaders ignoring warning signs for 60 years contributed to the problems. Among his biggest concerns, Snyder said, is the decline of municipal services for Detroit’s remaining 700,000 residents, including police response times of nearly one hour.

Snyder said the state cannot help and asking for a federal bailout is “not the right answer,” though Washington has that option.

The Obama administration has extended no offer to help, after Congress and the White House agreed to bail out Chrysler and General Motors during the recent recession.

“Can we help Detroit? We don’t know,” Vice President Joe Biden said last week. His remarks followed White House Press Secretary Jay Carney appearing to rule out such assistance.

“That's something that local leaders and creditors are going to have to resolve,” he said. “But we will be partners in an effort to assist the city and the state as they move forward.”

Among the emerging concerns is that the federal government would have to help repeatedly, considering Chicago reportedly has an unfunded pension liability of at least $19 billion while Los Angeles’ is estimate to be as much as $30 billion.

The bankruptcy filing for Detroit marks a final step in the chrome-plated city’s decades-long decline — which started with the country’s overall manufacturing slowdown and continued with the departure of U.S. automakers and residents, leaving behind a sprawling city trying to survive on dwindling coffers.

Detroit was in the 1950s a worldwide hub of auto manufacturing, making it the fourth-largest U.S. city with one of the country’s highest per-capita incomes.

However, the so-called Motor City’s decline started soon after with residents — following their counterparts in other U.S. cities — starting to move to the suburbs and take with them businesses, jobs and tax dollars.

Historians argue the deadly 1967 riot in Detroit, one of the many so-called “race riots” across the country in the 1960s, accelerated the trend.

And as the population dwindled from roughly 1.8 million to 700,000, city officials struggled to keep up with municipal services in the 142-square-mile city, with a tax base just half of what it was in the 1950s.

Meanwhile, auto companies began opening plants in other cities as Japan-made cars dominated the international market. By 2009, the U.S. auto industry collapsed with the entire economy, eventually pulling down Detroit with it. When the UAW demanded high wages and more benefits the auto companies began moving to right to work states in the south so they could better compete with the Japanese car companies that were manufacturing cars and trucks there. As this happened the unions got what they wanted, but the jobs began to vanish and with that the tax base declined.

The city’s efforts to provide and maintain such basic services as law enforcement and trash removal were further complicated by the costs of paying union contracts and benefits, which have contributed to nearly $15 billion in unfunded liabilities for the city.

Once again these public service unions got the raises and pensions they demanded and the Democrats gave into their demands to get their financial support and their votes but the city did not have the money to fund these liabilities.

In addition, Detroit has a roughly 18 percent unemployment rate, one of the country’s highest violent-crime rates and about 80,000 blighted or abandon buildings.

“Chronic budget problems have taken a significant toll on everyday life for citizens,” Snyder said recently. “Detroiters deserve to feel safe when they walk down the street, to have their street lights on, to have the bus show up to take them to work.”

However, the city also has a history of corruption that has led to its financial problems, including Mayor Kwame Kilpatrick resigning in a 2008 sex-and-perjury scandal that cost the city almost $9 million from a lawsuit and legal fees.

Years of Democratic Party rule, corruption, escalating social welfare programs, failing public schools, high taxes, demands of the teachers and public service unions, racial tensions, gangs, and a rising crime rate have finally taken heir toll on Detroit.

The recent bankruptcy filing in Detroit is raising red flags about other major U.S. cities also dealing with billions in under-funded retiree benefits, prompting the question — who might be next?

Just last week, Chicago’s credit rating was downgraded as a result of its $19 billion in under-funded pension liabilities.

Moody's Investors Service called the liabilities “very large and growing" and warned that Chicago, the country’s third-largest city, faces a “tremendous strain’’ in trying to meet future funding requirements and public safety demands.

A similar scenario, though decades in the making, largely doomed Detroit, whose average police response time has grown to more than 50 minutes.

And like Michigan, which appears in no position to bail out Detroit, Illinois is dealing with its own $97 billion pension shortfall.

To be sure, other smaller cities have filed for bankruptcy, most notably California’s Stockton and San Bernardino in 2012. No other city of Detroit's size appears to be on the cusp of imminent financial collapse.

However, those bankruptcy filings together have resulted in speculation about whether more are on the horizon

Other cities now on the radar include Cincinnati, Minneapolis, Portland, Ore., and Santa Fe, N.M. — following Moody’s saying in April that they and 11 other municipalities were being reviewed for a possible credit downgrade, the result of a new analysis system that further considers pension liabilities.

Though much of the national concerns have focused on pension liabilities, heath care costs for retired municipal employees pose an equally if not larger problem.

Amid the $18.5 billion in long-term debt that led Detroit to file for bankruptcy is roughly $3.5 billion in under-funded pension liabilities. However, roughly $5.7 billion of that debt is health care costs and so-called “other post-employment benefits.”

The situation is highlighted a Pew Charitable Trusts Study of 61 major U.S. cities that found they collectively had enough money to cover 74 percent of pension liabilities but only 6 percent of health care liabilities.

The total difference between what the cities owed to retired employees and what was covered equaled $217.2 billion, according the report, “A Widening Gap in Cities.” It was released in January and based on 2009 numbers, the most complete data at the time.

The nonprofit group also released a report in March that found New York City has a combined $1.15 billion in under-funded pension and health-care costs, followed by such major cities as Philadelphia, at $8.6 billion. In comparison, that figure for Detroit was $12.9 billion.

The video clip shown here is from PJTV and the three commentators summarize the reasons Detroit and other cities will continue to fail.

As our nation continues down the road of higher taxes, more regulations, and runaway spending by politicians only interested in the next election more cities will fail. Just wait until 30 million illegal immigrants are added in the equation.

Today we have 47 million people on food stamps. That’s 15% of the population. Even college students are receiving food stamps today.

Rather than use the meager funds available to cities and states for big union contracts, luxury projects like light rail, and promoting more welfare programs they need to pay attention to the basic municipal functions of police and fire services, garbage collection, repairing crumbling sewer lines, streets, and bridges — the things people pay property taxes for.

Since the early days of the Republic, America’s cities have been centers of innovation, wealth, and power. As they grew larger and their governments more commanding, places like Boston, Chicago, Newark, New York, Philadelphia, and St. Louis also became battlegrounds where political machines contended for influence. The early ideal of the part-time citizen-legislator gave way to the professional pol. In his 1904 “The Shame of the Cities”, Lincoln Steffens observed that big-city governments across America had been undermined by a series of problems, including police corruption, politicians using the public till for their own gain, and rampant bribery in awarding public contracts, known at the time as “boodle.”

The Democratic Party is a party of special interest groups, or “factions” as James Madison called them. There are racial groups, LGBT groups, unions (both private and public sector), teachers unions, environmentalists, and pro-abortion advocates. All of these groups want something and the Democratic Party is who they turn to for it. They want plunder and the Democrats will give it to them as long as it brings them votes. They don’t care about the future. They only care about the next election and how to retain their power.

Decades of corruption built a mountain of liabilities, while scaring off the taxpayers needed to finance those promises. It’s like a movie trailer for the blockbuster disaster film to come, when America’s declining demographics catch up with the federal government’s vastly higher mountain of unfunded commitments. Detroit is the city our debt monster destroyed to get limbered up for the greater fiscal carnage to come.

Death spirals spin even faster when it’s possible for productive workers to escape. The population implosion in Detroit was swifter and more dramatic than our national workforce collapse, because it was relatively easy for citizens to escape the degenerate loop of declining municipal services and rising taxes but in the long run, the result will be the same. There are people capable of fleeing the United States entirely, when our moment of truth arrives. Their departure will be a good sign that the Great Crash is at hand. The loss of their capital and business acumen will hasten our collapse.

We should stop the death spiral before things get bad enough for the smart money to take a powder. Of course, there were people in Detroit who said the same thing, twenty or thirty years ago. They were drowned out by a perpetual-motion political machine, which promised the good times would keep rolling forever. Even now, frantic liberals are gibbering that Republican austerity measures somehow killed Detroit, even though Democrats held absolute power for fifty years. You’ll hear the same things right before the end at the national level too. In the very near future, you’ll be told your Social Security and Medicare benefits are being cut because evil rich people don’t want to pay enough taxes to fund them. It won’t matter that there literally isn’t enough money in the entire world to cover Uncle Sam’s long-term liabilities. Anger and resentment will be milked for power until the very end. Those who do the milking will soar away from the wreckage with millions of dollars in their pockets.

Pension and benefit liabilities are really just a concentrated form of the same toxin eating away at every level of government: deficit spending. They’re just another way to spend tomorrow’s money, which is easy, because tomorrow casts very few votes in today’s elections. The people who fret over “sustainable” development at environmentalist conferences are nowhere to be found when it’s time to discuss sustainable government. Forward-thinking “progressives” are perfectly happy to be ruled by the dead hand of past entitlement promises. Those who regard the U.S. Constitution as a dead scrap of old parchment think union benefit plans are chiseled on tablets of stone.

Here’s a trick question for you: What does the government buy with its billions in deficit money? The correct answer is: commitments. Very little of that crazy deficit spending is a one-time outlay, evaporating without trace in the next fiscal year. Governments use money they don’t have to rack up long-term spending commitments, which quickly acquire human faces. Cut a million in spending, and you’ll be putting this government employee out of work, or trimming back a program that person depends on for their livelihood. Lay a finger on the pension plans of Detroit, and you’ll outrage people who are counting on those payments to finance their lengthy retirements. Promises were made. Reform is betrayal. You’ll never see a more motivated group of voters than people who believe their well-earned benefits are at risk.

Maybe the people who made all those unsustainable promises should have thought about the grim day when it would become impossible to keep them. Perhaps the outraged beneficiaries should direct their ire at the people who bought their support by making commitments that can no longer be fulfilled. But it doesn’t work that way. The people who made the unsustainable commitments are long gone. Criticizing them is living in the past. All that’s left to discuss is how today’s young people will be indentured to pay off bills they never had a chance to vote against. Fate is written one borrowed dollar at a time, and the “progressives” tell us it cannot be unwritten. We surrender control of our fate whenever we allow the government to spend money it doesn’t have. We leave our children with a hope chest full of chains.

Liberals pretend that debt is only a concern when they want to talk about tax increases. And even then, it’s not that big of a concern. They’re not interested in balancing the budget, much less paying off the mountain of debt already incurred. Skeptics are told there’s no reason to worry, we’ll always be able to borrow more money. And then the day arrives that we can’t. It happens fast. The final promises of unlimited government credit are still ringing in our ears. Contrary to the promises of charlatans, government debt is not an abstract number floating on some spreadsheet. Money cannot be printed forever. There comes a moment that the cost of financing debt abruptly explodes, and suddenly the government’s financial commitments balloon by 30 percent, 50 percent, or more. Draconian tax increases are presented as the only possible solution. The geese that lay our golden eggs are duly strangled. And then what? It’s funny how quickly political rhetoric can shift from bright futures of unlimited possibility, to grim demands for the cash needed to fulfill ironclad entitlement commitments.

Private corporations and unions make unsustainable problems too, but at some point unsupportable demands will kill off the host organism. The company and its unions collapse together, leaving others to pick up the pieces and devise a more workable business plan. That’s what happened with the Twinkie — it’s back on store shelves following a cycle of creative destruction. But that’s not what happened with Big Auto or Detroit, is it? When the operation reaches a certain size, we’re told it can’t be allowed to undergo the cleansing cycle of death and rebirth which means suddenly it’s everyone’s problem.

As goes Detroit, so goes America. The steering wheel is lashed in place, a cement block has been dropped on the gas pedal, the emergency exits are welded shut, and nervous passengers are told to swallow their complaints. The commitments that were so very easy to make yesterday will become impossible to fulfill tomorrow. The range of options available to deal with fiscal crisis will be dramatically restricted, as every strategy to increase economic growth is pronounced unthinkable. How much flexibility does Detroit have to win investors, and attract productive labor back to the city? How much flexibility will Barack Obama’s successor have to restart the American economy? Promises become curses, then wither away into epitaphs.

For more photos of crumbling Detroit please click here.

As Stephen D. Eide, a senior fellow at the Manhattan Institute’s Center for State and Local Leadership, writes in the Daily Beast:

“However long it takes, bankruptcy will cut Detroit’s debt, but that’s a necessary, not sufficient condition of any revitalization. On its own, bankruptcy can’t reform city government, reduce unemployment, bring down the crime rate, or reverse depopulation. Eventually, Kevyn Orr will exit the stage, and leave those challenges for Detroit’s citizens and public officials to resolve. In the near-term, the task for Detroit city government is usefully simple: bring down the debt. If progress is made on other fronts along the way, private sector actors will most likely be responsible. Government was not the only cause of Detroit’s decline, and will play, at most, a supporting role in the city’s revival.”

Hamburgers, Batteries And Debates

"When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it." — Frederic Bastiat, The Law.

Yesterday I posted a blog about the administrative state and the increasing influence and power being exerted by the experts and masterminds who manage that state. Also there was round two of the Obama-Romney debate last night that I will address later.

But first let’s look at the cost of a hamburger and what is costs the taxpayer when you ride the government train called Amtrak. If you take a ride on the train from Boston to Washington D.C., known as the Northeast Corridor you will pay $6.65 for the no so tasty burger. What you may not realize is that the true cost for that burger is $16.15, leaving the taxpayer with a $9.50 deficit. No big deal you say. Wrong. Last year Amtrak lost almost $250 million on its food and beverage service and according to and August 2^nd report in the Washington Examiner the government subsidized rail service lost $833 million over the last decade on the food and managed to spend $1.70 for every dollar that they received in revenue. What a way to run a railway!

Why are they losing money on the F&B service? Are they serving burgers made with kobe beef? No. The major reason is the 1,234 union employees serving this food. According to Representative John Mica (R-FL):

“The food service is legally obligated to break even, but Amtrak lost $84 million just last year. “The rail service’s food and beverage operation has 1,234 employees, and taking into account Amtrak’s $84.5 million loss last year, that’s $68, 476 per employee.”

A similar report in the New York Times states Amtrak lost more than $800 million on its food and beverage services over the last 10 years, largely because of waste, employee theft and lack of proper oversight, government auditors have found:

“Joseph H. Boardman, president and chief executive of Amtrak, confirmed the losses but said the railroad was taking steps to address the problem. “We are still looking for ways to improve our cost recovery,” he said.

According to audits by the Government Accountability Office, an investigative arm of Congress, and the railroad’s own inspector general, Amtrak loses about $80 million a year selling food. Since 2002, Amtrak’s food service has lost $834 million.

Amtrak said it was increasing the use of credit cards for food sales to cut down on cash thefts by employees, reducing staff, creating a better system to track inventory and to collect revenue. It has also set up a three-person loss-prevention unit.

Ted Alves, the Amtrak inspector general, testified that the bulk of the losses were on Amtrak’s long-distance routes, which account for 87 percent of the deficit. Last year, Amtrak spent $206 million in providing food services but collected only about $121 million. Long-haul routes do not include the Northeast Corridor between Boston and Washington.”

If McDonalds, Burger King or Jack In The Box can sell a burger for less than two dollars and make a profit how is that Amtrak loses nine bucks on a burger that the customer shells our six buck for. The reason is Amtrak’s use of over-paid employees to pass out the food.

In 1991 when I was working as a GIS consultant for the West German Railroad (Deutsche Bundesbahn) I learned quite a bit about their operations and how the made money. One of the things they do is outsource their food and beverage service to private contractors who run the dining cars and snack trollies. In this manner they do not provide pensions and health care for these employees — that’s left (under German Law) to the contractor. It’s left to the contractor to provide good service and food and make a profit.

To a lot of the people who matter in media and politics "Amtrak" means "the guys who run the Northeast Corridor trains" and it seems unimaginable that they could lose that much on food service. If you delve into the report, however, it's clear that the losses are coming from Amtrak's weird long-haul routes off the NEC rather than from the Boston-D.C. service.

That said, this is no excuse for losing tons of money on food service! If selling food on trains isn't a profit center for the train operator, then the train operator is doing something badly wrong. And Nick Rahall's (D-WV) comments on this make me want to scream:

Representative Nick J. Rahall II, Democrat of West Virginia and the ranking member on the committee, said the hearing was a not-so-veiled attempt by Republicans to get rid of Amtrak food service workers, who number about 1,200.

“It’s a whopper of an idea, trading good-paying jobs for cheaper hamburgers,” Mr. Rahall said.”

This conception of government agencies as primarily jobs programs for public sector workers rather than public service providers is really toxic. The point of Amtrak is to provide passenger rail services. Its workforce practices should be designed with that end in mind. If adopting a leaner workforce would allow Amtrak to invest the money needed to run faster trains while holding fares constant, that would be a huge win for American transportation. And over the long run, the only way to have a vibrant railroad workforce in America is to have a vibrant railroad sector. But to have a vibrant railroad sector, Amtrak has to be focused on trying to run a railroad, not trying to create a handful of make-work jobs. If Amtrak was a truly private run operation I am sure their cost structure would be much different.

By now the $500 billion dollar fiasco of Solyndra is a household word. Now Obama has another brewing scandal with the battery manufacturer A123 Systems, a firm that makes batteries for green electric cars that are not selling. Yesterday A123 Systems declared bankruptcy leaving the taxpayers with a $241 million dollar debt. Of course to Obama, who touted this firm two years ago as one of his green energy firms that would employ 400 people, this is chump change. A123 Systems said it would sell its automotive business assets to Johnson Controls Inc. (JCI).

According to a report on Bloomberg:

“The filing may fuel a debate over government financing of alternative-energy and transportation businesses. Federal grants and loans to companies including A123, Fisker Automotive Inc. and Tesla Motors Inc. (TSLA) have drawn scrutiny from congressional Republicans following the September 2011 bankruptcy filing of solar-panel maker Solyndra LLC two years after it received a $535 million loan guarantee from the U.S. Energy Department.

“This action is expected to allow the company to provide for an orderly sale,” A123 said in a press release. Johnson Controls plans to acquire A123’s automotive-business assets in a deal valued at $125 million and will provide financing of $72.5 million to support A123’s operations, according to the release. A deal to sell a majority stake to a Chinese company fell through, A123 said.

…

Electric-vehicle sales since 2011 totaled fewer than 50,000 through September, just 5 percent of Obama’s target to have 1 million such vehicles on U.S. roads by 2015.

The debtors’ two largest customers are Fisker and AES Energy Storage LLC and its affiliates, which accounted for about 26 percent and 24 percent of their total revenue during the year ended Dec. 31, respectively, court papers show.

Republican presidential candidate Mitt Romney said last month that Obama has picked “losers” for alternative-energy loans and grants. His running mate, Paul Ryan, has called for all green-energy subsidies to be eliminated.

A123 has posted at least 14 straight quarterly losses. Its shares had fallen 85 percent this year to 24 cents as of yesterday’s close in New York.”

In a similar report on Obama’s brilliant record of investing our money President Barack Obama said last Thursday that “we got back every dime we used to rescue the financial system."

According to the Congressional Budget Office, however, the government will lose about $24 billion on the bailout.

According to a report on CNS “We got back every dime we used to rescue the financial system, but we also passed a historic law to end taxpayer-funded Wall Street bailouts for good,” Obama said in Miami Thursday:

“The Congressional Budget Office--based on figures from Obama’s own Office of Management and Budget---gives a different assessment.

“The cost to the federal government of the TARP’s transactions (also referred to as the subsidy cost), including grants for mortgage programs that have not yet been made, will amount to $24 billion,” said the CBO report, which was released on the same day Obama spoke.

TARP is the Troubled Asset Relief Program – the formal name of the government’s financial bailout program passed in October 2008.

CBO said that the cost of TARP “stems largely from assistance to American International Group (AIG), aid to the automotive industry, and grant programs aimed at avoiding home mortgage foreclosures,” noting that the losses will be so large they will eclipse the financial gains the government will realize from bailing out other large financial institutions.

In fact, CBO reported that as of now $65 billion in TARP funds remain outstanding.”

Why Romney did not hit this issue hard last night is beyond me. Red States has a very detailed article entitles; “The Pigs At Obama’s Green Energy Trough” that is well worth reading. There is a good expose of the corruption behind the BrightSource project.

Realistically, very few presidential debates have the kind of clear-cut winner that the first Romney-Obama debate did. It’s more productive to look at what each candidate came looking to accomplish.

Romney: Romney came in tonight with three main goals.

One, he wanted to repeat his strong showing from the first debate. He did that – he was vigorous, authoritative, and came across as the same technocratic moderate that he really is.

Two, he wanted to avoid any major gaffes that would foul up the momentum he has going. He did that, too. He never seemed stymied, never really put his foot in his mouth in a harmful way. Even when he bought into the false left-wing premise of a question on gender pay equity, he came away talking about his own experience hiring women in his cabinet (he might have mentioned his female running mate in Massachusetts as well and that Obama pays women in the White House less than men).

Three, he wanted to go in for the kill. On that, Romney failed. He let Obama get away with some flagrant lies, like claiming that Planned Parenthood performs mammograms. He completely botched an obvious attack on Obama’s disastrous and dishonest response on Libya, to the point where even moderator Candy Crowley – who was mostly running interference for Obama on this and on Fast & Furious – had to step in and remind Romney that Obama’s Administration had been dishonest on Libya. Romney forced a confrontation on the facts on oil drilling – one the fact-checkers have to give him – but like John McCain in 2008, he seemed hesitant to really take the fight to Obama on more divisive issues.

It’s true that Obama is now set up to be completely dismantled on Libya in the third debate, if Romney comes loaded for bear. But I suspect that by the time that debate arrives, nobody will be left undecided.

Obama: Obama also came in with goals, four of them.

First, Obama needed to show that he actually still wants the job. He did that – he was much more vigorous tonight, showing some fight and some indignation and squaring off in some true alpha-dog battles with Romney.

Second, Obama needed to give his partisans something to cheer for. He was late sometimes in doing so (especially waiting for his closing to attack Romney on the 47% tape) but did deliver.

Third, Obama needed to lay out something more like a positive second-term agenda. On this, he failed miserably. He has nothing to offer but a stew of “more of the same.” Closing with the 47% attack really underlines the extent to which this is a campaign bereft of positive promise.

Fourth, and perhaps most important, Obama needed to strip the bark off Romney, convince the voters that he was in no way an acceptable alternative. And outside the choir, Obama really didn’t seem to do that. He didn’t dismantle Romney’s agenda, he just disagreed with it. He basically denied the existence of the problems Romney cited on energy policy. Despite pre-debate preening on Romney’s record in Massachusetts, Obama never attacked that record. And despite his heavy reliance to date on attacking Romney as a tax-hiker, Obama spent far more of the debate bashing tax cuts, leaving little doubt which candidate was the low-tax candidate.

Romney’s strongest moments were two. One, he just buried Obama in response to an African-American man who declared himself a disheartened Obama ’08 voter; Romney responded with a blistering indictment of Obama’s economic record. And two, he offered a great answer on American competitiveness. He also came away with a good answer on immigration, albeit one that won’t please many of his own primary supporters.

As Erick Erickson writes in Red States:

“I think Mitt Romney won the debate, but not by much. He flubbed a few good opportunities to really score decisive blows on the President, but definitely drew more blood. The CNN polling and CBS News polling confirm it. While more thought Barack Obama won the debate, largely because his last performance was so bad, clear majorities outside the margin of error thought Mitt Romney would be best on the economy, jobs, the deficit, etc. That suggests Romney did win, but people viewed Obama’s debate performance as an improvement over the first one. In fact, while other areas of the debate may overshadow this point, Romney deftly dispatched Obama on his economic record. That is the one issue that matters. It got so bad, Obama had to trot out Planned Parenthood and Big Bird.

….

The President tried to claim that the reason gas prices were so low in 2008 was because the economy was so bad. He actually wanted the audience to believe that the economy is going gangbusters now as a reason for $4.00 gasoline — a delusion the undecided voters clearly did not buy. His words — he said that gas prices were so low because of the economy, which clearly means he thinks it is so high now because of the recovery. What recovery? Romney hit him hard on this and the undecided voters reacted favorably to Romney. There is more room for Romney to hit Obama on the airwaves over gas prices.

….

Candy Crowley should not have tried to referee the Libya answer as she moderated. Herding the cats was a difficult enough task. Interjecting on the Libya story made her part of the story in a way she should not have become. But for all the people heaping aspersions on her (full disclosure: I am a political contributor for CNN and have long thought the world of Candy Crowley even before I had a relationship with CNN), they should be thanking her. It was her interjection to clarify what was and was not said that muddied the water on what the President actually said”

Dick Morris has a similar take on the outcome of the debate when he writes:

“Fundamentally, Romney’s smooth, polished, dignified, articulate, sincere, and compassionate manner in the debate puts to rest eight months of Obama negative attacks on his character. Barack Obama is about to learn the lesson Jimmy Carter learned in 1980 when he lost to Reagan — and found his lead collapsing after the debates. When a president with a failed record tries to win by attacking and demonizing his opponent, he can succeed only if there are no debates. Since neither Goldwater (1964) nor McGovern (1972) had the chance to show themselves to America in debates, the negative characterization of them by first Johnson and then Nixon stuck. But Ronald Reagan’s debate performance nullified Carter’s attacks and showed him not to be the war-mongering madman the president had accused him of being. Similarly, Obama’s portrayal of Romney as insensitive, elitist, incapable of understanding the problems of the average person, a tax cheat, and a cold blooded capitalist all fell before Romney’s real persona as it came through on television.

And once Obama is stripped of his negative messaging, he has nothing to say. His defense of his economic record and his energy drilling essentially boiled down to asking people what they wanted to believe — their own eyes or Obama’s speeches.”

Since last night Crowley has issued a statement claiming Romney was rights and she was mistaken in her remarks. According to a report on Fox News this morning Crowley said; "He was right in the main. I just think he picked the wrong word.”

“The moderator in Tuesday night's presidential debate, after appearing to side with President Obama on the question of whether he called the Libya strike a terror attack from the start, conceded afterward that Mitt Romney was "right" on the broader point -- that the administration for days insisted it was a spontaneous act.

"He was right in the main. I just think he picked the wrong word," Candy Crowley said of Romney on CNN shortly after the debate ended.

Crowley was referring to the tense exchange in the final half-hour of the debate, when Romney questioned whether Obama had called the attack an "act of terror" rather than "spontaneous" violence that grew out of a protest against an anti-Islam video.

….

Obama, indicating he thought he had just gotten a boost from the moderator, then chimed in: "Can you say that a little louder, Candy?"

However, Obama didn't explicitly label the Benghazi strike terrorism in those Sept. 12 remarks. What he did say is: "No acts of terror will ever shake the resolve of this great nation."

Crowley, during and following the debate, pointed out that despite Obama's Sept. 12 remarks his administration was peddling a different story to the public. She said it took two weeks for officials to say more definitively that the attack was more than an out-of-control protest.

And she continued to clarify on CNN that Romney was making a legitimate point.

"Right after that I did turn around and say, 'but you are totally correct that they spent two weeks telling us that this was about a tape'," she said.”

In the baseball playoffs, the tie goes to the runner. In debates, ties are decided by the moderator and that’s what happened during the Tuesday night presidential debate at Hofstra University in New York. CNN’s Candy Crowley made her presence felt as a moderator in a major way on two points, but none larger than the issue of Libya.

The terrorist attack that killed Ambassador Chris Stevens and four others in Benghazi has become a sore point for Obama, but Crowley made sure she called Romney out before Obama could tag him.

When Romney said Obama had not called the attack an act of terror for 14 days, Crowley interrupted and said: “It -- it -- it -- he did in fact, sir. So let me -- let me call it an act of terror.”

Naturally, Obama asked her to restate her point and she did. “Can you say that a little louder, Candy?” asked the president. “He — he did call it an act of terror. It did as well take — it did as well take two weeks or so for the whole idea there being a riot out there about this tape to come out. You are correct about that,” she continued.

Conservatives were outraged, arguing that Crowley’s interruption spoiled a key Romney point. They weren’t the only ones. Even Politico’s Mike Allen called the Crowley point “arguable” and pointed to the transcript of Obama’s statement saying it “generally” referred to “acts of terror.” CNN’s John King called the Obama statement a “generic” comment about terror, not specifically calling the Libya attack a terrorist act.

In the run-up to the second presidential debate, CNN’s Candy Crowley declared that she would not just be a “fly on the wall” as she played the tiny role of moderator, that she would step in whenever she chose to say, “Hey, wait a second, what about X, Y, Z?”

And boy did she, cutting off Republican Mitt Romney repeatedly and often throwing the floor to President Obama with an open “let me give the president a chance here.”

More, she alone decided the topics for the debate, picking questions from the 80 so-called “undecided” voters chosen by the Gallup polling organization. Her selections were tailor-made for Mr. Obama — Mitt Romney’s tax plan, women’s rights and contraception, outsourcing, immigration, the Libya debacle (which gave Mr. Obama to finally say that the buck stops with him, not, as Hillary Clinton said, with her).

She even chose this question, directed to both men: “I do attribute much of America’s economic and international problems to the failings and missteps of the Bush administration. Since both of you are Republicans, I fear the return to the policies of those years should you win this election. What is the biggest difference between you and George W. Bush, and how do you differentiate yourself from George W. Bush?” Undecided my butt. This was just another chance for Obama and the left to blame Bush — how sad. To be fair and balanced Crowley should had found a person to ask if Obama was following the policies of Jimmy Carter, after all he was a Democrat.

Ms. Crowley, who called Mr. Romney’s selection of Rep. Paul Ryan as running mate a “ticket death wish,” asserted her unilateral power at the outset, telling the audience before the cameras went on that she planned to “give the debate direction and ensure the candidates give answers to the questions.”

After both candidates answered Question One, she blurted: “Let me get a more immediate answer” — whatever that means. But when Mr. Romney sought to correct falsehoods told by the president, she cut him off: “We have all these folks here.” In the end, Mr. Obama would get 9 percent more time.

Obama falsely said that he had called the murders in Benghazi a terrorist act the day after September 11. Gov. Romney was seemingly bewildered about what to say. Obama further told the outrageous untruth that in a democracy, the President should not be criticized over a defense/foreign policy disaster.

Let's look at the facts:

Obama gave a lengthy speech on September 12^th , after the murders in Libya, in which he first of all apologized to the Muslims for that infamous video. Then he talked about the terrorism of September 11, 2001, and his visits to some graves of some victims. It was in that context that he mentioned terrorist acts — NOT in the context of the killings in Libya. Those, he was still blaming on an inflamed mob and that video. For Obama to take his own words out of context to excuse his inexcusable kowtow to the Islamists was disgraceful, deceptive, but frankly, not surprising. But for Gov. Romney to not catch him on it and whip him was a disappointment. Gov. Romney might have said, "Sir, you were covering up for the al Qaeda affiliates most of September and you are still covering up for your incompetence. It is insulting to the nation."

Even worse is Obama's anti-Constitutional pretention that no one is allowed to criticize him on foreign policy or else it's "playing politics."

To this, Mr. Romney should have said that it is the essence of a free people that the elected officials can and must be criticized for their mistakes. Otherwise, we do not have a democracy.

If this is how Obama misunderstands the First Amendment, he should not be in high office.

But Mr. Romney missed that moment, too.

Something went wrong last night. Romney was not on the beam on Libya. But the dishonesty and shameless obfuscation of Obama were genuinely frightening. Look, Secretary of State Clinton has already apologized, so we know something went badly wrong in Benghazi. Only Obama is still saying he didn't do anything wrong. Obama is smooth, but he is in a box now, and let's hope that Gov. Romney does not let him out next time.

Third City in California to go Broke

“A government big enough to give you everything you want, is big enough to take away everything you have.” — Thomas Jefferson

This is an update for my blog posted on June 28, 2012 – “The Tale of Two Cities.” In this post I compared Stockton, California with Sandy Springs, Georgia. Stockton, due to its lavish spending and bloated public employee costs filed for bankruptcy, while Sandy Springs, through sound fiscal management and outsourcing of most of its public services, is thriving.

Today Reuters announced that The City of San Bernardino, California has filed for Bankruptcy. This is the third city in California to take this action with the Town of Mammoth Lake being the second and announcing its decision to take the bankruptcy route on July 4^th. This also goes along with the city of Scranton, Pennsylvania declaring that it would reduce the pay of all municipal employees to minimum wage due to its total lack of money and rising debt.

Reuters announced:

“The city council of San Bernardino, California, voted on Tuesday to file for bankruptcy, marking the third time in recent weeks a city in the most populous U.S. state has opted to seek protection from its creditors.

The decision by the leaders of San Bernardino, a city of about 210,000 residents approximately 65 miles (104 km) east of Los Angeles, followed a report by city staff that said the city faced an imminent financial crisis.

The report said the city had exhausted its reserves and projected spending would exceed revenue by $45 million in the current fiscal year which started on July 1.

Chapter 9 bankruptcy would give San Bernardino an opportunity to restructure its battered finances, city staff said during a webcast of the city council meeting.

But the council's vote may backfire on San Bernardino in the municipal debt market, and raises concerns about local officials in California potentially looking to bankruptcy protection as an easier solution than making tough decisions about spending cuts and raising revenue, said Dick Larkin, director of credit analysis at muni bond broker-dealer HJ Sims.

"Am I troubled? You bet," said Larkin. "I couldn't believe how quickly this vote happened."

Larkin noted the concerns of San Bernardino's staff about the risk of the city not meeting its payroll in coming months may be eclipsed by concerns it could be frozen out of the muni debt market if it goes through with a bankruptcy filing.

It may take San Bernardino 30 days to complete the actual filing, according to its city attorney.

"I hope California isn't becoming the flashpoint for municipal bankruptcy because if that happens then everyone in the state will be paying for it," Larkin added. "If there are more coming, there will be big penalties to (municipal debt) issuers in California, all the way up the state level."

San Bernardino will join the California communities of Stockton and Mammoth Lakes in bankruptcy court.

Stockton failed after three months of talks with its creditors to obtain concessions to close its $26 million budget gap and the city of nearly 300,000 in the state's Central Valley last month became the most populous U.S. city to file for bankruptcy.

Mammoth Lakes, a ski resort town of about 8,000 residents, last week filed for bankruptcy due to a nearly $43 million legal judgment against it.

Like Stockton, San Bernardino has suffered from the housing crash and high unemployment. According to the report to its city council, the city "has reached a breaking point and faces the reality of deficient cash on hand to meet its contractual and debt obligations due in July 2012."

"The city has declared numerous fiscal emergencies based on fiscal circumstances and has negotiated and imposed concessions of $10 million per year and has reduced the workforce by 20 percent over the past four years," the report said.

"Yet, the city is still facing the possibility of insolvency due to a variety of issues including accounting errors, deficit spending, lack of revenue growth, and increases in pension and debt costs."

I can guarantee this is not the end of this story. The lavish spending, bloated public employee staffs, out of control public service union pension and benefit costs, welfare payments, and reduced tax revenues due to the depressed housing market are forcing more and more cities to go broke.