Why Detroit and the Rest of the Nation suffers

I grew up in a suburb of Detroit, Michigan and thought it was a great place to live at the time. We had four seasons, beautiful trees, and it was a wonderful place to be a kid. However, it was also a place in significant economic decline and, by the time we left in the mid 1970s, Detroit was a place on the ropes. Like the many "Michiganders" that flew south to escape the economy of Detroit, we often joked, "would the last person to leave Detroit, please turn off the lights." With many economists indicating that real unemployment in the Motor City is around 50 percent, the day this city dies seems to be drawing near.

Detroit has reached such a dire status that its own demise has become a description for the decline of other economies. The Michigan based Mackinac Center discusses "Detroitification," which is defined as the "hollowing out of the private economy to prop up unsustainable (and often unresponsive) government establishments." That is a perfect explanation of what is going on in our nation's capitol today.

The federal budget is expanding at a breakneck pace, with the deficit growing annually at an amount our entire national debt was just two decades ago. The US already has the second highest tax rates of any industrialized country in the world. Our fiscal policies are going to make the government demand more. Every dollar the government takes is money that would go to an expanding economy and job creation.

What is the government doing with its expanding expenditures? According to USA Today, during the current recession, the number of federal workers earning six-figure salaries has grown at a rapid rate. While Americans struggle with economic decline that is demonstrated in higher unemployment, falling wages, businesses going under and housing foreclosures; federal employees are flourishing at the expense of taxpayers.

USA Today provides an example of this growth in government employment, at the beginning of the recession, the Transportation Department had only one person earning a salary of $170,000 or more. Today there are 1,690 employees with salaries above $170,000. The growth in six-figure salaries has made the average federal worker's pay climb to $71,206, compared with $40,331 in the private sector. Furthermore, government jobs usually include many benefits that are not typical in the private sector, making the public jobs even more expensive. One can easily see how the costly nature of the government and private sector trade off.

Michael Jar of the Mackinac Center rightly notes, "So much for shared sacrifice." The same tragic policies that have economically wiped out the city of Detroit are now being applied on a national level. Such policies keep certain political parties in power, and certain bureaucrats happy, but create ruin for the rest of the population.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Christopher Dodd Has to Go

I am not at all sympathetic of the plight of the automobile industry. The Big Three of Detroit have largely brought their terrible situation upon themselves through decades of bad decision making. In spite of this reality, I was offended when Senate Banking Committee Chairman Christopher Dodd (D-CT) informed the CEOs of Ford, Chrysler, and GM that if they wanted money for their companies, they needed to go. This is the same Christopher Dodd who has been on the Senate Banking Committee for years and oversaw the financial debacle of Wall Street that led to an $800 billion bailout at taxpayers expense. This is the same Dodd who has fueled record government spending for years that has led to our debt of trillions of dollars.

As chairman of the Senate Banking Committee, Dodd proposed a housing bailout on the Senate floor in June 2008 that would assist troubled mortgage lenders such as Countrywide Financial. Condé Nast Portfolio reported that in 2003 Dodd had refinanced the mortgages on his homes in Washington, D.C. and Connecticut through Countrywide and had received favorable terms due to being placed in what was later called the "Friends of Angelo" (Countrywide's CEO) program. Dodd received mortgages from Countrywide at allegedly below-market rates on his Washington, D.C. and Connecticut homes. Dodd has not disclosed the below-market mortgages in any of six financial disclosure statements he filed with the Senate or Office of Government Ethics since obtaining the mortgages in 2003. The Senator's home state Hartford Courant reported Dodd had taken "a major credibility hit" from the scandal.

If direct payment has influence, the problem is even more widespread. Countrywide has also contributed a $21,000 total to Dodd’s campaigns since 1997. Dodd has also received $70,000 in campaign contributions from Bank of America, which is buying Countrywide, in the last year-and-a-half before the Countrywide Financial loan scandal surfaced. Senators Barack Obama and Hillary Clinton are the only other Senators who have received more money from Bank of America than Dodd. However, no politician has received more contributions from Fannie Mae and Freddie Mac than Dodd's combined $133,900.

Marcus Cicero, when discussing the Roman Empire, said "the arrogance of officialdom should be tempered and controlled..." Dodd's throwing stones in a glass house and maintaining a straight face in the process, is arrogance at its height. Senator Dodd needs to go and should be a part of a serious "house cleaning" that should be seen in both the US House and Senate. It is true that, in the end, many familiar faces like Dodd would disappear. That would be a face lift the US could afford.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Too Slow Cities?

Recently I wrote two articles about "fast cities" according to Fast Company magazine. According to Fast Company, these cities are on the cutting edge of culture, entrepreneurship, innovation, and other areas that major progress. Fast Company's analysis didn't end there, however, they also have opinions about cities that they describe as "too fast" and "too slow." In this post I'm going to focus on this latter group.

Budapest, Hungary

"Breathtakingly romantic--but its economy is broken. Among the world's 150 biggest cities, last in predicted GDP growth, according to PricewaterhouseCoopers."

I have to agree. This is the most beautiful city I have ever seen and one very difficult to make a profit. I traveled extensively through out Eastern Europe and the former Soviet Union following the fall of Communism and Budapest was one city I had a great deal of hope for and it is a city that has shown little progress. Very sad indeed.

St. Louis, Missouri

"Too normal for its own good. It ranks dead last on CityVitals' "Weirdness Index," a measure of passion and engagement."

My dad grew up near this once great city and he use to often sing its praises. It is sad to see that it to has reached such a lowly position.

New Orleans, Louisiana

"We wish it weren't so. But NOLA was slow before Katrina. The cleanup debacle has only reinforced that reality."

New Orleans is a tragedy that I believe we remain a shell of the city it once was. The political leadership in both the state and city have done everything they could, in my opinion, to prevent this community from turning around.

Detroit, Michigan

"Last one out, shut off the manufacturing line. Tragically, inevitably bound to the U.S. auto industry's failings."

When I left the Motor City in the 1970s the joke was "will the last person leaving Detroit please turn off the lights." Fast Company's statement may be better. In addition to being a slave to unions, the city hates innovation and seem to prefer dying a slow death than doing what is necessary to revive this once great city.

Havana, Cuba

Celebrating a half-century of economic decay. Thanks, Fidel. Seemingly no cars on the road made after 1968.

Well put.

I liked Fast Company's assessment of slow cities far more than those they described as "fast." What about those they deem too fast? Those will be examined in a future post.

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When Ads are Too Subtle

For quite some time I have been seeing an ad campaign on television about why businesses should move to Michigan. I like Michigan, I was born just outside of Detroit and have fond memories of growing up there. Like many, my parents had to leave in the 1970s because of a deteriorating economy. The joke then was "will the last person to leave Michigan please turn off the lights." So, I was glad to see an effort to lure business back.

I've seen the ads many times and took close note of the testimonies of individuals whose lives or businesses have changed since moving into that state. Each advertisement ended with "Michigan has the upper hand" and a nifty little drawing showing the state. Upper hand, hmmm. I saw the ad on TV so often, I can't even tell you, but I was thumbing through a magazine and saw it again with special emphasis on the picture (see above).

Ahh, upper hand. It's a glove. One of the first things you learn about Michigan when growing up in the schools there is that it is shaped like a glove. Furthermore, it is one of the country's most northern states (just south of Canada, unless you are in Detroit, which is just north of Windsor, check it out on a map).

I grew up in Michigan and it took forever for this message to finally click with me. This ad is intended to reach people outside of Texas (thus they didn't likely go to Michigan public schools) and they are expecting it to resonate with the vast majority of its viewers? I doubt it. If Michigan is going to attract new businesses, it is going to have to be a little clearer in reaching its audience. As an aside, it would help if they created an economic environment that will attract business. But that will be another post.