The Consequences of America's Shrinking Cities and States

Americans are on the move. They're leaving various cities and states to avoid high taxes, crime, high costs of living, and to seek better jobs; or, to simply retire.  The downside to this is potential bankruptcies as the tax bases shrink; leaving cities and states with expensive pensions and other commitments that are left over from a time when populations were much higher.

This was certainly the case in the now-bankrupt Detroit.  In 1950, that city's population was 1.8 million. By 2013, it had only 700,000 residents.  But, Detroit's problems -- as the largest city in Michigan -- are taking that state along with it.  Right now, Michigan is on the verge of losing one of it's  Congressional seats due to it's slowing growth.  As a state with nearly 10 million residents, the population increased by only 6,270 from 2014 to 2015; according to the Census Bureau. 

Illinois is in a similar "state" of affairs.  It, too, is close to losing a Congressional seat to some other faster growing states like Texas.  Key to the loss there, is the fact that its largest city, Chicago, is shrinking in size.  New York state is also losing people, but in its case, many of those leaving are high end earners.  Even the weather-desirable California is seeing its population growth slowing.  The fact is that 8 states have growth rates of less than 1/2 of a percent and well below the inflation rates for running the state's expenses.

We are getting very close to an actual bankruptcy of the entire State of Michigan, and not just a single city like Detroit.  Not far behind are Cleveland, Pittsburgh, St. Louis, and Youngstown, Ohio who have all seen losses greater than 50% from their peak populations.  The list of all the cities (see references) that have lost populations is substantial.  As a result, people located in those areas are bound to see higher taxes as the legislatures try to cope with increased costs and a lower tax base.  Raising taxes would only cause even more people to leave.  This is a serious spiral that America cannot afford.  The city/states that are effected need to rethink ways to restore population without raising taxes or we will all wind up paying higher taxes to bail them out.

References:

The Incredible Shrinking Illinois: http://www.chicagomag.com/city-life/February-2016/Where-Is-Illinois-Losing-Population/

Chicago area sees greatest population loss of any major U.S. city, region in 2015: http://www.chicagotribune.com/news/local/breaking/ct-chicago-population-record-loss-met-20160324-story.html

Taxpayers are fleeing New York in droves: http://nypost.com/2016/09/15/taxpayers-are-fleeing-new-york-in-droves/

The Decline of Detroit: https://en.wikipedia.org/wiki/Decline_of_Detroit

Mich. population rebound is slowing, census shows: http://www.detroitnews.com/story/news/local/michigan/2015/12/22/mich-population-rebound-slowing-census-shows/77746798/

Once a boom state, California sees a historic period of slow population growth: http://www.sacbee.com/site-services/databases/article69054977.html

Warning: New Jersey in Midst of Millennial Outmigration: http://www.njspotlight.com/stories/16/02/15/new-report-warns-that-new-jersey-is-in-midst-of-millennial-outmigration/

New Jersey Herald: Time to address population loss: http://www.njherald.com/article/20160327/ARTICLE/303279973#

List of U.S. states by population growth rate: https://en.wikipedia.org/wiki/List_of_U.S._states_by_population_growth_rate

Shrinking cities in the United States: https://en.wikipedia.org/wiki/Shrinking_cities_in_the_United_States

Trump's Impossible Dream for Detroit

By any measure, the city of Detroit is a perfect example of the failure of Democratic rule in many of our major cities.  Run by Democrats for decades, the Motor City has the highest black population of any city in America. 81.6% of Detroit is African American.  Unfortunately, it is also the most violent. At its peak, it had 1.8 million residents.  By 2013, only 689,000 could claim residency.  Worse yet, 47% of Detroit's residents are functionally illiterate and can only read at a fourth grade level or below.  It is the poorest big city in the country with 40.1% living below the poverty line.

Illiteracy and crime will not bring good jobs and businesses back to this town. It will take decades of reform to improve the educational system sufficiently enough to attract hiring by well-paying businesses, and, the high crime rate will just continue to cause people to leave the city in fear.

In light of all these problems, it may seem that there is no way that anyone can put this town back together.

However, in the short term, Trump could attract new businesses to the Motor City by declaring Detroit an enterprise zone.  In other words, give tax breaks for every new job a business creates.  He can also provide substantial tax breaks for any company who relocates to, or starts a  new business there.

Another way to help rebuild the city would be to start a revitalization program.  Using federal funds from the Department of Education, they can take unskilled and unemployed men and women, and train them to rehab properties while learning trades such as painting, carpeting, dry walling, etc.  A program like this would help gentrify entire neighborhoods and attract people back to the city; while preparing many  for new careers.

Sadly, because Hillary will be elected, Detroit will never see any movement towards the rebuilding of a once vibrant city.  There are only so many "green" jobs Hillary can create to get Detroit and America back on its feet.  Sorry for the sarcasm (Not really!).  At least, Trump's trip to Detroit has focused a bright light on the condition of many black lives in America.

References:

Detroit mayor slams Trump's visit to black church: http://thehill.com/blogs/ballot-box/presidential-races/294420-detroit-mayor-slams-trumps-visit-to-black-church

At Least A Few Black Churchgoers Liked Trump's Detroit Speech: http://www.huffingtonpost.com/entry/trump-detroit-black-voters_us_57cb60c6e4b078581f13559f

Blackest Cities in America: https://www.google.com/search?q=detroit+blackest+city+in+america&ie=utf-8&oe=utf-8

Census bureau: Detroit is poorest big city in U.S. - Detroit News: http://www.detroitnews.com/story/news/local/michigan/2015/09/16/census-us-uninsured-drops-income-stagnates/32499231/

Detroit Population 2013: https://www.google.com/search?q=detroit+population&ie=utf-8&oe=utf-8

US Cities With The Highest Violent Crime Rates: https://www.google.com/search?q=most+dangerous+city+in+u.s.&ie=utf-8&oe=utf-8

Nearly Half Of Detroit's Adults Are Functionally Illiterate, Report Finds: https://www.google.com/search?q=detroit+literacy+rate&ie=utf-8&oe=utf-8

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America's Cities In Decline

On Monday, May 1st, Atlantic City avoided a default on its debt payment by the hair of its
mayor's chinny, chin, chin.  They may not be so lucky the next time around.

With a third of its casinos now shuttered, the city is struggling to survive, as shown by this graphic from the Wall Street Journal:

With per-person debt at double that of Detroit and Chicago, Atlantic City looks as if it will  soon be joining Detroit in bankruptcy.  Raising taxes isn't going to do the trick unless you tax everyone an average of 26% against their $26,936 incomes.

Then, there was a story from CNBC that said that 34% of the San Francisco Bay residents surveyed wanted to leave that area due to the cost of living, traffic, poverty, crime, and homelessness.

Add to that the story in Bloomberg News which showed that 20 cities in 2014 -- one-fifth of the top 100 cities -- saw their populations decline.

The point about all this is that declines in populations lead to struggling economies for all too many American cities because the people who do manage to move away are those who can afford to do so.   The ones left behind are generally the poorer and can't afford to move.  As a result, city revenues fall, debt increases; and bankruptcy isn't far behind.

The bottom line is that we have too many population centers in this country that are dying due to high taxes, crime, no jobs, low pay, decaying infrastructure, traffic, record poverty, and homelessness.  The lackluster economic growth of the last 7-1/2 years of the Obama administration have done nothing to correct this urban decay.

References:

Atlantic City, America’s Worst-Rated Town, Stares at Default: https://www.google.com/search?q=Atlantic+City%2C+America%E2%80%99s+Worst-Rated+Town%2C+Stares+at+Default+&ie=utf-8&oe=utf-8

Atlantic City makes debt payment as mayor averts a default: http://www.chicagotribune.com/news/sns-wp-blm-atlantic-city-683c0ab6-1084-11e6-a9b5-bf703a5a7191-20160502-story.html

Survey says: 34 percent of Bay Area residents are ready to leave: http://www.cnbc.com/2016/05/02/survey-says-34-percent-of-bay-area-residents-are-ready-to-leave.html

These Are the Top 20 Cities Americans Are Ditching: http://www.bloomberg.com/news/articles/2015-07-22/these-are-the-top-20-cities-americans-are-ditching

Obama Whines About Lack of “Credit” for Economy as it Tanks: http://www.whitehousedossier.com/2016/04/28/obama-complains-lack-credit-economy-growth-sinks/

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Are We Really Better Off Since Obama Took Office?

In front of adoring crowds at one of his all-too-many campaign style events, President Obama has claimed that "By almost any measure, we are better off since I took office" or that America is stronger under his watch.

The problem with such statements is that they are factually untrue when looking at the broader state of our union.

Sure, the President can claim that overall unemployment is down from where it was when he took over the reins of government in January 2009.  But, to get there, overall unemployment rose to a rate of 10% in the first year-and-a-half of his presidency.  Something that the so-called "stimulus" was supposed to avoid by promising that the unemployment rate wouldn't go above 8%. Even now, 5 years passed the end of the official end of the recession, this country still has an unemployment rate that is a full point above pre-recession levels.

Our major cities have extraordinarily high unemployment rates.  Chicago, Obama's home town, is still at 8.0%; and, that's just recently down from a January 2014 rate of 9.6%.  Detroit, now in bankruptcy, had an unemployment rate of  17.7% in July.  A city like Atlantic City, that depends heavily on Americans spending leisure-time money, is suffering from cash-strapped tourists unable to indulge in what they have to offer. The casinos are closing and the unemployment rate sits at 13.7%. More worrisome is the fact that our three largest cities -- Los Angeles, New York, and Chicago -- are dangerously close to following Detroit into bankruptcy.

The Gross Domestic Product (GDP) is stuck at a 5-year growth rate of about 2%. This is, at least, the worst recovery since World War II and, some say in the history of the United States when using alternate methods of calculating GDP.
Then there's the overall economic health of America.  For 5 straight years the median incomes of this country have fallen and income inequality has risen to a record high.  Half the jobs created under this President's watch were low income/low paying.  When he took office, only 30 million Americans were on food stamps.  Today, that number is 47 million; a 56% increase.  Similarly, only 38 million Americans were living in poverty.  Today, that number is a record 47 million and has stood at 15 percent of the population for the last 2 years. Thus, as the population grows, so does the amount of people left in poverty.

Of course, the real elephant in the room is the amount of debt that Obama has left us with; a number that only gets worse by the day.  At the beginning of his first term, the federal debt was $10.6 trillion.  Today, it is closing in on $18 trillion; just $250 billion from the current number (as of this writing) of $17.756 trillion. A number that, for the first time in this nation's history, is greater than the total annual economic output of the country.  Of those advanced economies in the world, only Portugal, Italy, Ireland, Greece and Spain can claim debt levels above their economic output. All of which are near bankruptcy and on the brink of bringing the European Union to its knees.

When we see people standing behind President Obama and nodding in agreement that things are better, you have to wonder what planet they're from.  Most other Americans (74% in one poll) still think that we never recovered from the recession.  And, in so many ways, they're right.

References:

By almost any measure, we are better off since I took office: http://www.realclearpolitics.com/video/2014/07/10/obama_by_almost_every_measure_we_are_better_off_than_when_i_took_office.html

Obama claims US is 'stronger' than 'when I first came into office' as economy weakens, debt soars, America loses global influence and border crisis deepens: http://www.dailymail.co.uk/news/article-2722926/Obama-claims-US-stronger-I-came-office-economy-weakens-debt-soars-America-loses-global-influence-illegal-immigrants-flood-border.html

Half Of The Jobs Created During The Recovery Were Low-Paying: http://thinkprogress.org/economy/2013/05/14/2008591/jobs-recovery-low-paying-minimum-wage/

Chicago Unemployment Rate Falls to 8.0%: http://www.worldbusinesschicago.com/news/chicago-unemployment-rate-jul2014

Detroit Unemployment Rates:  https://ycharts.com/indicators/detroit_mi_unemployment_rate

Unemployment rises in most US states in July: http://www.detroitnews.com/article/20140818/BIZ/308180072

 Another Atlantic City Bust: Trump Plaza Closes: http://abcnews.go.com/US/wireStory/trump-plaza-4th-atlantic-city-casino-shutdown-25528499

3 huge cities flirting with bankruptcy: http://money.msn.com/investing/post--3-huge-cities-flirting-with-bankruptcy

Obama’s economic recovery: officially the worst in US history: http://poorrichardsnews.com/post/41366829334/obamas-economic-recovery-officially-the-worst-in-us

Median Income Falls For 5th Year, Inequality At Record High: http://www.huffingtonpost.com/2013/09/17/median-income-falls-inequality_n_3941514.html

47 million Americans on food stamps: http://img.washingtonpost.com/blogs/wonkblog/files/2013/09/SNAP-participants.jpg

That’s rich: Poverty level under Obama breaks 50-year record: http://www.washingtontimes.com/news/2014/jan/7/obamas-rhetoric-on-fighting-poverty-doesnt-match-h/?page=all

America's Poverty Rate Stuck At 15 Percent For Second Straight Year: http://www.huffingtonpost.com/2013/09/17/poverty-america-census_n_3940812.html

 74% said we are still in a recession: http://patch.com/new-hampshire/concord-nh/is-the-recession-over-yet#.VBR1qmNAVLU

U.S. Federal Debt Exceeds GDP: http://jamesviser.com/?p=995

The Detroit Experiment: Michigan's New Minimum Wage

Most advocates for raising the minimum wage argue that it would pull people out of poverty and, in fact, is good for the economy because it gives people more money to spend.  Because of this, some actually contend that raising the minimum wage creates jobs due to the increased consumer demand and the general strengthening of the economy.

Of course, I'm the old stick-in-the-mud student of economics who believes that raising the minimum wage causes wage inflation and that hurts more people than are helped.  Inflation of any kind, hurts businesses and costs jobs since the vast majority of Americans won't see their wages go up enough to counter the increase in prices.  Thus the consumer buys less and pays more for what they buy.  This is especially true for the millions of Americans who live on fixed incomes or social security, which has only gone up a meager 1.1% in the last 5 years; while overall inflation has exceeded 2%.


So, it will be interesting to see what happens in the city of Detroit following Michigan's Labor Day increase in the minimum wage by 10% to $8.15 an hour.  Here's a city that is already bankrupt with an unemployment rate of 14.5% in April and with more than 38% of the city's residents in poverty.  Currently, the average individual income is $14,861 a year.  By raising the minimum wage to $8.15 an hour, the average minimum wage worker in Detroit could see a full-time salary of $16,300; assuming two weeks of unpaid vacation and no overtime.  And, of course, this is $1,439 higher than the current average salary in Detroit.  But, keep this in mind.  While I don't know exactly how many workers in Detroit will benefit from the hike, on a national basis, there are only 1.5 million workers who earn exactly the minimum wage.  That's only four-tenths of a percent of our population.  But raising it affects many more than just those earning that wage by what I call the leap frog effect.  Because the minimum wage earners instantly get raises, it can leap-frog some other employees above him/her who will then,  in fairness, have to have their wages increased.  Some estimates are that this could affect 17% of all the workers or more than 8% of the nation's population.

In the title, I call raising the minimum wage an experiment.  If the proponents of the increase are correct then good things should happen to Detroit's horrible numbers noted in the preceding paragraph.  However, if I am right, the current downtrend in unemployment will reverse itself. The poverty number will only go higher; and, the average salary won't be affected by much, if any.  Also, it will show how irresponsible the legislature in Michigan was to further risk damaging Detroit (and, other high unemployment cities in Michigan) by passing this new law.  A law that won't just raise the minimum wage this year; but, also all successive years until it tops out at $9.25 in 2018.  And, why?  Because raising the minimum wage in this election year was politically expedient, Yes, even for the Republican legislature; as in the case of Michigan.

References:

Minimum wage hike launches this Labor Day: http://www.myfoxdetroit.com/story/26417826/minimum-wage-hike-launches-this-labor-day

Detroit QuickFacts: http://quickfacts.census.gov/qfd/states/26/2622000.html

Detroit Unemployment Rate: https://www.google.com/search?q=detroit+unemployment+rate&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb

Characteristics of Minimum Wage Workers, 2013: http://www.bls.gov/cps/minwage2013.pdf

The Real Story of Unemployment and the Economy In America

Every month, we get an accounting of the overall unemployment rate.  Last month, the number moved up slightly to 6.2% from June's 6.1%.  All-in-all, that number seems reasonable; given that we were at nearly 10% unemployment in 2011. As a result, many Americans feel that unemployment is not a big problem anymore.

However, out of that top-level 6.2%, there are some very disturbing facts.

First, many of our major cities are still suffering.  Take Chicago, for example. That city's unemployment rate is at 8.4% or 35% higher than the national average.  Los Angeles sits at 7.6%.  Cleveland is at 8.5%,  and Detroit -- still in bankruptcy -- is at a whopping 14.5%.

The two cities that depend on gaming and leisure revenues -- Las Vegas and Atlantic City -- are still on the high side of unemployment; indicating that Americans don't have the ability to resume vacationing at these pre-recession, entertainment hot spots.  In Las Vegas, the unemployment rate is still 7.6%.  Atlantic City is almost double that, and worse than Detroit at 14.9%, and we are now seeing once high-trafficked casinos closing for lack of visitors.

The bottom line is that many of our major cities have high rates of unemployment because, quite frankly, their economies haven't recovered.  All three of the major metropolitan areas -- New York, Los Angeles and Chicago -- are struggling to keep their heads above water, and at least 20 more smaller cities such as Oakland, Fresno, and Harrisburg could see themselves in bankruptcy court very soon.

So, when I hear that President Obama is going to "pivot" to the economy and how well it's doing under his watch, I know that he's only able to do so because many Americans only hear the top line numbers every month and too many of those will falsely think it's the truth.  But, this country -- now 5 years since the recession ended -- is still in a world of hurt; and, that's a story that is definitely not being told.

References:

Chicago Unemployment Rate: https://www.google.com/search?q=chicago+unemployment+rate&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb

Los Angeles Unemployment Rate:  https://www.google.com/search?q=Los+Angeles+unemployment+rate&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb

Cleveland Unemployment Rate: https://www.google.com/search?q=cleveland+unemployment+rate&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb

Detroit Unemployment Rate: https://www.google.com/search?q=Detroit+unemployment+rate&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb

Las Vegas Unemployment Rate: https://www.google.com/search?q=las+vegas+unemployment+rate&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb

Atlantic City Unemployment Rate: https://www.google.com/search?q=atlantic+City+unemployment+rate&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb

Casinos no longer golden for Atlantic City: http://www.latimes.com/nation/la-na-atlantic-city-blues-20140725-story.html

3 huge cities flirting with bankruptcy Staggering under pension obligations and debt, any of these could follow Detroit into court:  http://money.msn.com/investing/post--3-huge-cities-flirting-with-bankruptcy

20 Cities That May Face Bankruptcy After Detroit: http://www.newsmax.com/US/cities-bankruptcy-after-detroit/2013/08/06/id/519081/

Obama pivots to economic legacy: http://thehill.com/news/administration/213888-obama-pivots-to-economic-legacy

Is Detroit The Poster Child Of Failed Union/Democrat Coziness?

Most Americans are well aware of Detroit's fabled nickname  'Motown',  but that city also had the lesser known moniker of  'Union Town'.   It was called 'Union Town' because of all the mid-Western cities, it had the strongest union representation in almost all areas of work and manufacturing, and its city's operations. In 1986, the Chicago Tribune highlighted this supposed strength of Detroit with this glowing reference: `Union Town` Detroit Runs Rings Round Most U.s. Blue-collar Cities.

Today, Detroit is now, arguably, the most decayed major city in the U.S., where abandoned homes and buildings have to be bulldozed into oblivion.  Some homes are actually being sold for as little as one dollar; just so the owners can get out from under the tax burden.  In June, Detroit avoided bankruptcy by allowing itself to be put into administrative receivership where the State of Michigan oversees the operation and expenses of the city.

How Detroit went from a 'Union Town' that "Runs Rings Round Most U.S. Blue-collar Cities" to one that is literally at death's door is probably the worst testament to the symbiotic relationship that existed between the city's controlling Democrats and the Unions.  First of all, the private sector declined because companies, in order to stay competitive and avoid high union wages, moved their operations to non-union, right-to-work states, or overseas.  This resulted in Detroit losing the breadth of its tax base. Secondly, the City's Democratic mayors and city council continually gave into the union demands for higher pay and pensions in order to keep the City running.  So, the combination of declining taxes and higher costs of operations proved to be the bitter end to this once great city.  A lesson that all city managers in America should learn from. 

--- BloombergBusinessWeek: Detroit Council Accepts State Plan to Avoid Bankruptcy: http://www.businessweek.com/news/2012-04-04/detroit-council-accepts-state-plan-to-avoid-bankruptcy