I’ve written before about the problems big cities are facing when it comes to Cadillac pensions. San Bernadino, California and Detroit, Michigan declared bankruptcy largely due to this. And now comes word that another California city may follow in their footsteps.

Desert Hot Springs , a resort town of 26,000 warned that it will run out of money by March due to burdensome salary and pension costs. That would make it the third California city along with San Bernardino and Stockton to succumb to that. Amy Aguer, the interim director of finance, said nearly 70 percent of the city’s budget was consumed by police costs, most of which were spent on salaries and pension payments.

Now, part of this problems is the California public employees’ pension program, Calpers. The cost charged for participating keeps going up. Karol Denniston, a bankruptcy attorney in San Francisco said, "Calpers keeps increasing costs and many of these cities have cut costs down to where there is nothing else left to cut." And I’m sure that contributes to the problem, but I really don’t think it accounts for 70% of Desert Hot Springs’ budget.

But the main thing is, if they do go under, who gets paid? Do the pensions get cut in order to pay off creditors? That’s a difficult question to answer. It’s a case of competing promises. The root causes of all of this, though, are those initial promises. Russell Betts, a council member, stated the obvious when he sad, "It’s obvious we can’t continue with salaries and pensions that are in the stratosphere, no matter how much love there is for our police department.” Sure, it’s obvious now, when the problems arise. But if you’d said anything like that years ago, you’d have been labeled as someone who “hates” the police, or public workers in general. “We should be paying our police more than our football players!”, some might shout, even though I’m sure that Desert Hot Springs doesn’t have a national football team. But anyway…

That’s a nice sentiment until you have no money left. I’m not suggesting what Desert Hot Springs should be paying its cops, nor suggesting that such pensions aren’t deserved. It’s just that when you overpromise, sooner or later someone’s got to pay the piper. And even if it’s shared pain between pensioners and creditors, promises get broken.

The solution is to state the obvious before having to break those promises. The problem is that there are too many voters and council members who think that government money is limitless, which is only true until it isn’t. Sure, stating the obvious – that we should live within our means – may get you called ‘heartless’, among other choice adjectives, but it must be said.

That’s kind of like how those of us who were against this huge set of promises we often call ObamaCare were treated. We’re stating the obvious, but we’re being called ‘heartless’, all because we don’t want to go bankrupt. We’re already going bankrupt, that much is for sure, but we’re rather not hang another boulder around our neck while trying to stay above water. As I’ve mentioned before, federal pensions and existing entitlements alone cost more than we take in in taxes. Among the many promises that ObamaCare will not fulfill is that it will reduce the deficit. We can’t afford that.

I feel like I’m council member Cassandra sometimes, warning of danger that is obvious to anyone who would see, but not being believed, in spite of so much evidence surrounding us. Website glitches are sideshows. Economic realities will bury us.

OK, so let me get this straight. The problem that ObamaCare was trying to fix was this: uninsured people got free healthcare at emergency rooms, but this cost was borne by taxpayers.

So the solution is to subsidize their insurance. The subsidies come from their tax refund via the IRS. Where does the money come for these subsidies? The taxpayer. And for those not getting subsidies for their ObamaCare insurance, many are seeing rate increases to also offset these lower cost plans. And since the Supreme Court called this a tax, then again, the money is coming from the taxpayer.

And since those subsidized plans don’t really get subsidized until folks get the credits on their tax refund, they have to front both the cost of the plan and the cost of the often huge deductibles, until tax time. How about that? The poor give Uncle Sam a no-interest loan. How compassionate.

Here’s the bottom line: The problem was that taxpayers bore the cost of the poor getting free health care. The solution is that the taxpayers bear the cost of insurance for the poor, and the poor bear the full cost of the insurance and thousands of dollars of deductible until sometime the following year. Does that make sense to anyone?

Yeah, I know I’ve been harping on ObamaCare for quite a while now, but there’s just so much wrong with it. And I’m not speaking of the website. All I’ll say about that is that the oversight that was given to putting that together is the same oversight you’re likely to see on the program itself. How does that make you feel?

No, the big deal is the fact that what you were sold is not what you’re getting. You were given some promises about this that were repeated over and over.

Well of course no one was saying you’d lose your coverage. Obama couldn’t have sold this particular bill of goods if he’d been honest about it. What we’re getting are millions of Americans whose insurance companies had to—had to—cancel their policies because they didn’t meet ObamaCare’s standards. Yes, you can keep your plan, as long as the government says you can. And then you can’t. Ben Shapiro tweeted, “PolitiFact rated Obama’s ‘If you like your plan, you can keep it’ as ‘half true.’ Which half? ‘If you like it’?”

Oh, and you can keep your doctor, as long as he doesn’t leave the practice, or get laid off from the hospital. There are links in the show notes to stories about how the Patient Protection and Affordable Care Act is, for many Americans, not being very protective in this regard.

And the “affordable” part? Not so much, either. First there was the promise.

And now comes the reality. Supporters of ObamaCare, most notably, are getting acute cases of “sticker shock” as they find out how much their premiums will go up. A writer at the left-wing Daily Kos website was floored that his rates were doubling.

I never felt too good about how this was passed and what it entailed, but I figured if it saved Americans money, I could go along with it.

I don’t know what to think now. This appears, in my experience, to not be a reform for the people.

What am I missing?

Well for starters, you’re missing the reality of basic economics. And, as Dave Ramsey says, you’re missing basic math skills. What happening is that non-subsidized premiums are skyrocketing, but even if you get the subsidies, the deductibles are huge, reaching 10-12 thousand dollars. Sure the insurance may be affordable, but the health care is not.

But it’s not even so much the broken promises, so much as it is the fact that they knew, from the start of this awful bill, that they couldn’t keep it. Regulations within the bill itself give an estimate that 40 to 67 percent of customers who bought their own insurance will not be able to keep their policy. That’s an estimate right in the bill.

But Obama kept parroting that promise, and the media kept dutifully reporting it. From the “Now They Tell Us” Department, NBC News now reports this rather important bit of information, now that the bill has passed the Congress and the Supreme Court, and has started signing people up. And this startling revelation was worth a whopping 21 seconds on the NBC Nightly News.

Yeah, you can report on how the administration lied to us, but what about the journalistic malpractice in not doing this digging years ago? I’m looking at all of you, including CBS, ABC, CNN, MSNBC and Fox.

Why is it that conservatives saws this coming but liberals didn’t? And why were conservatives who pointed this out called “racists” (and still are)? The truth would have benefited conservatives, liberals and independents. But blind partisanship won the day, and we’ve all been dragged into the same pit.

Indeed, dealing with the pre-existing conditions issue and lowering the cost of insurance are admirable goals. But the ObamaCare way of dealing with this is, overall, not the way to do it. The Republicans have had their proposal up on the web for all to see for years; a plan to fix the specific problems without upending the entire industry and forcing government’s choice on the individual.

Here’s something I’ve not done in a while. Let’s once again play “Name That Quote”. This is the game where I read someone’s words verbatim, and you try to figure out who said it. If you’re playing along at home, give yourself 10 points for being correct, 5 points if you’re close (and I’ll let you determine what close is), and 1 point if you get the political party right. (Hey, it’s a 50-50 chance.) And for this quote, party is a factor. Here’s the quote:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

There’s lots more, but you get the gist of it. Come to the website and see the show notes for a link to the full text of this rant against a debt limit increase.

I will give you a hint; this is not from the current debt limit fight. The speaker is someone who has been on both sides of the debate. That’s right, he was against the debt limit increase before he was for it. No, it’s not John Kerry, but if you thought that, you were close.

This quote, from March 16th, 2006, during a Republican presidential administration, is from the, then, junior Senator from Illinois, Barack Obama. Of course, now that he’s in the Oval Office, it’s just as reckless, and just as much a failure of leadership, to agree with what he said. You’re likely to get whiplash discovering what a difference an administration makes.

Blogger Donald Sensing noted that someone writing at the very liberal Daily Kos website was rather irked that, due to ObamaCare, she’d wind up paying over $8000 a year for what she called “crappy, high-deductible insurance” in New York state. The writer notes, “This means we will all be required to pay steep premiums and deductibles but may not have the financial resources to actually access healthcare.”

You mean ObamaCare is not going to be the panacea its proponents claimed it would be? Color me meh.

She concludes , “I am reminded on days like today, that President Obama campaigned on the idea that people like me would see something like a $2500 reduction in health insurance costs. What was I thinking?” Don Sensing surmises that thinking didn’t enter into it. I’d say, wow, now who could have anticipated that?

The magazine The Nation is a liberal-leaning publication; that much is certain. What’s not so certain is whether or not they really understand the topics they cover.

Here’s a case in point. It recently asked it readers to sign an open letter to Wal-Mart demanding that they pay workers at least $12 an hour. However, another web site, ProPublica, reported, as good news, that, this fall, interns at the Nation Institute, who put out the magazine, will be paid minimum wage for the first time in the history of the 30-year-old program. Up until now they’d been paid at less than minimum wage, when all the while they railed against those who did just that.

But anyway, that’s good news, right? Those overworked interns will now get the federal minimum wage and have more to spend in our economy. Well, consider this. In a statement to ProPublica on the report, The Nation said that, “We are not yet certain how this will work out long term, but for the fall we are anticipating hiring ten interns rather than twelve.”

So they’re raising the pay, but hiring fewer workers in response. Wow, now who could have anticipated that?

I’ve written before about how Detroit had become the victim of big-spending, blue-state politics. The idea that government must do everything for everyone has been shown to be bankrupting. So many liberals will say, when conservatives want to cut this or that government program, that those conservatives don’t care, or even hate, those people who are served by that program. That is to say, if the government doesn’t do it, no one will, certainly not the private sector.

A private, for-profit business, the Threat Management Center, or TMC, has sprouted up in Detroit to pick up where the incompetent city government has left off. Dale Brown started TMC in 1995, initially to aid law enforcement. But after getting no interest from the cops, Brown just kept doing what he did best; helping prevent crime, rather than taking notes long after the bad guys got away. He’s paid, not by collecting fines like the city does, but by his customers. And if he doesn’t do the job, he doesn’t get paid and goes out of business, unlike a government that, with no competition, doesn’t care if they perform well or not. And thanks to TMC’s efficiency and profitability, they are also able to provide free or incredibly low-cost services to the poor as well.

Here’s an article about TMC, and another private enterprise; the Detroit Bus Company. The headline is, “This is What Budget Cuts Have Done to Detroit … And It’s Freaking Awesome”. It proves that private enterprise can handle essential services far better than the government can. Not that die-hard liberals will ever admit to it, in spite of the evidence. I really suggest you stop by the show notes and give it a read.

The profit motive works. For all of us.

[This is the script from the latest episode of my podcast, "Consider This!"]

Detroit, Michigan, formerly the auto-making capital of the US, if not the world, filed for chapter 9 bankruptcy protection on July 18^th, becoming the current capital of big cities going under in the US. What brought Detroit under water is not really debatable; declining income and spending beyond its means. What is being debated are the causes of the two.

On the spending side, I think it’s no coincidence that the city has had essentially one party rule for the past 51 years. No surprise that the party in question is the Democratic Party. Detroit’s current budget deficit is believed to be more than $380 million, and its long-term debt could be as much as $20 billion. Rather than cutting spending, Detroit ignored the common sense lesson of living within your means, embrace the Paul Krugman idea that austerity kills, and died anyway, spending like there was no tomorrow. Well, there is a tomorrow, and it’s here.

When tax and spend had to be curtailed, because of a shrinking tax base, then borrow and spend kicked in. I suppose someone like Krugman would say they didn’t borrow enough. When that wasn’t enough, President Obama said that Detroit wouldn’t go bankrupt on his watch, and he tossed boatloads of money at the union-controlled, Democrat-voting auto industry, and pronounced it, merely on the reasoning that he had written a check, that Detroit was coming back. Yeah, no so much.

Now, even the Obama administration won’t touch them. They’ve stood up for their big spending principles, in DC and in Detroit, and reality has hit them upside the head with the mother of all clue-bats, as in “get a clue”. It doesn’t matter what your intentions are. Consistently spending more – far more – than you have will one day come home to roost. And everyone – both those from whom the money was taken, and to whom the money was given – will suffer. And it will affect the poor disproportionately because the rich have the means to escape.

And they did escape, which brings us to the income side of the equation. The riots of 1967 chased citizens and businesses alike out of the city, which only accelerated and existing trend, such that in the past 60 years, it lost 60% of its residents. But the riots weren’t the only reason. With corruption, over-promising and the requisite overspending, those that could read the handwriting on the wall did what they had to do. If you can’t change the government, change your location, and they did.

And if you’re inclined to lay the blame at the feet of greedy corporations that outsource jobs, Walter Russell Mead has some information that tends to suggest a group as, or more, culpable. The city’s $11 billion in unsecured debt includes $6 billion in health and other retirement benefits and $3 billion in retiree pensions for its 20,000 city pensioners. That’s “billion”, with a “B”. But now, these folks, whose union representatives negotiated this package, and now very likely going to get less than 10 percent of that. Like I said, everyone gets hurt, ultimately, with these kinds of policies. Those who got their benefits and hit the road are not unlike the folks who start a pyramid scheme. They cash in early and often, while those who get in later either get very little return, or lose out. The pyramid in Detroit has played itself out.

Walter Russell Mead, again, has a relevant warning for those in other cities who still think such policies are a good idea, because of their good intentions.

Progressive politicians, wonks, and activists can only blame big corporations and other liberal bogeymen for so long. The truth is that corrupt machine politics in a one-party system devoted to the blue social model wrecked an entire city and thousands of lives beyond repair. The sooner blues come to terms with this reality, the greater chance other cities will have of avoiding Detroit’s fate.

I would add that the sooner DC comes to terms with this, the better, for the same reason. And, working our way back in the political process, the sooner the voters of this nation come to terms with this, the better off we will all be. It may not sound, to the untrained ear, to be very caring, or fair, or socially just. But Detroit has a 47% illiteracy rate. 60% of its children are living in poverty. Its crime rate is 5 times the national average. The murder rate is 11 times higher than New York City. Is it caring, or fair, or socially just, to pursue policies that led to that?

If you continue to vote for those policies, then what visited Detroit will be visiting you soon enough. It may already be in the process of happening. Detroit just got there first. Who’s next?

The housing bubble, anyone remember it? That’s when people who would not have otherwise been able to get credit to buy a house were given it anyway because the government pressured banks to do it. Everybody gets a home, and if you’re against this policy, you clearly hate the poor. Then the bubble burst, defaults were rampant, and more government programs had to be thought up to save us from the previous government programs. And, as Bruce McQuain notes at the Q&O blog, yes, the government’s meddling is what caused that sub-prime mortgage meltdown, which then was a huge contributor to the subsequent recession.

And now we have this.

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

Those who do not learn from history are doomed to … create public policy to repeat it. It’s allegedly being instituted to allow the poor to participate in the housing recover, but you can be sure that it won’t be a temporary measure, because any attempt to return to semi-sane credit checks will, will, be demagogued, once again, as eeevil Republicans throwing the poor out on the streets. This has to prove without a doubt that Democrats only care about intentions, not results. Even if the results have just finished happening.

Short-attention span voters love this stuff. Obama just thinks anything Bush did he can do better, and in this case, he very well could. We just did this, like, six years ago, and Barney Frank told us it was all good and not to worry. And then we had to bail out a bunch of banks, because we made them make loans to people who couldn’t pay them back, because, you know, racist / sexist.

The President has been treating the cuts from the sequester as some sort of budget Armageddon; blaming Republicans and talking up how much they’ll hurt. Here’s another perspective on these cuts from people who look more closely at our financial situation.

Credit rating agencies are shrugging off sequestration, saying the U.S. government will need to do more to reduce the deficit if it wants to prevent a downgrade of the nation’s credit rating.

While the agencies say the $85 billion in automatic spending cuts represent at least a step towards deficit reduction, they argue much more is needed to prevent the United States from losing its “AAA” rating.

“It’s not the most ideal outcome,” said David Riley, Fitch Rating’s global managing director for sovereign ratings, on CNBC Europe. “You’d rather have intelligent cuts and some revenue measures as well … but we don’t live in an ideal world, and it’s better to have some deficit reduction than none at all.”

The agencies view it as a positive sign that Congress did not simply scrap the unpopular sequester. Erasing the cuts without coming up with an alternative, something pushed by some liberal lawmakers, would have added to the deficit and debt and further pressured agencies to downgrade the nation’s credit rating.

They are glad Congress didn’t scrap it, but the year’s still young. In any event, when you hear Democrats freak out about these cuts, just remember that the credit agencies are yawning.