News / Brèves Back to previous selection / Retour à la sélection précédente Detroit Battle: Glass-Steagall and National Credit, or Genocidal Austerity 19 June 2013 (LPAC) — Austerity as deep, as deadly, and as sure to fail as that imposed on Greece, Ireland, Portugal, and Cyprus by the European "Troika", is now being demanded against the City of Detroit, with disastrous potential consequences for bankrupt cities and states around the nation. The unconstitutional elimination of public employee pension and health benefits, and drastic reductions in wages, being proposed by Detroit’s "Emergency City Manager", Kevyn Orr, will have the same impact as Wall Street’s drastic 50% cut in private (auto sector) wages and benefits from 2006 through the 2009 auto bailout by President Barack Obama. With private wage and benefit cuts, Obama accelerated the contraction and impoverishment of the former arsenal city of democracy; with the public cuts, Orr will finish its destruction even while failing to make its debts "payable". This is a genocidal policy, and can not be tolerated. But as much as Orr’s proposed policy is pre-certified (by the current European depression disaster) as economically insane, unconstitutional, and criminal, the city and the nation have to have an alternative policy to prevent such economic suicide. That alternative is a national system of credit which aims to build an entirely new infrastructure for transportation and transport, water management, and energy production, reconstructing Detroit as a central hub for new machinery construction and transport as it was for a key century of this country’s growth. It includes a national bank ready to buy the industrial development bonds of this and other cities and states, as well as its revenue bonds. And the alternative starts with national restoration of the Glas-Steagall Act, to reorganize a commercial banking sector for lending only, and stop the Federal Reserve’s massive, monthly bailouts of the securities markets and investment companies with the nation’s credit. Detroit has 12% fewer residents than it had just a decade ago, but 21% fewer employed residents (280,000 vs. 354,000), and a total population just one-third of what it once was, so, obviously, it has far less tax revenue. Its $1.1 billion a year in tax revenue is less than half of Boston’s $2.4 billion, with the same population! The problem is not the size of the city, but the extraordinarily low income and lack of wealth of its residents. Detroit’s official unemployment rate is 18.6%, some 250% of what it was a decade ago; and its poverty rate is more than twice its unemployment rate. Thus, all its forms of revenue (casinos included!) have shrunk disastrously, and its public services have all been devastated, as in the 50% cut in the police force. With an annual budget of $1.2 billion currently (9% over its shrunken revenues) Detroit is hardly "overspending". Employee and retiree health benefit and pension costs, plus debt service, make up 40% of its budget — somewhat less than the same costs in the Federal budget. The austerity-crazed Emergency Manager Orr in fact wants to get new Federal loans, but for such mistakes as privatizing the city’s water division. This will do Detroit no good, and just funnel Federal funds and residents’ payments to enrich service-cutters from the private financial sector. But Detroit does need Federal credit. The fundamental cause of this drastic impoverishment is the past 20 years’ shrinkage of the auto/machine-tool industry, capped off by the industry’s across-the-board entry-level wage cut from $27 to $14 an hour in Obama’s 2009 "auto bailout". There are 50,000 fewer auto and auto-parts workers employed in the Detroit area than a decade ago, and the remaining workers’ income on average is one-third lower. LaRouchePAC and many auto industrial leaders proposed in 2005 to convert the unused auto/machine-tool capacity, with Federal credit, to producing factory components and machinery for great infrastructure projects such as the North American Water and Power Alliance. This was concretized in the Emergency Recovery Act of 2005. The refusal by Wall Street and two White Houses to allow this retooling and re-expansion of auto and machine tools, is what has doomed Detroit. The re-enactment of the Glass-Steagall Act by Congress can give hope to Detroit and the cities and states of the great former Midwestern industrial core of the nation, because it will cut off the U.S. national credit going into non-stop bailout of the financial speculators of Wall Street and the City of London. If it is immediately followed up with a national credit system, to redevelop the nation’s infrastructure platforms and re-engage its industry and machine-tool capacity, Detroit can revive at the center of a modern "arsenal of democracy". We can put the potentially genocidal drive for "economic austerity" in the trash-can where it belongs. [PBG]