Sunday, March 27, 2011

Financial Martial Law? A second look.

The link that JBH posted for Michgan's "Financial Martial Law" bill was a floor summary. After he posted it, I looked up the text of the bill, as well as a lot of the debates. Some other things ended up delaying me, but on that first day, I noticed that the story was only picked up by CBS, the Michigan Messenger (which I have no familiarity with), and archlefty Mother Jones. The rest of the search results for it were mostly copypasta of the CBS story, and almost universally on lefty blogs, with the exception of all-around conspiracy theorist Alex Jones. Color me skeptical, but I take both of those Joneses with a big grain of salt.

Here's a link to the bill, as approved by the Gov and filed by the Secretary of State of Michigan:
House Bill 4214
And in easier-to-read PDF format:
House Bill 4214

Some of the most important things to note are in one of the first summaries - note the background information.

Note the citation of Citizens Research Council of Michigan's report 362: Financial Emergencies in Michigan Local Governments.

The report basically goes over some of the levels of failure of Michigans, townships, school boards, cities, and communities. It's bad.

To give an anecdotal example, an economic refugee from Michigan who I know bought his house a few years back for about $170,000. He ended up getting away from it at $40,000. He was happy to get out from under the crushing debt on a house that wasn't worth anything anymore due to the housing bubble collapse.

Yes, really. He could buy it.

Now, consider how towns, cities, and even states generate revenue. One of the big methods is property taxes. It's considered a progressive (in the lefty sense) tax that's acceptable, because it only taxes the rich, landed classes. It's politically acceptable, since folks who are well-to-do typically want to think they're paying for their schools, and it's not visible enough like sales taxes to bother people who rent. It's considered a cost of "owning" a home, even though you can never truly own something you have to pay someone not to confiscate, but I digress. It's a standard source of revenue, and widely accepted.

Using that $170K to $40K transition, let's assume a tiny tax rate of 1% of the property's value per year. If Anytown, Michigan, were making $1700 per year in taxes off a house, and budgets according to what they have to spend, even with no deficit spending (unlikely), times 1000 houses in their township, then Anytown, Michigan, has about a $1,700,000 operating budget. That's enough to hire several police, maintain a small fire department, and Anytown's part of Anycounty's incorporated school distruct running (there are also roads, sanitation, etc.).

And with the end of the housing bubble, suddenly Anytown is making $400 per year in taxes off a house. With the 1000 houses in the township, Anytown, Michigan now has only $400,000 to spend for their operating budget. Suddenly, the cost of police, a fire department, and Anytown's part of the school district is threatened, along with the town's other few services.

Anytown still has financial obligations to pensioners, to contracts (be they private or union), and suddenly Anytown is faces with a financial disaster. So Anytown petitions the State to come in. The state is faced with the same budget crisis, and has no money to spare to bail out 200 desperate Anytowns.

The solutions do become desperate. Does the township reneg on its obligations? Do they declare bankruptcy? Do they raise taxes on the remaining residents? Since those residents have fewer jobs, and can't meet their personal obligations and declare bankruptcy as individuals, does Anytown get even the $400 tax anymore? Should the town go bankrupt if it has thriving industries and in simply going through a hard time? Should the town, run by a corrupt mayor and crooked board of aldermen, simply be dissolved?

That's where the bill comes in. Michigan is in a state of financial emergency, no matter what Chrysler is trying to sell. The dominance by unions, democrats, and leftist identity politics melded together to keep everyone but the political exploiters down. The big car companies made foolish decisions to sign unsustainable union contracts and are saddled with debt to the point that taxpayers around the country had to bail out GM and Chrysler - formerly companies that were powerhouses - are now weak shells of their old selves. Black/white identity politics tore communities apart as the economy fell, and things just got worse from there. Economic destruction is all part of that, intertwined with societal destruction and redistribution and unsustainable economic policies.

The state of Michigan didn't past the bill to start dissolving neighborhoods. They passed the bill to keep the entire state from imploding due to its horrible economic situation - they passed it to put capable managers in charge of towns and districts that need help. If they keep doing what they're doing, they'll be begging for a federal bailout, and as Margaret Thatcher said: "Socialism works great until you run out of other people's money."

The thing is, the rest of the country doesn't want to bail out Michigan. For example, California with its own mismanagement certainly doesn't need to be taxed to bail out Michigan, nor does a successful state need to have its success confiscated to bail out Michigan. The successful states need to be emulated, not taxed.

The grasshopper needs to stop having government steal the ant's hard work, and instead the grasshopper needs to get off his ovipositor and start doing what the ant did to succeed. Michigan acknowledges this, as there are towns that are ants, and towns that are grasshoppers within it, and there is no reason why the entire state should be consumed.

Having read a lot of it, I'm not so sure that it's a power grab - it seems to be an extreme austerity move, wherein most of it is a move by the state against local governments, and all with checks and appeals to the state court system as well.

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