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    city of Detroit files for bankruptcy

    Detroit bankruptcy filing marks new low for Motor City



    Detroit filed for bankruptcy Thursday afternoon, becoming the nation's largest public sector bankruptcy.
    Reuters


    Detroit filed the largest municipal bankruptcy in U.S. history on Thursday, setting the stage for a costly court battle with creditors and opening a new chapter in the long struggle to revive the city that was the cradle of the American auto industry.

    The bankruptcy, if approved by a federal judge, would force Detroit's thousands of creditors into negotiations with the city's Emergency Manager Kevyn Orr to resolve an estimated $18.5 billion in debt that has crippled Michigan's largest city.

    Michigan Governor Rick Snyder said he saw no other options for Detroit and approved Orr's request to file for Chapter 9 bankruptcy protection.

    "Detroit simply cannot raise enough revenue to meet its current obligations, and that is a situation that is only projected to get worse absent a bankruptcy filing," wrote Snyder, a Republican, in a letter accompanying the filing.

    Detroit's creditors are expected to face huge losses, and the future of retiree pension and health benefits for thousands of city workers hangs in the balance.

    Anticipating the filing on Thursday, investors drove prices of Detroit bonds and notes lower, sending their yields to record highs on Thursday.

    In some respects, Detroit's legacy as a model for American innovation is at stake as well. Its crippled condition threatens to overwhelm its image as the home of Henry Ford's pioneering assembly line and Motown's 1960s soul-music hit machine. More recently, the city has become an incubator for efforts to repopulate and reinvigorate an urban relic of a bygone, industrial age.

    New York, Cleveland and Philadelphia previously teetered on bankruptcy, but Detroit is the first major U.S. city to go over the edge.

    Detroit has lost 25 percent of its population in the last decade, with just 700,000 residents remaining. The ranks of retirees outnumber the city's active workers by more than a 2-1 ratio. With a quarter of its buildings abandoned in some neighborhoods, no other American city has borne the brunt of deindustrialization so heavily.

    In his July 16 letter to the governor making the case for a bankruptcy filing, Orr laid bare the scope of the city's decline.

    "After decades of fiscal mismanagement; plummeting population, employment and revenues; decaying City infrastructure... Detroit today is a shell of the thriving metropolis that it once was," Orr wrote.

    WHITE HOUSE MONITORING

    Snyder named Orr in March to tackle the city's spiraling long-term debt, which is estimated at $18.5 billion.

    A White House spokeswoman said Democratic U.S. President Barack Obama and his senior team were monitoring the situation in Detroit closely. But unlike after the economic collapse of 2008, in which the federal government injected billions in cash into U.S. auto makers General Motors Co and Chrysler as the first step of a quick turn through a managed bankruptcy process, Obama made no promises this time.

    "While leaders on the ground in Michigan and the city's creditors understand that they must find a solution to Detroit's serious financial challenge, we remain committed to continuing our strong partnership with Detroit...," White House spokeswoman Amy Brundage said.

    Detroit was once synonymous with U.S. manufacturing prowess. Its automotive giants switched production to planes, tanks and munitions during World War Two, earning the city the nickname of the "Arsenal of Democracy."

    Now the city's name has become synonymous with decline, decay and crime. A population that peaked at 1.8 million in the 1950s has fallen steadily since then. Manufacturing job losses and an exodus of white residents to the suburbs, which accelerated after race riots in the 1960s, have left huge swaths of this 80 percent black city blighted and crime-ridden.

    Pay cuts and job reductions in the city's police and fire departments have added to the sense of insecurity. Budget cuts have left streetlights broken, fire hydrants out of order, and cop cars and fire trucks badly in need of repair.

    The city's murder rate is at its highest in nearly 40 years; only a third of Detroit's ambulances were in service in the first quarter of 2013; and an estimated 5,000 buildings a year intentionally are set on fire.

    To compound the challenges, a crime wave in city government has compromised efforts to recover. In just one high-profile case, former Mayor Kwame Kilpatrick sits in prison, after he and associates were convicted of public corruption and systematic bid rigging.

    The private sector has sought to make inroads against the crushing problems. Quicken Loans founder Dan Gilbert in 2010 began moving more than 7,000 jobs downtown, and several Detroit-based foundations have begun targeted investment in small local firms, neighborhoods and public schools.

    But despite high taxes, the city's coffers have continued to dwindle.

    In June, the city's emergency manager, Orr, presented a proposal to creditors offering them pennies on the dollar. His plan had met with resistance from some creditors, most notably Detroit's two pension funds representing retired city workers. The funds recently filed lawsuits in a state court challenging the governor's ability to authorize Orr to file for bankruptcy.

    LONG ROAD AHEAD

    Creditors are expected to mount a stiff challenge to the bankruptcy, which was filed in the U.S. Bankruptcy Court in the Eastern District of Michigan.

    Douglas Bernstein, a bankruptcy attorney at Plunkett Cooney in the Detroit suburb of Bloomfield Hills, said he expected the case would last one to three years and would be very costly.

    "This could run to tens-of-millions to hundreds-of-millions of dollars," he said.

    Orr has said previously that he hoped Detroit could emerge from bankruptcy in a year or less. During a press conference in Detroit on Thursday after the bankruptcy filing, he said he hoped Detroit would emerge from bankruptcy by late summer or fall in 2014.

    "We are planning to get through this process as expeditiously as possible," said Orr, an experienced bankruptcy lawyer before he took the emergency manager job.

    Corporate bankruptcy filings with far less at stake have taken much longer than Orr's targeted timeline. Richard Ciccarone, managing director of McDonnell Investment Management, said it would be a long, drawn out process.

    "They're dealing with very difficult issues in which there's not very much court precedent for a major city in this arena," he said.

    While thousands of companies have gone through bankruptcy and emerged intact, only a relative handful American cities have made Chapter 9 filings since the Bankruptcy Act was amended in 1934 to include municipalities. The paucity of precedent and sheer number of creditors portend a complicated road ahead.

    "It's a very complex landscape and it's one that's going to be watched very closely by municipal investors," said Robert Amodeo, a portfolio manager at Western Asset in New York.

    General Motors, the only major U.S. automaker headquartered in Detroit, said in a statement that the company "is proud to call Detroit home and...(this is) a day that we and others hoped would not come. We believe, however, that today also can mark a clean start for the city."

    Ford Motor Co, which is based in the Detroit suburb of Dearborn, said it was "optimistic that governmental leaders will be successful in strengthening the community."

    But Ed McNeil, chief negotiator for a coalition of 33 unions that represent most of the service workers for the city of Detroit said the bankruptcy filing was about "busting the unions."

    "I've said all along that this is a power grab," said McNeil. "This is not about fixing the city's finances. It's about the governor and his own agenda to take over the city of Detroit."




    http://www.chicagotribune.com/news/c...,6170774.story
     
         

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    Re: city of Detroit files for bankruptcy

    Nice synopsis you did there.
     
         

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    Re: city of Detroit files for bankruptcy

    So sad. .
     
         

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    Re: city of Detroit files for bankruptcy

    wow, Sucks to be detroit right know
     
         

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    Re: city of Detroit files for bankruptcy

    Watch all Ceo's, goverment officials and the mayor get a nice christmas bonus following the citys tremendous restoration.
     
         

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    Re: city of Detroit files for bankruptcy

    Everything has to fall dont worry obama will do something later about it ..though he could have done somethings earlier too
     
         

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    Re: city of Detroit files for bankruptcy

    Definetly sucks to see a whole city go bankrupt.
     
         

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    Re: city of Detroit files for bankruptcy

    just like in 1930, you will see all the rich CEO's and the authority run away to somewhere else. they may have created the problem but no one expecet them to stay and suffer for it right?
     
         

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    Re: city of Detroit files for bankruptcy

    Quote Originally Posted by Narutohokage7 View Post
    Definetly sucks to see a whole city go bankrupt.
    yes it is sad
     
         

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    Re: city of Detroit files for bankruptcy

    Quote Originally Posted by ' ~ Dantee ~ ' View Post
    Watch all Ceo's, goverment officials and the mayor get a nice christmas bonus following the citys tremendous restoration.
    There won't be a restoration.

    What you see in Detroit is what is coming at the federal level.

    It is precisely what befell the Soviet Union.

    Quote Originally Posted by Gary777 View Post
    Everything has to fall dont worry obama will do something later about it ..though he could have done somethings earlier too
    There's nothing Obama, or any government, can do about it. Except get the hell out of the way and re-prioritize spending on the absolute bare bones of government (emergency response and criminal justice).

    It was government constantly screwing with stuff and supporting workers' unions that led to this problem.

    Quote Originally Posted by EnDash View Post
    just like in 1930, you will see all the rich CEO's and the authority run away to somewhere else. they may have created the problem but no one expecet them to stay and suffer for it right?
    None of the CEOs live there. Many businesses have already vacated the region - because the "we hate rich people" crowd got their way.

    Which is precisely why there is no tax revenue. 18% of nothing is still nothing. And with tax rates that high - no one is going to willingly choose to set up a business there (and certainly not with crime as high as it is). Unless they are desperate or stupid.

    Which is why retirees outnumber the workers 2:1. The only people who care to be in the region are those who don't have to worry about employment or business prospects.

    What caused this is the idea that government always knows better, that government is a good thing, and that government should be in charge of everything and 'support a living wage.'

    And y'all had best take note and/or hang on tight... because this is precisely what's going to be happening to the federal government before too much longer.

    It happened in Greece.

    Might I recommend you all brush up on your farming and woodcrafting skills. Though, unfortunately, about 30% of you will end up starving to death or killing each other in the wake of the coming collapse. That's good news for those of us in the less densely populated areas - fewer people we have to worry about invading from the cities and being complacent mouths to feed.

    But bad news for most concrete crawlers.

    You might want to start looking up books on herbal remedies, as well. Shit's about to become a hippy organic orgasm.
     
         

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    Re: city of Detroit files for bankruptcy

    Quote Originally Posted by Aim64C View Post
    None of the CEOs live there. Many businesses have already vacated the region - because the "we hate rich people" crowd got their way.

    Which is precisely why there is no tax revenue. 18% of nothing is still nothing. And with tax rates that high - no one is going to willingly choose to set up a business there (and certainly not with crime as high as it is). Unless they are desperate or stupid.

    Which is why retirees outnumber the workers 2:1. The only people who care to be in the region are those who don't have to worry about employment or business prospects.

    What caused this is the idea that government always knows better, that government is a good thing, and that government should be in charge of everything and 'support a living wage.'

    And y'all had best take note and/or hang on tight... because this is precisely what's going to be happening to the federal government before too much longer.

    It happened in Greece.
    i'm sorry, i should have brough more to my post then the simple thing i wrote. but let me just be clear that i have less then common knowledge about the state of detroid today or of america as a whole.

    in my opinion big corporations don't help the country or govermant or the people. simply because the money the corporations make don't go to the govermant or to employees but to the CEO's and back to the company itself to make risky moves that may fail. when the risky moves succed the money goes again to the CEO's and back to the company but when it doesn't the company files for bankruptcy and someone have to save it. Taxes are lowerd for big corporates simply to attract them, and if another country offers very low taxes for corporates then those corporates will move there cause it's more beneficial.


    i once heard an argument from a CEO of a company saying we should lower tases for big companies more, so that he can build a hotel faster and offer both a place to sleep and tourist attraction as well as higher employment. he did build that hotel and guess what? it costs more money then a normal citizen can afford and only viable for rich people, and most of the employees make minimum wage.

    taxes should get higher and higher the more income the person make and should get higher and higher the more a company makes, not something that will lower them to middle class or even high middle class, they should still be the rich class, but much much more then they pay today. but you can't do that cause then all the rich people would run away to other states or countries that offer almost no tax. cause who cares about a stupid city and it's stupid people? i go to where i can generate the most money and screw people that might need it.

    in short, if a company files for bankruptcy it's like the end of the world and we should spend millions to save it. but when a city files for bankruptcy we should all abandon it cause we lose money there. money has no homeland.
     
         

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    Re: city of Detroit files for bankruptcy

    Quote Originally Posted by EnDash View Post
    in my opinion big corporations don't help the country or govermant or the people. simply because the money the corporations make don't go to the govermant or to employees but to the CEO's and back to the company itself to make risky moves that may fail.
    This is, largely a misnomer. The problem, here, is that the media likes to take misrepresentations of a CEO's pay, such as when he/she receives a bonus or when he/she cashes in stock options, and portray it as "this is what they make all the time." Which is not an accurate portrayal.



    when the risky moves succed the money goes again to the CEO's and back to the company but when it doesn't the company files for bankruptcy and someone have to save it.
    This is rather rare. The exception to this is in banks - where banks are, essentially, different arms of the Federal Reserve.

    Taxes are lowerd for big corporates simply to attract them, and if another country offers very low taxes for corporates then those corporates will move there cause it's more beneficial.
    That is sort of true.

    There are many factors that influence whether or not a company decides to relocate.

    Zoning laws, various industry restrictions (a number of environmental regulations do very little to actually reduce negative effects on the environment but cost companies substantial amounts of money), and taxes are all direct government impacts.

    Other major factors are costs of shipping. Why set up a business that is largely going to try and export to other nations in the middle of Missouri?

    Perhaps one of the most detrimental, though, are labor unions. If enough people of a given trade in a region join a union, and they demand $30 an hour because minimum wage just got taken up to $9 an hour (and they were previously at $24 an hour) - then you have to pay them that, or relocate.

    Since it's a never-ending battle against the entitlement mentality in the U.S. - most companies elect to move.

    Why? Because contrary to popular belief - they only make about a 3% profit margin on what rolls off the line. Employee wages often account for about 50% of most companies' expenses. Which means a demand for a 20% increase in employee wages is going to force roughly a 10% increase in price.

    And you're selling this product in a market where other companies in China (many of them native to China) are making competing products.

    That graph doesn't even begin to make any sense. Why would you compare corporate income tax to the GDP of a country? The government has continually doctored the process for determining GDP in order to favor certain statistics.

    There is, however, a more relevant factor: http://en.wikipedia.org/wiki/Corpora..._United_States

    "Deferral is one of the main features of the worldwide tax system that allows U.S multinational companies to delay paying taxes on foreign profits. Under US tax law, companies are not required to pay US tax on their foreign subsidiaries’ profits for many years, even indefinitely until the earnings are returned to US. Therefore, it is one of the main reasons that U.S corporations pay low taxes, even though the corporate tax rate in the U.S is one of the highest rates (35%) in the world."

    This is a huge part of the picture, and something our government has yet to really realize and address. Our exceptionally high corporate tax rate encourages abuse of this behavior.

    What this also means is that, since the 70s, our government has been in nearly direct competition with other governments. Governments compete for businesses - those businesses bring economic activity and also hire people to increase employment rates. The U.S. has long lived in a largely self-serving economic system as a net exporter. That's come to an end with the rise of China and India - where we are a net importer and are in direct competition for high tech and manufacturing centers with these countries.

    Which is why high tax rates will ultimately drive companies overseas. Those that don't will try to make it appear as if their profits were made overseas rather than under U.S. tax jurisdiction.

    Nothing our government can do - short of take over the world - is going to improve the situation. The only thing it -can- 'do' is 'not do' and to step out of business affairs and to drop tax rates.

    i once heard an argument from a CEO of a company saying we should lower tases for big companies more, so that he can build a hotel faster and offer both a place to sleep and tourist attraction as well as higher employment. he did build that hotel and guess what? it costs more money then a normal citizen can afford and only viable for rich people, and most of the employees make minimum wage.
    I didn't hear a single bad thing about that.

    Those 'rich people' who 'are the only ones who can afford to stay at the hotel' are now in a place where they weren't, before. They are traveling from their homes and staying in a temporary residence. They can and will pay for convenience. They'll visit local restaurants. They'll shop at the corner store owned by a family to pick up a night's snack/meal at a 50% price hike rather than drive all the way to Wal-Mart to pick up groceries for the week at a less than 1% profit margin.

    The construction of that hotel brought in hundreds of construction workers and gave them jobs that would have, otherwise, not been available. Many of them were also commuting to the job - boosting revenues at many different gas stations and restaurants scattered through the commute region.

    The 'rich' people staying at those hotels are likely to be having meetings and holding other events that will draw people to the "motel 8" down the road that has 60% of its rooms vacant during normal business days.

    You're complaining about there not being money for you - and you're turning your nose up at the idea of having people in your community who have more money than they know what to do with - the people who can afford to go pay $20 on a meal and tip the waitresses while racking up another $30 at the bar.

    taxes should get higher and higher the more income the person make and should get higher and higher the more a company makes, not something that will lower them to middle class or even high middle class, they should still be the rich class, but much much more then they pay today. but you can't do that cause then all the rich people would run away to other states or countries that offer almost no tax. cause who cares about a stupid city and it's stupid people? i go to where i can generate the most money and screw people that might need it.
    That's the reality of life. If you want to run off the rich people who will spend money in a way that makes your performing arts degree useful - then that's your prerogative. Don't blame them for not seeing to your needs.

    There are limits in our responsibilities to other people. If you want a rich person's money, then, perhaps, rather than being hateful about it, you should consider things you can do that would make them willing to exchange some of that excess money.

    Maybe you can weld - or maybe you can make amusing toys that they'll buy at a premium price.

    Maybe you can sing or dance especially well.

    Or maybe you just have a nice rack and can convince them that you'll be more satisfying than their political union.

    It's nothing more than common thuggery when you decide that you're going to start taking someone else's earnings because "you need them."

    You don't. If you can't provide for you or cannot convince someone that you are worth keeping around - then you don't belong amongst the healthy and living. Simple as that.

    in short, if a company files for bankruptcy it's like the end of the world and we should spend millions to save it. but when a city files for bankruptcy we should all abandon it cause we lose money there. money has no homeland.
    The government, essentially, purchased those companies. It wasn't that they were just 'bailed out.'

    The problem, however, is that the fundamental problems weren't fixed. Those still remained.

    Honestly - the companies should have been 'allowed to fail.' The government's solution was a Band-Aid applied to a sucking chest wound. The Band-Aid was quickly soaked through, and the country's condition not improved.

    The same thing, here. We could bail out the city. But nothing we could do can fix it. Even if the city were to repeal all of its horrible decisions and drop its tax rates through the floor - the whole thing is pretty much doomed.
     
         

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    Re: city of Detroit files for bankruptcy

    Clevland, Ohio's Theme

    "At least were not Detriot!"
     
         

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    Re: city of Detroit files for bankruptcy

    Quote Originally Posted by Penguin2640 View Post
    Clevland, Ohio's Theme

    "At least were not Detriot!"
    That's like watching the first car of the roller coaster you're on fly off of the tracks and saying: "Well, at least that isn't us."

    *sigh*

    Life is about to get... interesting.
     
         

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    Re: city of Detroit files for bankruptcy

    Quote Originally Posted by Aim64C View Post
    This is, largely a misnomer. The problem, here, is that the media likes to take misrepresentations of a CEO's pay, such as when he/she receives a bonus or when he/she cashes in stock options, and portray it as "this is what they make all the time." Which is not an accurate portrayal.





    This is rather rare. The exception to this is in banks - where banks are, essentially, different arms of the Federal Reserve.



    That is sort of true.

    There are many factors that influence whether or not a company decides to relocate.

    Zoning laws, various industry restrictions (a number of environmental regulations do very little to actually reduce negative effects on the environment but cost companies substantial amounts of money), and taxes are all direct government impacts.

    Other major factors are costs of shipping. Why set up a business that is largely going to try and export to other nations in the middle of Missouri?

    Perhaps one of the most detrimental, though, are labor unions. If enough people of a given trade in a region join a union, and they demand $30 an hour because minimum wage just got taken up to $9 an hour (and they were previously at $24 an hour) - then you have to pay them that, or relocate.

    Since it's a never-ending battle against the entitlement mentality in the U.S. - most companies elect to move.

    Why? Because contrary to popular belief - they only make about a 3% profit margin on what rolls off the line. Employee wages often account for about 50% of most companies' expenses. Which means a demand for a 20% increase in employee wages is going to force roughly a 10% increase in price.

    And you're selling this product in a market where other companies in China (many of them native to China) are making competing products.



    That graph doesn't even begin to make any sense. Why would you compare corporate income tax to the GDP of a country? The government has continually doctored the process for determining GDP in order to favor certain statistics.

    There is, however, a more relevant factor: http://en.wikipedia.org/wiki/Corpora..._United_States

    "Deferral is one of the main features of the worldwide tax system that allows U.S multinational companies to delay paying taxes on foreign profits. Under US tax law, companies are not required to pay US tax on their foreign subsidiaries’ profits for many years, even indefinitely until the earnings are returned to US. Therefore, it is one of the main reasons that U.S corporations pay low taxes, even though the corporate tax rate in the U.S is one of the highest rates (35%) in the world."

    This is a huge part of the picture, and something our government has yet to really realize and address. Our exceptionally high corporate tax rate encourages abuse of this behavior.

    What this also means is that, since the 70s, our government has been in nearly direct competition with other governments. Governments compete for businesses - those businesses bring economic activity and also hire people to increase employment rates. The U.S. has long lived in a largely self-serving economic system as a net exporter. That's come to an end with the rise of China and India - where we are a net importer and are in direct competition for high tech and manufacturing centers with these countries.

    Which is why high tax rates will ultimately drive companies overseas. Those that don't will try to make it appear as if their profits were made overseas rather than under U.S. tax jurisdiction.

    Nothing our government can do - short of take over the world - is going to improve the situation. The only thing it -can- 'do' is 'not do' and to step out of business affairs and to drop tax rates.



    I didn't hear a single bad thing about that.

    Those 'rich people' who 'are the only ones who can afford to stay at the hotel' are now in a place where they weren't, before. They are traveling from their homes and staying in a temporary residence. They can and will pay for convenience. They'll visit local restaurants. They'll shop at the corner store owned by a family to pick up a night's snack/meal at a 50% price hike rather than drive all the way to Wal-Mart to pick up groceries for the week at a less than 1% profit margin.

    The construction of that hotel brought in hundreds of construction workers and gave them jobs that would have, otherwise, not been available. Many of them were also commuting to the job - boosting revenues at many different gas stations and restaurants scattered through the commute region.

    The 'rich' people staying at those hotels are likely to be having meetings and holding other events that will draw people to the "motel 8" down the road that has 60% of its rooms vacant during normal business days.

    You're complaining about there not being money for you - and you're turning your nose up at the idea of having people in your community who have more money than they know what to do with - the people who can afford to go pay $20 on a meal and tip the waitresses while racking up another $30 at the bar.



    That's the reality of life. If you want to run off the rich people who will spend money in a way that makes your performing arts degree useful - then that's your prerogative. Don't blame them for not seeing to your needs.

    There are limits in our responsibilities to other people. If you want a rich person's money, then, perhaps, rather than being hateful about it, you should consider things you can do that would make them willing to exchange some of that excess money.

    Maybe you can weld - or maybe you can make amusing toys that they'll buy at a premium price.

    Maybe you can sing or dance especially well.

    Or maybe you just have a nice rack and can convince them that you'll be more satisfying than their political union.

    It's nothing more than common thuggery when you decide that you're going to start taking someone else's earnings because "you need them."

    You don't. If you can't provide for you or cannot convince someone that you are worth keeping around - then you don't belong amongst the healthy and living. Simple as that.



    The government, essentially, purchased those companies. It wasn't that they were just 'bailed out.'

    The problem, however, is that the fundamental problems weren't fixed. Those still remained.

    Honestly - the companies should have been 'allowed to fail.' The government's solution was a Band-Aid applied to a sucking chest wound. The Band-Aid was quickly soaked through, and the country's condition not improved.

    The same thing, here. We could bail out the city. But nothing we could do can fix it. Even if the city were to repeal all of its horrible decisions and drop its tax rates through the floor - the whole thing is pretty much doomed.
    Exactly.
    When the economy goes down the tubes people always try to blame the rich.
    Earn your own damn money. I don't understand where this stupid sense of entitlement comes from in people.
    People are forgetting what a free market economy is. Darwinism. The weaker businesses fail. The stronger survive. That doesn't mean the biggest either. All you need is a location, a niche, a supply, and a demand. Basic economics people. You do not need a government hand out pulled from other people's pockets.
     
         

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