Monthly Archives: August 2013

Great Powers Could Slash Over Syria

The long-delayed western intervention in Syria may well be the most complicated Middle Eastern venture to date.

Unlike prior actions in Iraq or Libya, strong international interests, predominately from Russia and China, are arrayed against humanitarian action, and the regime of Syrian strongman Bashar al-Assad has shown no reluctance to employ weapons of mass destruction. Indeed, British news sources have reported that Assad’s forces have even fired on U.N. observers. An emboldened Iran could also become a major player.

A number of factors are in play. American credibility is at an all-time low following the Obama Administration’s failure to respond to the murder of its ambassador in Benghazi. The diminished size of the U.S. military, and the White House’s premature withdrawal from Iraq and the announced departure from Afghanistan portray an administration that is allergic to confrontation.

Assad may have a more significant arsenal at this disposal than prior regional adversaries. Israel’s Mossad has reported that Saddam Hussein’s weapons of mass destruction were evacuated to Syria before the second Gulf War deposed the dictator.

Most worrisome, however, are China and Russia’s steadfast opposition to western action. Both have used their influence at the United Nations. Unusually strong language, including the phrase “catastrophic,” have been employed by Moscow to describe what they believe would be the result of western attempts to intervene on behalf of the Syrian opposition to halt Assad’s internationally banned use of poison gas against his own populace.

Russia’s opposition is clearly motivated by its direct military self-interest. Moscow has a key naval base at the Syrian port of Tartus. The facility service Russian naval vessels in the Mediterranean, an area that has once again become an active area of contention between Moscow and the West.

President Putin has been strongly dedicated to restoring and enhancing his nation’s oceanic prowess, returning to bases employed by the Soviet Union before it collapsed, and committing vast resources to modernizing and expanding its naval force. The Kremlin announced an unprecedented $700 billion programfor that purpose.
China, which has established close military ties to Russia, has had the most dramatic naval armament program of all. In addition to establishing key elements of blue-water navy such as an aircraft carrier, it has developed sophisticated ship-killing missiles that have no equal anyplace in the world.
The Chinese economy requires vast supplies of oil, and coming to the assistance of the Syrian regime may give it influence to secure supplies.
It is not an exaggeration to state that the possibility of a wider conflict arising out of this situation is a very real danger.

EGYPT’S COPTIC CHRISTIANS PROTEST OBAMA ACTIONS SEEN AS SUPPORTING MOSLEM BROTHERHOOD

Largely ignored by the media, Coptic Christians, who have been targeted by the former Egyptian President Morsi’s Moslem Brotherhood, marched on the White House on August 22 to protest what they describe as President Obama’s support of that terrorist group.

According to the Coptic Solidarity organization,

“Houses of worship and Coptic-owned property have been systematically targeted and the geographic scope of the attacks has spread to several villages and districts within single governorates; the resulting damage is unprecedented.

“At least 45 churches came under simultaneous attack in various governorates as soon as procedures to clear the two sit-ins began, resulting in the death of 7 citizens, the torching of 25 churches, the looting and destruction of 7 churches and the partial destruction of 5 more churches. This is in addition to assaults on numerous schools, civic associations and church-affiliated social services buildings.” Other reports note that Christian nuns have been paraded through the streets of Cairo as “prisoners of war.”

This was not a reaction to any western influence. Coptics are native to Egypt, and actually constituted the majority religion of the nation as far back as 400 A.D. Even after the Moslem conquests, Coptics remained the majority for hundreds of years. After centuries of Moslem rule, they still represent a significant minority of the population. Both Catholic and Protestant sects of the religion exist.

The White House supported the ousting of former Egyptian leader Hosni Mubarak, who did not oppress Christian groups, was friendly towards the United States, and supported peace in the region. His replacement by Mohammed Morsi, a Moslem Brotherhood leader, was seen as a blow to both Coptic Christians, those supporting middle eastern peace, and improved relations with the West. Despite Morsi’s anti-Coptic, anti-peace, and anti-Western policies, the White House continued aid to Egypt.

Morsi’s rule was marked by administrative chaos and attempts to impose strict Sharia, the harsh Moslem religious-based law. Widespread dissatisfaction with both governmental miscues as well as the attempts to impose Islamic law led to his downfall.

Following Mr. Morsi’s subsequent overthrow by the Egyptian military, the U.S. continued aid, despite federal legal prohibitions against assisting governments formed under those circumstances. In the aftermath of Morsi’s overthrow, however, his Moslem Brotherhood supporters, many of whom were well armed, initiated violent actions against the new government of interim president Adly Mansour. At the same time, the Brotherhood increased its campaign of violence against Coptic Christians.

The Mansour government reacted to the violence by deploying the Egyptian army to contain it. In the ensuing fighting, a number of Moslem Brotherhood fighters were killed. This apparently prompted the White House to cutoff assistance to Egypt. Coptic Christians believe that President Obama’s action encouraged the Moslem Brotherhood.

THE DETROIT LEGACY

“Detroit can no longer be ignored…Americans are swimming in debt…Go ahead and laugh at Detroit. Because you are laughing at yourself…at the end of the day, the Detroiter may be the most important American there is because no one knows better than he that we’re all standing at the edge of the shaft.”

–Charlie LeDuff, author of Detroit, An American Autopsy.

THE COLLAPSE

With an annual budget deficit of $380 million and $18 billion in debt, Detroit’s fiscal position had become untenable. It had no reasonable expectation of repayment; indeed, some borrowed funds have been utilized for operating expenses. The unemployment rate, which has almost tripled in the past thirteen years, is over 18% and its population has dived from 1,850,000 in 1950 to a mere 710,000 currently.Since the advent of the 21st century, over a quarter of its population fled .

The descent of what was once one of the world’s most prosperous cities wasn’t inevitable. “Detroit and its adjacent cities were to the early 20th century what California’s Silicon Valley is today,” notes the Wall Street Journal. “Today, 40,000 structures of land parcels sit vacant or empty…36% of Detroiters [live] below the poverty level…in 2012 Detroit had the highest violent crime rate for a city with more than 200,000.”

It’s cultural grip on the American imagination is significant. Once the fourth largest U.S. city, and one of the most prosperous, in the nation, It had the potential to continue its significant and healthy position within the pantheon of the nation’s great urban centers. Now, it may not be able to even keep its commitments to its 20,000 muncipal retirees.

WHAT HAPPENED

The simplistic reason for The Motor City’s financial demise is the reduced presence of the auto industry. But that industry shrunk its footprint for very real and substantial reasons. Its withdrawal was not unique. Even Motown Records has left.

With the reduced spending on defense, government contracts could not provide even a minor fallback to the loss of auto manufacturing. A plant building tanks for the U.S. armed forces was closed under President Clinton in 1996.

The United Auto Workers has been extremely successful in its representation of its members. But in driving salaries up to $70 an hour in wages and benefits, along with onerous work rules, it made American auto manufacturing in Detroit uncompetitive. Manufacturers had every incentive to move out.

Municipal services in Detroit have been abysmal. A Heritage report notes that it takes the police an hour to respond to calls. Rampant crime (The Washington Post notes that it has the highest crime rate of violent crime among the nation’s big cities) has chased many of the city’s most productive citizens out, as have schools that cater more to union members at the expense of the students. Uncollected trash abounds. 40% of its streetlights don’t work.

According to a Fox News analysis, the high labor cost, combined with inadequate service has added $15 billion to the city’s unfunded liabilities.

While services are extremely low, Detroit’s taxes are excessive. The CATO Institute notes that of the 50 largest U.S. cities in 2011, Detroit had the highest property taxes on homes, apartment buikdings, commericial buildings, and industrial buildings.

THE ROLE OF BAD GOVERNMENT

For over half a century, Detroit has been subjected to one party rule. More than just the fact that Democrats have dominated the government for that extraordinary stretch of time is the fact that the individuals elected have followed an economically radical path that clearly dissuaded businesses from investing in the once prosperous municipality.

A report by the Better Government Association has ranked Michigan 48th out of 50 in key areas or governance.

A collection of crooked and politically extreme politicians has abused and defrauded the people of this once prosperous city. Former mayor Coleman Young, who many believed exacerbated the issue, expended political capital defending his police chief, William L. Hart, who eventually was convicted of stealing $2.6 million from the city’s taxpayers.

The career of former mayor Kwame Malik Kilpatrick, widely known as the “Hip-Hop Mayor,” symbolizes this sad legacy. Kilpatrick’s reign was brought to a close after convictions for perjury and obstruction of justice in 2010. In March of this year, he was convicted of violating his parole, and in May he was convicted of 24 counts of mail fraud, wire fraud, and racketeering.

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“Kwame Kilpatrick wasn’t the first Detroit politician to milk the city. It had been going on for a hundred years. And it wasn’t just the politicians. It was union bosses and contractors and industrialists and receptionists who were nieces of the connected. Evrybody got their piece and that was all right when Detroit was rolling in money. There was always enough grease to hide the flaws.”

–Charlie LeDuff, “Detroit, An American Autopsy”
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During his trial, federal officials noted that Detroit suffered from an environment of extortion, bribery, and fraud. Indeed, it is not inappropriate to suggest that the government of Motown has been more an exercise in organized crime than civic leadership in the past half century. Is it any wonder that it fell into bankruptcy? In response to these charges, the city’s leaders scream racism. But how does that account for the fact that middle income blacks move out of Detroit–a city solidly under the control of black politicians– as fast as they can?

An emphasis by Detroit civic leaders on exploiting racial divisiveness rather than cooperation has been deadly. Former Mayor Kwame Kilpatrick has strongly emphasized racial issues.

A Daily Caller http://dailycaller.com/2013/08/24/in-detroit-racial-rhetoric-concealed-corruption/article noted:
“Playing on people’s sensitivities and fears distracts attention from holding elected leaders accountable. Detroit’s political class understand this, and regularly delivers racial division rather than doing the hard work of attracting investment in the city.”

A journalist for Forbes of India visited Detroit, and reported that he was shocked at the state of disrepair in the once great metropolis. “A wrong turn around 10pm had us in a typical Detroit neighbourhood. The streets were pitch dark and potholed. The only lights were from the headlights of our car. It seemed like the zombie apocalypse had finally arrived–we couldn’t get out of there fast enough.”

$18 billion dollars of liabilities have mandated the move to Chapter 9 bankruptcy of what was one of the world’s most prsoperous cities. Chapter 9 is a form of bankruptcy under federal law reserved for municipalities, established by Congress in 1937. The Pew Center notes that its core purpose is to insure that basic civic functions are maintained even during a severe fiscal crisis. In Detroit’s case, that bears a touch of irony, since it can reasonably be argued that those services were already largely absent.

Permission from the state government is required for the move. Since the legislation became law eight decades ago, over 620 municipalities have sought its protection, including Orange County, California and Jefferson County, Alabama. But the trend is accelerating, and Detroit’s failure is unprcedented.

Both the White House and Detroit have pursued the expansion of social programs at the expense of creating an environment in which private sector jobs can be maintained and created. It’s a suicidal course that has already led to disaster. Michigan’s Mackinac Center’s Director of Labor Policy calls it the “Detroitization of America.”

Major Garrett, writing in the National Journal, notes that “Detroit’s failings are many and its debts staggering. Obama did not cause them. But his economic remedies and intervention have achieved little.” Obama’s extensive bailouts to the auto industry only served to strengthen the unions without delivering any improvements to the city’s dire condition.

It’s not as though Michigan hasn’t provided assistance. Reuters reports that multiple state programs and tax provisions aide Detroit. “Revenue from special levies add $164 million annually to Detroit revenues…Michigan Treasury Department data show that for fiscal 2013 Detroit was slated to receive nearly $260 per person from the state, several times what other cities in the state receive..”

Analysts note that Detroit’s policies closely resemble those implemented or sought to be implemented by President Obama. According to Michael Tanner, writing in Bloomberg.com, “A few years ago, the nonpartisan Bay Area Center for Voting Research rated Detroit as the most liberal city in America. The city’s own choices…are really responsible for Detroit’s failure.”

It’s a trend that leaves observers puzzled but that closely resembles current White House policy. While Detroiters are desperate for employment and the city itself urgently needs business, the muncipal government, notes Tanner, engages in a pattern of anti-enterprise taxes and regulations. It also imposes stiff “Living Wage” rules that sharply discourage hiring.

From The Michigan Governor’s Office:
The Facts on Detroit’s Bankruptcy

Q. 1: Why was it necessary for Detroit to use a Chapter 9 bankruptcy filing to address its financial problems?

A.: Detroit is in a financial crisis. Without major changes, the city is expected to run out of cash by December 2013. The city can’t borrow any more money, as it has for nearly a decade, to pay its bills. It can’t raise taxes, since its tax rates are already at the legal maximums. The city has an obligation to provide for the safety and welfare of its residents and without a comprehensive restructuring of its obligations, the city’s ability to do that is compromised. That situation must change to improve the quality of life for Detroit’s 700,000 residents and to attract new businesses and jobs to the city. Six decades of mismanagement and ignoring financial realities have brought us to this point. It’s time to fix the problem. Negotiations with creditors weren’t successful, so a bankruptcy filing was the last viable option to fix the city’s finances and start to provide Detroit’s 700,000 people the basic public services they need and deserve. Bankruptcy is the quickest way to get Detroit on a sound financial footing so it can meet the needs of its residents and be able to grow and prosper in the future.

Q. 2: Why didn’t the negotiations work?

A.: Fixing the city’s finances will require sacrifices from investors and many others. We had hoped those sacrifices would be worked out in good faith negotiations. Unfortunately, it became clear that those negotiations wouldn’t be successful for a number of reasons. There was no guarantee all the parties would agree. There was strong disagreement about the restructuring plan. Detroit is in a crisis and we’ve got to get going on the solution. A bankruptcy filing was the last viable option to fix the city’s finances and start to provide Detroit’s 700,000 people with the basic public services they need and deserve.
Q. 3: What does Chapter 9 bankruptcy mean?

A.: A court-supervised Chapter 9 restructuring gives the city an opportunity to resolve its financial crisis by providing additional tools that are not available outside of a federal court process. It provides a breathing spell during which the city can focus on restructuring and begin the process of sorely needed reinvestment. In addition, it allows the city to continue to work toward agreements with its vast and fragmented creditor groups. In the absence of agreements, the bankruptcy process can be used to bind non-consenting creditors. Detroit will continue to pay its employees and its vendors for essential services. It will continue to provide essential services to its 700,000 residents.
Q. 4: Why couldn’t the city solve its financial issues on its own? How can a judge decide what is the best for Detroit?

A.: A court-supervised process is the best and most efficient way to secure a strong, viable future for Detroit. Financial mismanagement, a shrinking population, a dwindling tax base and other factors over the past six decades have brought Detroit to the brink of ruin, both financially and operationally. All other options to fix Detroit’s finances have been exhausted. Detroit and its residents deserve better and we think a court-supervised restructuring is the best way forward. In this process, the city still will be the entity to propose its own restructuring plan and negotiate that plan.
Q. 5: How long will the city be in bankruptcy?

A.: That is hard to predict because the process can be affected by a variety of factors. Kevyn Orr and his team remain committed to moving forward with the speed, discipline, and efficiency of a corporate restructuring.
Q. 6: How could the city file so soon after just presenting its plan a month ago? Was that enough time to negotiate in good faith?

A.: We have held a series of meetings and negotiations and exchanged a significant amount of information. It quickly became clear that the city could not achieve consensual savings from its major creditors outside of a court-supervised process for a variety of reasons. First, there are large groups of creditors, including retirees and bond holders, that are unorganized and unrepresented. Having a forum in which to organize those creditors so that negotiations may ensue and binding solutions be developed is necessary for the restructuring to conclude. Second, some of the creditors with whom the city has met have refused to consider any changes to the city’s obligations. Resolutions with those creditors would have to be supervised by a court.
Q. 7: Does this mean the city won’t pay creditors or contribute to pensions any more?

A.: Chapter 9 bankruptcy allows the city time to focus on restructuring and revitalizations. These obligations will be addressed as part of the restructuring process.
Q. 8: Will the city continue to pay employees, retirees and vendors?

A.: Current employees will continue to receive their paychecks without interruption and will maintain their medical benefits and vacation privileges. The city will maintain current vendor contracts for essential goods and services and expects to continue to pay suppliers of such goods and services during the bankruptcy proceedings on a regular basis.
Q. 9: What does this mean for union contracts?

A.: The city will work with its various unions to address employee issues as part of its restructuring so that the city has an affordable long-term cost structure.
Q. 10: Will the city continue to provide essential services (police, fire, trash pickup) to residents?

A.: Yes, it will. There will be no change in services. In fact, over time, as the process of reinvestment begins, we expect to provide an improved service, which Detroit’s residents deserve.
Q. 11: Will the city begin selling certain assets, such as Belle Isle or the art in the DIA?

A.: The city continues to evaluate all legal options to maximize creditor recoveries and to provide funds to reinvest in the city and regain its place among America’s great and vibrant cities.
Q. 12: Will Detroit’s bankruptcy filing impact the creditworthiness of other Michigan municipalities and the state itself?

A.: Detroit’s situation is unique and it should not affect other cities or the state.
Q. 13: What happens next?

A.: Most importantly, the city intends to begin investing in its operational initiatives to improve services to Detroit’s residents and businesses. In addition, the city will continue to hold discussions with its creditor groups to seek consensual resolutions to obligations where possible.
Q. 14: What are the emergency manager and his team proposing?

A.: Kevyn Orr and his team presented a restructuring proposal to the city’s creditors on June 14. That proposal remains the basis for the city’s negotiations with creditors.
Q. 15: Won’t Detroit’s Chapter 9 filing have a negative impact on the city’s creditworthiness and reputation that will further impede Detroit’s ability to secure a strong, viable future?

A.: The filing was a decision we did not take lightly. However, it is the only viable option to secure a strong future for the city and its residents. The city had exhausted all other options. Detroit’s situation is well known and reasonable observers will recognize that the city had no other choice but to file for Chapter 9 protection. Longer term, we expect to have the processes and protocols in place to ensure that the reforms we make today will continue well into the future. In time, the short-term challenges we face today will yield to a brighter, more stable future for Detroit.
Q. 16: Wasn’t PA 436 and the process leading up to declaring a financial emergency just a pretense for filing Chapter 9. Wasn’t bankruptcy the goal all along?

A.: The goal is to create a strong, viable Detroit that can deliver basic essential services to its 700,000 people. That was the point of the consent agreement between the city and the state of Michigan that was entered into more than a year ago and which the city never implemented. That was the point for declaring a financial emergency in March. That was the reason an emergency manager was appointed and why a comprehensive city restructuring plan was proposed in June. The goal is a strong and viable Detroit. If this can be done in a negotiated way with creditors and stakeholders, the city will take that path. If not, then it will use other legal means to accomplish the goal. A bankruptcy filing was the last viable option to fix the city’s finances and start to provide basic public services to Detroiters.
Q. 17: Why the rush to file? Why not give more time for negotiations?

A.: It would be irresponsible not to file at this time. Detroit residents can’t wait for better services and safer neighborhoods. The emergency manager and the city’s restructuring team have worked for months to create a path to solvency. Together, they have held more than 100 meetings with stakeholders and negotiated in good faith with its creditors and unions. Those meetings have not put the city closer to a restructuring deal and it simply doesn’t have the financial resources to continue them without the structure provided by the Chapter 9 protection. Chapter 9 provides a process that can bring all of the city’s 43 unions, 53 creditors and other stakeholders to the table to arrive at a fair solution in an efficient and timely manner. At this point, without Chapter 9 protection, there is no likelihood that the city can reach a negotiated solution with its creditors and stakeholders.
Q. 18: This is the largest municipal bankruptcy in U.S. history and there has been speculation that it will have a big effect on the capital markets, especially on lending to public entities in Michigan. Did those factors have any influence on this decision?

A.: This decision was based on what’s best for the 700,000 people of Detroit and the state of Michigan. Filing for bankruptcy is the only viable option to provide the people of Detroit with the essential services that they need and deserve in a timely manner and to restore Detroit. Michigan can’t become a great state unless its largest city is healthy and strong. This filing puts Detroit on a path to have a solid financial footing. We won’t speculate about how the financial markets will react to this filing.
Q. 19: About 20,000 retirees from the city of Detroit are worried about their pensions and health care coverage. Can you give them any assurance that they’ll be protected in bankruptcy court?

A.: There’s the bankruptcy filing and other pending litigation against the state on this issue. Because of that pending litigation, it wouldn’t be appropriate to comment on that. We’re sensitive to the concerns of the retirees. While the pension funds do have assets, the challenge is that they have been underfunded and mismanaged. We are confident that all of the city’s creditors will be treated fairly in this process.
Q. 20. What about the claim from the retirees that the Michigan constitution protects their pensions? Do you agree with them?

A.: That’s a legal question that will have to be decided in the courts. Given that it’s already in the courts, it wouldn’t be appropriate to comment on it at this time.
Q. 21: What about a state bailout for the city or for the retiree pensions?

A.: The answer to that is “no.” That’s not an option. We don’t want to reward mismanagement. Keep in mind that we didn’t create this crisis. Sixty years of decline created this crisis. We’re making the tough decision to fix this problem so the 700,000 people of the city of Detroit get the basic public services they need and deserve and we can start to make Detroit great again.
Q. 22. So the state isn’t going to do anything to help Detroit and its 700,000 residents?

A.: The state has done a great deal to help Detroit and its people. There’s long list of things that the state has done to help Detroit over the past few years. Those include:
• Blight elimination. Detroit is one of five Michigan cities that will share in $100 million in federal funds to demolish abandoned properties.
• Economic development.
o Last year, the governor signed legislation to allow the 163-acre State Fairgrounds property to be used for economic development.
o Governor signed a bill that supports the development of a $650 million event center in downtown Detroit to be the new home of the Red Wings.
o The state is an active partner in revitalizing the Eastern Market, the Globe Building and the riverfront.
• Belle Isle offer: The state offered to lease Detroit’s treasured Belle Isle Park and handle restoration and maintenance, while allowing the city to retain ownership.
• Transportation
o The governor signed an agreement with Canada to build the New International Trade Crossing in southwest Detroit. That will generate 12,000 direct jobs.
o The state helped develop a regional transit authority to allow Wayne, Oakland, Macomb and Washtenaw counties to integrate all modes of public transportation.
o The state is partnering with community leaders to launch the M1 Rail, a proposed 3.3-mile rail line on Woodward Avenue that will benefit commuters, job providers, and help attract visitors.
• Children/Education
o In February 2013, the Michigan State Police and the Michigan Big Brothers Big Sisters Alliance formed a partnership to serve at-risk youth in Detroit and other urban areas.
o The Education Achievement Authority was created to provide a bold, innovative system of public schools that focus on the progress of each student.
 The system opened in September 2012 with 15 of Detroit’s lowest-achieving schools.
Q. 23: What would you tell a Detroit retiree who’s barely getting by today and is worried about seeing a big cut in their monthly pension?

A.: We’re not going to speculate about what might happen with pensions, because this legal process is just starting. We’re sensitive to the concerns of the retirees. While the pension funds do have assets, the challenge is that they have been underfunded and mismanaged. We are confident that all of the city’s creditors will be treated fairly in this process.
Q. 24: How do you think Detroiters will react to this bankruptcy?

A.: We won’t speculate on how people will react. What they should remember is that their needs have been secondary in the city for too many years. That the focus was on gimmicks and tricks to kick the financial can down the road and not on making sure the police or fire department would come when people called or that their garbage would be picked up or that their streetlights would be on at night to improve their safety. They should remember that the emergency manager has a plan to invest $1.25 billion in the city services over the next 10 years. They also should remember that this process will give Detroit a fresh start, so it can grow and prosper in the future.
Q. 25: What is your response to municipal bond market experts who say that Kevyn Orr’s restructuring plan to treat holders of general obligation bonds the same as holders of riskier securities breaks the long-standing “faith and credit” assumption for municipal bonds in the market and if implemented could have major repercussions?

A.: We’re not going to speculate about that. Obviously, the bankruptcy judge will make the final determination.
Q. 26: There have been some reports about the city having to pay $100 million or more for the attorneys and consultants handling this for the city. Couldn’t those dollars be used for pensions or something else?

A.: This is a very complicated matter and it needs to be done right. The city and Kevyn and his team have brought in some of the top experts in the country to work on this and they’ve gotten discounts on fees. This is not a do-it-yourself project. These experts are working to solve a financial crisis 60 years in the making. They’re doing their best to put the city on a sound financial footing and position it to grow and prosper in the future.
Q. 27: Attorney General Schuette has issued an opinion that the art at the Detroit Institute of Arts can’t be sold off to help the city out of its financial problem. Do you agree with that or do you think art lovers should be worried about losing the DIA art?

A.: That’s a complicated issue. The city continues to evaluate all options to maximize creditor recoveries and to provide funds to reinvest in the city and regain its place among America’s great and vibrant cities. Since this is all in the courts than that.

MISGUIDED PRIORITIES

For over half a century, the “Motor City” has solidly adhered to a pattern of emphasizing public assistance at the expense of basic services. Despite this politically-motivated “generosity,” little was gained for the people of Detroit. The police force dwindled, fire trucks went unrepaired, and even fire hydrants were left to rot.

Misguided funding priorities, combined with high taxes, (residents endure one of the highest big city property taxes in the U.S.) the undue influence of union leaders, and a continuously scandal-plagued government made the downfall of this once great metropolis inevitable. The dramatically reduced presence of auto makers (whose departures, most argue, were due to those practices) certainly presented an enormous fiscal challenge. However, the reality is that no amount of funding would be adequate to make up for the misguided programs and outright theft that characterized the municipal administration.

Irrationally, as Detroit desperately needed more jobs and a larger tax base, it imposed regulations and taxes that drove those two vital commodities out of town. In the same manner, Washington has been hiking taxes and enacting copious amounts of new regulations.

National Review notes that “Detroit is evidence for the fact that the economic limitations on tax increases sometimes kick in before the political limitations do. The relationship between tax rates, tax revenue, economic incentives, growth, and investment is complex, to say the least, and deeply dependent on the historical and economic facts of particular places at particular times. We have theories of growth, but no blueprint. But Detroit was not reduced to its present wretched circumstances by historical inevitabilities or the impersonal tides of economics. It did not have to end this way, but it did, and understanding why it did is essential if we are to avoid repeating Detroit’s municipal tragedy on a national scale.”

DETROIT’S FALL NOT INEVITABLE

Detroit’s fall was not inevitable. Michael D. LaFaive of Michigan’s prestigiousMackinac Center notes that thirteen years ago, he warned city leaders that excess expenditures and pension obligations would bring the city down. He recommended:

1. The city should contract out for the operation of its busing system. Possible savings: $60 million annually. (Through 2010 the operating subsidy ranged from $70 million to $75 million).
2. Sell Detroit’s electrical power system to an investor-owned utility. Estimated revenue from private sale in 2000: $301 million to $501 million.
3. Sell Cobo Conference/Exhibition Center. When we published our 2000 MPR, Cobo was receiving operating subsidies exceeding $15 million. A 1991 issue of Detroiter magazine – 20 years ago – estimated a sales price of $50 million. At that price a private owner might pay $1.9 million in property taxes each year.
4. Sell the water system for between $1.775 billion and $2.285 billion or just contract out for its management ($47.2 million in annual savings).
5. Contract out for garbage collection. Savings: $6.4 million annually.
6. Privatize inspections for mechanical, electrical, plumbing or building permits and licenses. We estimated in 2000 that the possible savings for privatizing these positions could top $5.1 million.
7. Sell Bell Isle: $370 million in one-time revenue and up to $13.8 million in new revenue. In addition, the city would be relieved of its [then] annual appropriation to Island care of $6.6 million.
Similarly, the White House has dramatically expanded programs such as food stamps at the expense of national security and other vital areas of federal responsibility. Just as basic municipal services were allowed to diminish in that once great urban center, Washington now discusses cuts in basic services across the nation. Just one example: while more and more giveaway programs emanate from the White House, the federal government can barely afford to deliver the mail six days a week.
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“Having led us on the way up, Detroit now seems to be leading us in the way down. Once the richest city in America, Detroit is now Ameria’s poorest. Once the vanguard of America’s machine age–mass production, blue-collar jobs, and automobiles–Detroit is now America’s capital for unemployment, illiteracy, dropouts, and foreclosures. It is an eerie and angry place of deserted factories and abandoned homes and forgotten people. Trees and switchgrass and wild animals have come back to reclaim their rightful places. Coyotes are here. The pigeons have left. A city the size of San Francisco or Manhattan could neatly fit into Detroit’s vacant lots.”
–From Detroit: An American Autopsy by Charlie LeDuff
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Despite Detroit’s ominous example, the federal government over the past four and a half years has also trod the path of escalating taxes, undue union influence, and an increasingly nontransparent administration.

Union Influence Trumps Citizen Needs

Both the White House and Detroit’s municipal government have redirected spending from basic services to an emphasis favoring unions, which contribute heavily to the campaigns of those favoring ever-expanding government, and those dependent on government programs, who overwhelmingly favor big government candidates. Detroit has not had a Republican mayor since 1961; in the last election, 96% of its voters favored President Obama.

The city’s public schools point to the problems of emphasizing union influence over the needs of the people. Michigan’s Capitol Confidential reports that despite some of the nation’s highest per capita expenditures on students, the city’s pupils have among the worst scores in the entire state. In 2003, a philanthropist’s offer of $200 million to develop charter schools was rejected because union chieftains were angered that these institutions would not be unionized.

Like Detroit, the USA is falling deeper and deeper into debt. Similar to Motown politicians for the past 50 years, the president and his allies are deeply indebted to union chieftains who care little about imposing strains on the general economy as long as they can look good to their members–even if those temporary gains mean that their membership eventually will lose their jobs. The New York Observer notes that “In Detroit, the policies of candidates who posed as ‘friends of the unions’ have now bought enormous pain and fiscal woe to the very pensioners who trusted them. Killing the goose that laid the golden egg is not being a friend–it’s madness.”

Corruption, Incompetence, & Excuses

The collection of corrupt and incompetent politicians who have run what was once one of the world’s most prosperous cities into the ground continuously provide ridiculous and insupportable excuses. They point to the reduced presence of the automakers. What they fail to admit, however, is that their policies drove those automakers out of town.

They scream racism. But how does that account for the fact that the government of Motown has been solidly African American for decades, and that middle income blacks move out of Detroit as fast as they can?

Again, the similarities with the practices of the current White House are ominous. Attention to scandals including the failure to rescue America’s ambassador to Libya, the transfer of weapons in the “fast & furious” scandal, the abuse of the IRS to attack political opponents, the refusal to prosecute election misdeeds, and the surveillance of reporters is deflected by making a racial incident of the Trayvon Martin case.

New York’s Michael Bloomberg, The mayor of America’s largest city, noted that his constituents should pay particular attention to the lessons of Detroit. The policies that ruined Detroit are not isolated to that city–they are a harbinger of the end result of a course now being implemented on the national level.

Detroit’s Today, America’s Tomorrow

“Detroit can no longer be ignored…Americans are swimming in debt…Go ahead and laugh at Detroit. Because you are laughing at yourself…at the end of the day, the Detroiter may be the most important American there is because no one knows better than he that we’re all standing at the edge of the shaft.”

–Charlie LeDuff, author of Detroit, An American Autopsy.

THE COLLAPSE

With an annual budget deficit of $380 million and $18 billion in debt, Detroit’s fiscal position had become untenable. It had no reasonable expectation of repayment; indeed, some borrowed funds have been utilized for operating expenses. The unemployment rate, which has almost tripled in the past thirteen years, is over 18% and its population has dived from 1,850,000 in 1950 to a mere 710,000 currently.Since the advent of the 21st century, over a quarter of its population fled .

The descent of what was once one of the world’s most prosperous cities wasn’t inevitable. “Detroit and its adjacent cities were to the early 20th century what California’s Silicon Valley is today,” notes the Wall Street Journal. “Today, 40,000 structures of land parcels sit vacant or empty…36% of Detroiters [live] below the poverty level…in 2012 Detroit had the highest violent crime rate for a city with more than 200,000.”

It’s cultural grip on the American imagination is significant. Once the fourth largest U.S. city, and one of the most prosperous, in the nation, It had the potential to continue its significant and healthy position within the pantheon of the nation’s great urban centers. Now, it may not be able to even keep its commitments to its 20,000 muncipal retirees.

WHAT HAPPENED

The simplistic reason for The Motor City’s financial demise is the reduced presence of the auto industry. But that industry shrunk its footprint for very real and substantial reasons. Its withdrawal was not unique. Even Motown Records has left.

With the reduced spending on defense, government contracts could not provide even a minor fallback to the loss of auto manufacturing. A plant building tanks for the U.S. armed forces was closed under President Clinton in 1996.

The United Auto Workers has been extremely successful in its representation of its members. But in driving salaries up to $70 an hour in wages and benefits, along with onerous work rules, it made American auto manufacturing in Detroit uncompetitive. Manufacturers had every incentive to move out.

Municipal services in Detroit have been abysmal. A Heritage report notes that it takes the police an hour to respond to calls. Rampant crime (The Washington Post notes that it has the highest crime rate of violent crime among the nation’s big cities) has chased many of the city’s most productive citizens out, as have schools that cater more to union members at the expense of the students. Uncollected trash abounds. 40% of its streetlights don’t work.

According to a Fox News analysis, the high labor cost, combined with inadequate service has added $15 billion to the city’s unfunded liabilities.

While services are extremely low, Detroit’s taxes are excessive. The CATO Institute notes that of the 50 largest U.S. cities in 2011, Detroit had the highest property taxes on homes, apartment buikdings, commericial buildings, and industrial buildings.

THE ROLE OF BAD GOVERNMENT

For over half a century, Detroit has been subjected to one party rule. More than just the fact that Democrats have dominated the government for that extraordinary stretch of time is the fact that the individuals elected have followed an economically radical path that clearly dissuaded businesses from investing in the once prosperous municipality.

A report by the Better Government Association has ranked Michigan 48th out of 50 in key areas or governance.

A collection of crooked and politically extreme politicians has abused and defrauded the people of this once prosperous city. Former mayor Coleman Young, who many believed exacerbated the issue, expended political capital defending his police chief, William L. Hart, who eventually was convicted of stealing $2.6 million from the city’s taxpayers.

The career of former mayor Kwame Malik Kilpatrick, widely known as the “Hip-Hop Mayor,” symbolizes this sad legacy. Kilpatrick’s reign was brought to a close after convictions for perjury and obstruction of justice in 2010. In March of this year, he was convicted of violating his parole, and in May he was convicted of 24 counts of mail fraud, wire fraud, and racketeering.

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“Kwame Kilpatrick wasn’t the first Detroit politician to milk the city. It had been going on for a hundred years. And it wasn’t just the politicians. It was union bosses and contractors and industrialists and receptionists who were nieces of the connected. Evrybody got their piece and that was all right when Detroit was rolling in money. There was always enough grease to hide the flaws.”

–Charlie LeDuff, “Detroit, An American Autopsy”
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During his trial, federal officials noted that Detroit suffered from an environment of extortion, bribery, and fraud. Indeed, it is not inappropriate to suggest that the government of Motown has been more an exercise in organized crime than civic leadership in the past half century. Is it any wonder that it fell into bankruptcy? In response to these charges, the city’s leaders scream racism. But how does that account for the fact that middle income blacks move out of Detroit–a city solidly under the control of black politicians– as fast as they can?

An emphasis by Detroit civic leaders on exploiting racial divisiveness rather than cooperation has been deadly. Former Mayor Kwame Kilpatrick has strongly emphasized racial issues.

A Daily Caller article noted: “Playing on people’s sensitivities and fears distracts attention from holding elected leaders accountable. Detroit’s political class understand this, and regularly delivers racial division rather than doing the hard work of attracting investment in the city.”

Is America is following the very policies
that have driven Detroit into bankruptcy?

Both the White House and Detroit have pursued the expansion of social programs at the expense of creating an environment in which private sector jobs can be maintained and created. It’s a suicidal course that has already led to disaster. Michigan’s Mackinac Center’s Director of Labor Policy calls it the “Detroitization of America.”

Analysts note that Detroit’s policies closely resemble those implemented or sought to be implemented by President Obama. According to Michael Tanner, writing in Bloomberg.com, “A few years ago, the nonpartisan Bay Area Center for Voting Research rated Detroit as the most liberal city in America. The city’s own choices…are really responsible for Detroit’s failure.”

It’s a trend that leaves observers puzzled but that closely resembles current White House policy. While Detroiters are desperate for employment and the city itself urgently needs business, the muncipal government, notes Tanner, engages in a pattern of anti-enterprise taxes and regulations. It also imposes stiff “Living Wage” rules that sharply discourage hiring.

Benefits vs. Essential Services

For over half a century, the “Motor City” has solidly adhered to a pattern of emphasizing public assistance at the expense of basic services. Despite this politically-motivated “generosity,” little was gained for the people of Detroit. The police force dwindled, fire trucks went unrepaired, and even fire hydrants were left to rot.

Misguided funding priorities, combined with high taxes, (residents endure one of the highest big city property taxes in the U.S.) the undue influence of union leaders, and a continuously scandal-plagued government made the downfall of this once great metropolis inevitable. The dramatically reduced presence of auto makers (whose departures, most argue, were due to those practices) certainly presented an enormous fiscal challenge. However, the reality is that no amount of funding would be adequate to make up for the misguided programs and outright theft that characterized the municipal administration.

Irrationally, as Detroit desperately needed more jobs and a larger tax base, it imposed regulations and taxes that drove those two vital commodities out of town. In the same manner, Washington has been hiking taxes and enacting copious amounts of new regulations.

Similarly, the White House has dramatically expanded programs such as food stamps at the expense of national security and other vital areas of federal responsibility. Just as basic municipal services were allowed to diminish in that once great urban center, Washington now discusses cuts in basic services across the nation. Just one example: while more and more giveaway programs emanate from the White House, the federal government can barely afford to deliver the mail six days a week. Both the White House and Detroit have pursued the expansion of social welfare programs at the expense of creating an environment in which private sector jobs can be maintained and created.

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“Having led us on the way up, Detroit now seems to be leading us in the way down. Once the richest city in America, Detroit is now Ameria’s poorest. Once the vanguard of America’s machine age–mass production, blue-collar jobs, and automobiles–Detroit is now America’s capital for unemployment, illiteracy, dropouts, and foreclosures. It is an eerie and angry place of deserted factories and abandoned homes and forgotten people. Trees and switchgrass and wild animals have come back to reclaim their rightful places. Coyotes are here. The pigeons have left. A city the size of San Francisco or Manhattan could neatly fit into Detroit’s vacant lots.”
–From Detroit: An American Autopsy by Charlie LeDuff
___________________________________________________________

Despite Detroit’s ominous example, the federal government over the past four and a half years has also trod the path of escalating taxes, undue union influence, and an increasingly nontransparent administration.

Union Influence Trumps Citizen Needs

Both the White House and Detroit’s municipal government have redirected spending from basic services to an emphasis favoring unions, which contribute heavily to the campaigns of those favoring ever-expanding government, and those dependent on government programs, who overwhelmingly favor big government candidates. Detroit has not had a Republican mayor since 1961; in the last election, 96% of its voters favored President Obama.

The city’s public schools point to the problems of emphasizing union influence over the needs of the people. Michigan’s Capitol Confidential reports that despite some of the nation’s highest per capita expenditures on students, the city’s pupils have among the worst scores in the entire state. In 2003, a philanthropist’s offer of $200 million to develop charter schools was rejected because union chieftains were angered that these institutions would not be unionized.

Like Detroit, the USA is falling deeper and deeper into debt. Like Motown politicians for the past 50 years, the president and his allies are deeply indebted to union chieftains who care little about imposing strains on the general economy as long as they can look good to their members–even if those temporary gains mean that their membership eventually will lose their jobs.

Corruption, Incompetence, & Excuses

The collection of corrupt and incompetent politicians who have run what was once one of the world’s most prosperous cities into the ground continuously provide ridiculous and insupportable excuses. They point to the reduced presence of the automakers. What they fail to admit, however, is that their policies drove those automakers out of town.

They scream racism. But how does that account for the fact that the government of Motown has been solidly African American for decades, and that middle income blacks move out of Detroit as fast as they can?

Again, the similarities with the practices of the current White House are ominous. Attention to scandals including the failure to rescue America’s ambassador to Libya, the transfer of weapons in the “fast & furious” scandal, the abuse of the IRS to attack political opponents, the refusal to prosecute election misdeeds, and the surveillance of reporters is deflected by making a racial incident of the Trayvon Martin case.

New York’s Michael Bloomberg, The mayor of America’s largest city, noted that his constituents should pay particular attention to the lessons of Detroit. The policies that ruined Detroit are not isolated to that city–they are a harbinger of the end result of a course now being implemented on the national level.

The A-Rod–Obama Connection

Both Barack Obama and Alex Rodriguez have had remarkably similar life stories and career arcs, differentiated only by the way each has been treated by the media.

The biographical facts set the stage for their roughly parallel careers.

Each man lived at least a small portion of their childhood abroad. Both were the product of parents that parted, and each was raised by their mother. They were apparently recognized early on as having exceptional potential. Both do possess extraordinary talent, enabling them to reach the pinnacle of their respective professions. Each has, at some point in their lives, admitted to the use of banned substances. They both have two daughters.

Both have been known to bend the rules. Rodriguez has been criticized for a variety on-field antics, such as attempting to distract an infielder; the President has been an ardent practitioner of “The Chicago Way.” As noted in National Review, “The [Chicago Democrat] machine’s core principle, laid out in an illuminating Chicago Independent Examinerprimer on “the Chicago Way,” is that at all times elections are too important to be left to chance.

Both blame others for their own questionable actions. Rodriguez has alleged that the New York Yankees are attempting to save dollars on their monumental contract obligations to him, now that his abilities have been depreciated by injury and age. The President blames the Republicans.

If it were not for the existence of scandals, both would have established a legacy for the ages. Rodriguez’s accomplishments on the ball field would have placed him in the very top tier of athletes. Barack Obama’s place in history doesn’t come from any particular accomplishment in office, but from his role as the first African-American president.

Both, however, have been irreparably scarred by scandals. But this is where the similarity ends.

A-Rod’s misdeeds are headline news throughout all the sports pages, and beyond. He has been subjected to scathing criticism by journalists, broadcast on every possible medium.

On the other, despite a train of scandals that in both number and seriousness exceeds anything found in preceding administrations, (including that of Richard Nixon) the current president has largely been gifted with press reaction that has chosen to, with only a few exceptions, ignore his extensive misdeeds.
These scandals began instantly upon taking office, when his Justice Department refused to prosecute overt cases of voter intimidation in Philadelphia. They continued with the inept transfer of weapons into the hands of Mexican drug cartels in the “Fast & Furious” debacle. Obama’s Attorney General, Eric Holder, was cited for contempt of Congress for his refusal to appropriately cooperate in investigations.

The misdeeds continued with revelations that the regulatory machinery of the Obama Administration, in true compliance with its “Chicago Way” roots, has been extensively and illegally employed to harass and intimidate political opponents. The abuses by the IRS and other federal agencies have no precedents, in terms of scale and seriousness, in U.S. history.

The White House’s failure to respond to the Benghazi assault resulted in the death of an American ambassador and others; the ludicrous attempt to blame the disaster on an unknown video was an amateurish move that was almost instantly disproved by experts.

Despite the dire seriousness of these misdeeds, however, the media has not subjected President Obama to the scathing criticism it has delivered over Alex Rodriguez’s actions. The reasons offer a fascinating insight into the inner workings of the American news establishment.

Beginning in the 1960s, the traditional concept of reporting—an objective description of the “who, what, when, where and why” of news stories, was replaced by what been called “the new journalism.” Under this formula, which now forms the dominant basis of current journalism, the actual facts are considered secondary to advocating a particular point of view, to the detriment of allowing the public access to the facts necessary to make their own decisions.

It is that concept that has helped the President, and worked against A-Rod. Journalists have been largely unhappy with the massive contract dollars given to the world’s most famous third baseman. On the other hand, they have been overtly supportive of President Obama’s policies, and provided him with mostly laudatory coverage both as a candidate and while in office.

The two men have similar biographies and career successes. Both have injured what could have been extraordinary legacies thanks to their misdeeds. But in their treatment by the media, their stories could not be more different.

IMMIGRATION REFORM: S744

IMMIGRATION REFORM

Senate passage of the “Border Security, Economic Opportunity, and Immigration Reform Act” (and the prospects for a fiery debate in the House of Representatives) have brought the contentious issue of illegal immigration to the forefront of American politics. The New York Analysis will take a multi-part look at this vital issue, reviewing the facts behind 21st century immigration, the wide range of opinions about it, current legislation, and possible alternatives.

THE BASIC IDEA

Supporters of S.744 (especially the White House, which lobbied heavily for it) stress that the measure provides increased border security for a conditioned pathway to legal status for illegal aliens, as well as a modernization of the entire immigration process. It’s supported by most Democrats in Congress and a minority of Republicans.

Editorial note: we use the language of the information sources we quote. The terms “illegal aliens” and “unauthorized immigrants” are therefore used interchangeably.

IMMIGRATION FACTS

Before reviewing the details or the politics of the measure, a check of the facts is vital.

According to the Pew Research Hispanic Center “The nation’s total immigrant population reached a record 40.4 million in 2011, according to an analysis of Census Bureau data by the Pew Hispanic Center…Over the last decade, the number of immigrants in the U.S. has steadily grown. Since 2007 alone, the number of immigrants living in the U.S. increased by 2.4 million. The number of unauthorized immigrants living in the U.S. also grew during the last decade, rising from 8.4 million in 2000 to 11.1 million in 2011…in 2010, there were 1 million unauthorized immigrants under age 18 in the U.S, as well as 4.5 million children whose parents were unauthorized…nearly two thirds of unauthorized immigrants had [as of 2010] lived in the U.S. for at least a decade and…(46%) were parents of minor children. ”

The Migration Information Source reports that Mexicans “constitute the single largest group of immigrants to the United States. 11.7 million Mexican immigrants reside in the United States, representing 29% of the US immigrant population and close to 4% of the overall US population.”

According to the Urban Institute, “Mexicans make up over half of undocumented immigrants–57 percent of the total, or about 5.3 million. Another 2.2 million (23 percent) are from other Latin American countries. About 10 percent are from Asia, 5 percent from Europe and Canada, and 5 percent from the rest of the world…Almost two-thirds of the undocumented population lives in just six states: California (26 percent), Texas (12 percent), Florida (10 percent) New York (8 percent), Illinois (4 percent), and New Jersey (4 percent). But, the most rapid growth in the undocumented population since the mid-1990s has been outside these states.”

While debate exists over the financial implications of illegal immigration, those costs remain considerable. According to a study by the Federation for American Immigration Reform, “The annual costs of illegal immigration at the federal, state and local level [is] about $113 billion; nearly $29 billion at the federal level and $84 billion at the state and local level.” The study also estimates tax collections from illegal alien workers, both those in the above-ground economy and those in the underground economy. “Those receipts do not come close to the level of expenditures and, in any case, are misleading as an offset because over time unemployed and underemployed U.S. workers would replace illegal alien workers.”

Senator Lamar Alexander (R-TN) notes that an illegal immigrant without a high school degree, which represents the majority, “…will impose a net cost on taxpayers of $89,000 over his or her lifetime.”

The Council of Foreign Relations contends “that America has reaped tremendous benefits from opening its doors to immigrants, as well as to students, skilled employees and others who may only live in the country for shorter periods of time.” But it warns that “the continued inability of the United States to develop and enforce a workable system of immigration laws threatens to undermine these achievements…. According to the report, the high level of illegal immigration in the country is increasingly damaging to U.S. national interests-“[it] diminishes respect for the law, creates potential security risks, weakens labor rights, strains U.S. relations with its Mexican neighbor, and unfairly burdens public education and social services in many states.”

ENFORCEMENT QUESTIONED

The Obama Administration’s enforcement of immigration laws has recently been called into question. In March, Senator Dan Coats (Republican-In) sharply criticized the Immigration and Customs Enforcement agency (ICE) for initiating an order to reduce the population of detained illegal aliens, noting the distress this caused to local communities. Although ICE claimed the release was for budgetary reasons, Coats noted that the agency was appropriated sufficient funds.

S.744 was sponsored by the “Gang of Eight” bipartisan group that included Senators Chuck Schumer (D-NY), John McCain R-Az), Michael Bennet,(D-Col.) Richard Durbin (D-IL), Jeff Flake (R-Az) , Lindsey Graham (R-SC), Robert Menendez (D-NJ), and Marco Rubio (R-Fl.) It passed the Senate by a 68-32 margin, but will face a tough time in the House.

The 1,000-plus page bill affects the entire immigration process and issues related to it, including border security and enforcement against illegals. It substantially addresses a broad range of matters related to legal immigration. S.744 alters family and employment-based visa categories, specifies due-process protection, and broadens the availability of nonimmigrant foreign workers. It provides legal status to illegals.

The measure requires that a series of “triggers,” (enforcement measures) take effect before the legalization process begins. The DREAM Act (“Development, Relief, and Education for Alien Minors) and the AGJOBS (Agricultural Job Opportunities, Benefits and Security Act) are incorporated into S. 744.

It also affects matters related to immigrant removal, detention and legal proceedings. It gives greater discretion to judges in removal cases, and simplifies the asylum procedure. It increases available penalties for specified criminal activities.

Official Summary of S.744
Border Security, Economic Opportunity, and Immigration Modernization Act
(Congressional Research Service Summary)

(Sec. 2) States that passage of this Act recognizes that the primary tenets of its success depend on securing U.S. sovereignty and establishing a coherent and just system for integrating those who seek to join American society.
(Sec. 3) Prohibits the Secretary of Homeland Security (DHS) (Secretary) from processing applications for registered provisional immigrant status (RPI), as established by this Act, until the Secretary has submitted to Congress the notice of commencement of implementation of the Comprehensive Southern Border Security Strategy and the Southern Border Fencing Strategy.
Prohibits the Secretary from adjusting RPI aliens to lawful permanent resident status, with certain exceptions, until the Secretary certifies to the President and Congress that: (1) the Comprehensive Southern Border Security Strategy is substantially deployed and operational, (2) the Southern Border Fencing Strategy is substantially completed, (3) a mandatory employment verification system to be used by all employers to prevent unauthorized workers from obtaining U.S. employment has been implemented, and (4) an electronic exit system at air and sea ports of entry that operates by collecting machine-readable visa or passport information from air and vessel carriers is in use.
Authorizes the Secretary to waive legal requirements necessary to ensure construction of the physical infrastructure pursuant to this section. Grants U.S. district courts exclusive jurisdiction to hear claims (which may only be brought on Constitutional grounds) arising from any such action.
(Sec. 4) Establishes a Southern Border Security Commission if DHS has not achieved effective control in all high-risk border sectors within five years after enactment of this Act.
States that the Commission’s primary responsibility shall be to make border security policy recommendations and submit a related report to the President, the Secretary, and Congress. Terminates the Commission 30 days after submission of such report.
(Sec. 5) Directs the Secretary to implement: (1) a Comprehensive Southern Border Security Strategy for achieving control between the ports of entry in all high-risk sectors along the Southern border, and (2) a Southern Border Fencing Strategy to identify where fencing and technology should be deployed along the Southern border.

(Sec. 6) Establishes in the Treasury the Comprehensive Immigration Reform Trust Fund.
Provides initial funding from the Treasury and continued funding from fees collected pursuant to this Act.

CONGRESSIONAL BUDGET OFFICE REVIEW

The Congressional Budget Office estimates that S.744 would lead to a net increase of 10.4 million people residing in the U.S., compared to the change that would have occurred under current conditions.

The CBO’s examination of S. 744 has met with mixed reviews, due in part to its unsupported supposition that some federal revenues-by the sum of $459 billion over the 2014-2023 period– would rise due to increased employment. The CBO fails to convincingly detail where, in an era of already high unemployment and extremely slow economic growth, these jobs would come from.

It estimates that the bill would boost direct spending by $262 billion for federal benefit programs as well as direct spending for enforcement and other expenses.

The CBO also notes that S.744 would impose private sector and intergovernmental mandates, with the burden falling on employers and other entities that hire, recruit or refer employment candidates. These costs would total a minimum of $700 million by 2016.

THE NEXT PHASE

S.744 now moves to the House of Representatives, where it is not expected to pass in its current form. Speaker John Boehner (R-Ohio) notes:

“…Border security in the Senate bill is not sufficient to solve the problem…the Congressional Budget Office agreed. It found that illegal immigration would only drop by 25% under the Senate Plan…First and foremost, that means confidence that our borders are secure; confidence that those who came here illegally are not given special treatment; confidence that hardworking taxpayers are being respected; and confidence that a majority of both parties have had their say and support the final product.”

ELECTED OFFICIALS VIEWS ON S.744

Upon passage of the Immigration Reform Bill in the Senate, President Obama stated:

“The bipartisan bill that passed today was a compromise. By definition, nobody got everything they wanted. Not Democrats. Not Republicans. Not me. But the Senate bill is consistent with the key principles for commonsense reform that I – and many others – have repeatedly laid out.

“If enacted, the Senate bill would establish the most aggressive border security plan in our history. It would offer a pathway to earned citizenship for the 11 million individuals who are in this country illegally – a pathway that includes passing a background check, learning English, paying taxes and a penalty, and then going to the back of the line behind everyone who’s playing by the rules and trying to come here legally. It would modernize the legal immigration system so that it once again reflects our values as a nation and addresses the urgent needs of our time. And it would provide a big boost to our recovery, by shrinking our deficits and growing our economy.”

In contrast, Senator Tom Coburn (R-Indiana) stated:

“This bill is a historic missed opportunity for the United States Senate. It is a $48 billion border stimulus package that grants amnesty to politicians who want to say they are securing the border when in fact they are not. I very much wanted to support an immigration reform proposal that balances our fundamental American values of legal immigration and the rule of law. Sadly, this bill fails that test.

“Speaker Boehner and House Republicans now have all the justification they need to start over. I would encourage the House to use President Reagan’s view of immigration as a blueprint. In his farewell address Reagan described what he saw when he talked about America as the ‘shining city on the Hill.’

“Reagan said, ‘it was a tall, proud city built on rocks stronger than oceans, wind-swept, God-blessed, and teeming with people of all kinds living in harmony and peace; a city with free ports that hummed with commerce and creativity. And if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here.’

“Walls with doors’ is an immigration policy that can unite our nation. But, today, Democrats sound like they want only doors; Republicans only walls. The truth is we have neither. We have chaos.

“House Republicans have a chance to be the higher chamber and get reform right. They should first remind the public that America is exceptional because it is a miracle of assimilation unrivaled in human history. The fire beneath our melting pot is not our economic or material wealth, but an immaterial idea that all people are created equal and are endowed by the Creator – not the State – with certain rights. Every legal immigrant who ‘comes hurtling through the darkness, toward home,’ as Reagan said, makes that fire brighter and our nation stronger.

“The House also has an obligation to defend the rule of law, which is what the debate about border security is really about. According to the Council on Foreign Relations, our border is only 40 to 55 percent secure. At the same time, under the Senate bill, illegal immigration will drop by only 25 percent according the Congressional Budget Office. Meanwhile, more than 40 percent of all people who are currently here illegally came through the front door and have overstayed their visas.

“The rule of law is the glue that holds our nation together and it guarantees the freedom that has drawn millions to our country. As a nation, we have an obligation to our citizens – and to legal immigrants – to uphold the rule of law and ensure the process is fair to all. Unfortunately, this bill is full of holes as far as the rule of law is considered. It is written so that the Secretary of Homeland Security can waive almost every portion of it. That’s not the rule of law. That’s the rule of rulers.

“The House can, and must, do better. But we should be precise about what the problem is. Oklahomans and people across this country aren’t mad at illegal immigrants. They’re mad at Washington. And they are right to be angry. Politicians who pass laws they have no intention of enforcing do more to undermine the rule of law than a Guatemalan father of four who crosses the border twice a year to help feed his extended family. We can’t welcome everyone, but we should be delighted people want to come to this country, and we should do everything in our power to treat aspiring Americans fairly and with dignity.

“I filed 19 amendments to improve this bill, including amendments to help secure the border and increase interior enforcement. Unfortunately, those amendments were not considered. The House now has an opportunity to give the American people the debate they want and deserve.”

REACTION IN THE
HOUSE OF REPRESENTATIVES

It appears that the Senate legislation will not pass the House of Representatives in its current form. On July 10, the House leadership, including House Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), Majority Whip Kevin McCarthy (R-CA), Conference Chair Cathy McMorris Rodgers (R-WA), Homeland Security Committee Chairman Michael McCaul (R-TX), and Judiciary Committee Chairman Bob Goodlatte (R-VA) issued the followingstatement in the aftermath of a special meeting of the House Republican Conference to discuss the issue of immigration reform:

“Today House Republicans affirmed that rather than take up the flawed legislation rushed through the Senate, House committees will continue their work on a step-by-step, common-sense approach to fixing what has long been a broken system. The American people want our border secured, our laws enforced, and the problems in our immigration system fixed to strengthen our economy. But they don’t trust a Democratic-controlled Washington, and they’re alarmed by the president’s ongoing insistence on enacting a single, massive, Obamacare-like bill rather than pursuing a step-by-step, common-sense approach to actually fix the problem. The president has also demonstrated he is willing to unilaterally delay or ignore significant portions of laws he himself has signed, raising concerns among Americans that this administration cannot be trusted to deliver on its promises to secure the border and enforce laws as part of a single, massive bill like the one passed by the Senate.”

A SAMPLING OF
ORGANIZATIONAL REACTIONS

1. In Favor of the Legislation

A. United Auto Workers

“The UAW commends the 68 U.S. senators for approving a strong bill and passing the Border Security, Economic Opportunity and Immigration Modernization Act (S.744) Thursday. We urge the House to do the same, and we must remain vigilant to ensure fair and comprehensive immigration reform is passed.

“From our earliest days, the UAW has been a leader in the struggle to secure economic and social justice for all people. Our commitment to improving the lives of working men and women extends beyond our borders. It encompasses families from around the globe, and keeping families together is integral to helping shape the future of American economic stability, and protecting and preserving workers’ rights.

“The heart of S. 744 is our movement’s core demand: the creation of a reliable, inclusive road map to citizenship for 11 million aspiring Americans. This bill represents a big step toward ending family separation and toward strengthening worker protections.

“Our country’s immigration system is broken. Without a pathway to citizenship, millions of workers are forced into a shadow economy and exploited by unscrupulous employers,” said UAW President Bob King. “That drives down wages and working conditions for all workers and puts employers who want to do the right thing at a competitive disadvantage.

“Who wins when undocumented immigrants live in fear? Only employers who take advantage of them win. The rest of us lose,” King added. “Comprehensive immigration reform supports the right of all workers to a voice on the job and a decent standard of living for their families. It’s past time to lift the fear of deportation for individuals who are contributing to our country.”

“The current system divides families and forces workers to live in fear,” said UAW Vice President Cindy Estrada, who directs the union’s Competitive Shop/Independents, Parts and Suppliers (IPS) Department and leads organizing efforts in the auto parts industry. “No child should be separated from its parents. Too many children go to school in the morning not knowing whether their parent will be home when they return.

“Our country can do better for our families. Policies that separate spouses and tear children from parents are anti-family, and yet, that’s what our broken immigration system does,” added Estrada. “Between July 1, 2010, and Sept. 31, 2012, nearly 23 percent of all deportations – or 204,810 deportations – were issued for parents with citizen children.”

“We are deeply disheartened that Republicans insist on wasting billions more to further militarize the border at a time when schools, military and infrastructure are facing extreme budget cuts. But today’s 68-32 passage represents a positive step forward, and we call on House Speaker John Boehner to allow a vote on comprehensive immigration reform to preserve the pathway to citizenship for the 11 million aspiring Americans.”

B. Catholic Legal Immigration Network

“The Catholic Legal Immigration Network, Inc. (CLINIC) commends the United States Senate for voting in favor of important changes to the nation’s broken immigration system. Yesterday, the Senate passed S. 744, the Border Security, Economic Competitiveness, and Immigration Modernization Act of 2013. The measure includes significant reforms to family- and employment-based immigration programs, provides an earned path to citizenship for undocumented immigrants, and provides for additional enforcement measures along the U.S.-Mexico border.

“While we have grave concerns about the unprecedented build-up along the southern border, we are encouraged by the strong bipartisan support that the Senate has shown for reform. It is now up to the House to move forward on comprehensive immigration reform that will reunite families, grow businesses, protect workers, and provide a broad path to citizenship” said CLINIC’s executive director, Jeanne Atkinson.

“The passage of comprehensive immigration reform will have a profound effect on the nation and the communities CLINIC’s affiliates serve. CLINIC is focused on building the capacity of its network of more than 215 high-quality charitable legal immigration programs. Utilizing lessons learned from successfully implementing the Administration’s Deferred Action for Childhood Arrivals (DACA) program, CLINIC is ready to provide training and support on legalization implementation. CLINIC recently brought together, and will continue to work with, national partners to strategize ways to serve the millions who will qualify.”

2. OPPOSED TO THE LEGISLATION

A. The Coalition Against S.744

[S.744] s bloated and unwieldy along the lines of Obamacare or Dodd-Frank;
• Cedes excessive control over immigration law to an administration that has
repeatedly proven itself to be untrustworthy, even duplicitous;
• Legalizes millions of illegal immigrants before securing the borders, thus ensuring future illegal immigration;
• Rewards law breakers and punishes law enforcement, undermining the rule of law;
• Hurts American job-seekers, especially those with less education;
• Threatens to bankrupt our already strained entitlement system;
• Expands government by creating new bureaucracies, authorizing new spending, and calling for endless regulations;
• Contains dangerous loopholes that threaten national security;
• Is shot through with earmarks for politically connected interest groups;
• Overwhelms our immigration bureaucracy, guaranteeing widespread fraud.
B. D.C. March For Jobs

The DC March for Jobs, which is organizing a major rally against immigration reform which they believe ignores the needs of unemployed and underemployed Americans, is organizing a rally scheduled for July 15 in Washington.

According to the organization:

“We believe it is time that members of Congress act to preserve economic opportunity for American workers – and pass immigration legislation that protects and supports the nearly 22 million American citizens who do not have jobs, or cannot find adequate employment to support their families. Economists report that labor participation in the U.S. is at its lowest rate in over 30 years.

“Despite sluggish economic conditions, some in Congress have put forth immigration proposals to increase legal immigration levels by 50% and provide amnesty to over 11 million people who have entered the country illegally. We stand against these proposals, as they will result in adding millions more to the U.S. labor force, putting millions of American citizens out of work.”

During the Senate debate, the group delivered the following letter to Congress:

“Dear Members of Congress,

“We, the undersigned members of the Black American Leadership Alliance respectfully address this letter to Members of the Senate Gang of Eight, the Congressional Black Caucus, and to Senators from those states having the highest rates of black unemployment. We write in our capacity as leaders of the Black American Leadership Alliance, a Washington, DC-based organization whose primary mission is to further the economic and social interests of the black community. We write to express our serious concerns with Senate Bill 744. Given the fact that more than 13% of all blacks are unemployed – nearly double that of the national average, it is our position that each Member of Congress must consider the disastrous effects that Senate Bill 744 would have on low skill workers of all races, while paying particular attention to the potential harm to African Americans. Credible research indicates that black workers will suffer the greatest harm if this legislation were to be passed. We are asking that you oppose Senate Bill S.744 because of the dramatic effect it will have on the availability of employment for African American workers.

“Many studies have shown that black Americans are disproportionately harmed by mass immigration and amnesty. Most policy makers who favor the legalization of nearly 11 million aliens fail to acknowledge that decades of high immigration levels has caused unemployment to rise significantly, most particularly among black Americans. They further fail to consider how current plans to add 33 million more legal workers within ten years will have an enormously disastrous effect on our nation’s jobs outlook. With respect to African Americans, well respected researchers from some of America’s most venerable universities have found undeniable links tying large-scale immigration in the U.S. to declining rates of employment for America’s black citizens. The National Bureau of Economic Research recently issued a report
asserting that 40 percent of the decline in employment rates for low skilled black men in recent decades was due to immigration. Studies by Borjas and Katz, professors from Harvard University, found that immigration reduced the earnings of certain native born laborers by as much as eight percent and other demographic groups by 2 to 4 percent.

“According to research conducted by University of California San Diego economics Professor Gordon H. Hanson, immigration has accounted for 40% of the 18 percentage point decline in black employment rates, and current immigration proposals are sure to substantially raise these numbers. Upon conducting research in this area, Professor Vernon Briggs of Cornell University concluded that illegal immigrants and blacks, both of whom are disproportionately likely to be low skilled, frequently compete for the same jobs, and that a large number of illegal immigrants ensures a surplus of low skilled labor, thus keeping wages for black workers artificially low.

“The House Immigration Subcommittee also addressed this topic when panelists presented a report from the Center for Labor Market Studies (CLMS) at Northeastern University entitled “Exclusive: Over a Million Immigrants Land U.S. Jobs in 2008-2010.” Unsurprisingly, the study found that unskilled immigrants were taking jobs in the construction sector, jobs that young, American workers typically gravitate towards. Of course, some of the immigrants referred to by Senate Bill S. 744 work in high skill sectors, but the vast majority of them will compete with young Americans for entry level jobs, including jobs traditionally held by black workers in the low skilled wage sector. Andrew Sum, director of the Center for Labor Market Studies, estimates that 35 percent of the immigrants taking these construction jobs are
undocumented.

“Many blacks compete with immigrants, particularly illegal immigrants, for low skilled jobs due to skill level and geography, and there are simply not enough of these jobs to go around. Consider the fact that nearly 51% of African Americans do not have a higher education. In 2011, 24.6% of blacks without a high school diploma were unemployed. Even blacks with a high school diploma were unemployed at a rate of 15.5% that same year. Passing legislation to add additional workers to an already swamped labor market will only exacerbate these statistics. Despite the fact that these figures are readily available and have been reported by the U.S. Commission on Civil Rights, many lawmakers have chosen to do nothing, putting politics over the well-being of constituents. Yet, the fact remains that the proposed immigration bill will nearly double legal immigration levels and provide instant work authorization to over 11 million illegal immigrants. We are firmly convinced that such an expansion of the labor force during one of the most protracted periods of high unemployment in decades will result in suppressed wages for all Americans, but the effects on African Americans will be the most devastating.

“Given the current economic outlook, with declining wages and fewer opportunities for black workers, now is not the time to add millions more workers as S. 744 proposes.

“Nationally, labor participation is at 63.3% – the lowest level since 1979. Passage of the Senate’s amnesty bill will continue to flood an already overcrowded labor force and result in reduced wages and opportunities for many black citizens who are least able to afford it. Following even the simplest rules of supply and demand, this increase in available low skilled labor will undoubtedly reduce wages for all workers. However, according to the experts, the impact will be hardest on the black community.

“If passed, the proposed immigration bill will be costly for all Americans, but will harm black American workers more than any other group. Mass immigration and amnesty puts African Americans from all walks of life out of work and suppresses wages, causing them to compete with aliens willing to work in poorer working conditions for cheaper pay. When almost one in
seven blacks is unemployed, now is not the time to further saturate the labor force with increased immigration levels and amnesty. If Congress fails to stop this irresponsible legislation, the United States will continue to see more and more blacks out of jobs and unable to support their families. The disastrous effects of illegal immigration to the black community is not simply limited to jobs.

“The Black American Leadership Alliance is calling upon the Senate Gang of Eight and those Members from states having the highest rates of black unemployment to recognize the devastating effects amnesty and mass immigration has on low skilled workers, particularly those in the black community. Secondly, we implore each Member to fulfill his or her duty to the
millions of Americans struggling to find work by opposing amnesty and supporting policies to reduce overall levels of legal and illegal immigration.”

CONCLUSION

Prior legislative assurances of tightened border control have not been met, leading to a deep-seated mistrust of the basic compromise of S.744, which is more security for a guaranteed path to legalization. This promises to be a significant roadblock to achieving the compromises necessary for the passage of immigration reform legislation in the House.

AMERICA’S VANISHING DEFENSE INDUSTRY

AMERICA’S VANISHING DEFENSE INDUSTRY

n a stunning series of across the board reports from defense analysts, retired military leaders, manufacturers, elected officials, unions and Congressional committees over the past several years, it has been revealed that America’s ability to produce the weapons and technology vital to our national defense is rapidly vanishing.

An analysis prepared by the Industrial Union Council of the AFL-CIO
reports that:

“…a much greater number of items once supplied by U.S. manufacturers are now obtained from foreign suppliers–flat panel displays, machine tools, advanced electronics and information technologies–because they are not readily available from U.S. producers.” The study reports that U.S. Joint Forces Command Colonel Michael Cole believes that the problem is not just a matter of a handful of highly specialized items designed to meet narrow defense requirements, but the “eradication of the U.S. industry capacity.” Col. Cole also is concerned that current strategies to address the crisis are not working… ”

Those concerns are echoed by The Alliance for American Manufacturing:

“The United States’ national security is threatened by our military’s growing and dangerous reliance on foreign nations for the raw materials, parts, and finished products needed to defend the American people. The health of our manufacturing sector is inextricably intertwined with our national security, and it is vital that we strengthen the sector. The health of the United States’ defense industrial base–and our national security–is in jeopardy. We are vulnerable to major disruptions in foreign supplies that could make it impossible for U.S. warriors, warships, tanks, aircraft, and missiles to operate effectively.”

According to the Alliance, “China controls key inputs needed for military equipment…The United States is completely dependent on a single Chinese company for the chemical needed to produce solid rocket fuel used to propel Hellfire missiles.”

The news gets worse. High-tech magnets are vital components in military equipment and vehicles. The United States does not produce any of these key parts, but China manufactures 75% of the world’s supply.

The crisis extends also to essential raw materials. America imports 91% of the rare-earth element lanthanum, used for night vision, from China.”

HOW IT HAPPENED

America’s dependence on overseas sources is not merely the result of a change in global economics. Much of it is the unintentional result of financial policies which have driven U.S. manufacturers out of business, a downturn in military procurement, and, most recently, the intentional actions of the Obama Administration.

A key case in point concerns the Abrams tank, America’s premier fighting vehicle. There is only one plant–in Lima, Ohio–in the entire USA that manufactures these machines. There was another facility near Detroit, but it was closed in 1996. President Obama has sought to shut the Lima down, leaving America without the ability to produce this essential part of our defense. The plant’s life has been extended for two years, but the future looks uncertain.

Rep. Bud McKeon (R-Ca.), Chair of the House of Representatives Armed Forces Committee, notes that planned cuts would “devastate” the industrial base:

“Even without sequestration, companies are cutting investments, shuttering operations, and laying off workers because of the uncertainty emanating from Washington. Sequestration would risk severe and permanent damage to the defense industrial base as a competitive commercial enterprise, reliable provider of urgent wartime needs, and as a national strategic assets. Massive layoffs will lead to a lost generation of skilled workers that will be impossible to replace; Slashing R&D spending will stifle the innovation that keeps our military the most advanced in the world; Consolidation by large contractors will reduce competition, crush small businesses, and increase costs.”

The Industrial Union Council reports that, “No single indicator by itself can represent economy-wide manufacturing capabilities or trends. But [there are] several key indicators of domestic economic performance:

“value-added output, industrial capacity and capacity utilization, employment, and number of establishments-and global competitiveness-balance of trade in goods and import penetration rate–when taken together,provide strong evidence that America’s manufacturing base has greatly weakened over the last decade. The former indicators reflect the economy’s ability to maintain and increase output growth over the long run. The latter reflect the American manufacturers’ ability to compete with foreign producers in domestic and global markets.

“Well-known examples of defense critical technologies where domestic sourcing is endangered include propellant chemicals, space qualified electronics, power sources for space and military applications (batteries and photovoltaics), specialty metals, hard disk drives, and flat panel displays (LCDs). University of Texas at Austin engineering professor Michael Webber
evaluated the economic health of sixteen industrial sectors ‘within the manufacturing support base’ of the U.S. defense industrial system, ‘that have a direct bearing on innovation and production of novel mechanical products and systems,’ and whose output ‘is used directly in the design process of other industries.” Of the sixteen industries he examined, thirteen showed
significant signs of erosion, especially since 2001.

“These industries supply critical materials, components and parts used in defense systems or they are enablers and enhancers of innovation within industries important to national security, including aerospace. The movement of these industries oversea, which increases the dependence of the defense industrial base on offshore or foreign-owned components and equipment (e.g., semiconductors, PCBs, machine tools), can adversely impact national security…

“The erosion and migration of domestic manufacturing is also weakening the America’s R&D and innovation capacity and undermining its global technological leadership. The design, development and production of both commercial and defense-specific technologies and products are tightly linked. As Michael Webber warned, if the U.S. manufacturing base “that props up the
entire national innovation system continues to deteriorate in the United States, but grows and thrives overseas, then large numbers of America’s most innovative companies might be inclined to move overseas to be closer to production and the necessary support base. . . . Significant deterioration of companies that design and make discrete components is triggering a fundamental hollowing out of the national innovation system.”

Retired U.S. Army Brigadier General John Adams has called for a joint strategy by government, industry, academic research institutions, and the military to increase U.S. domestic production of manufactured items and recovery of natural resources that the armed forces require. In addition, his recommendations emphasize the importance of investment today in the technological innovation, education, and training needed to keep America secure tomorrow.

Sequestration, if implemented as planned, will have a further devastating impact both to existing U.S. forces as well as the American defense industrial base. According to Rep. McKeon, the impact would be “catastrophic.” The House Armed Forces committeereports:

“The Numbers: the defense budget would be cut an additional $55 billion per year from the levels established in the Budget Control Act. That would mean an additional $492 billion in cuts on top of the $487 billion already being implemented. In total, over $1 trillion would be cut over the next ten years with disastrous consequences for soldiers, veterans, national security, and the economy.

A Historically Small Military
in an Extraordinarily Dangerous World

“In the midst of the most dynamic and complex security environment in recent memory, sequestration would severely diminish America’s global posture. An additional 100,000 soldiers, sailors, Marines, and airmen would be separated from service. Those reductions would lead to The smallest ground force since 1940.
• A fleet of fewer than 230 ships, the smallest level since 1915
• The smallest tactical fighter force in the history of the Air Force
“Precisely at the moment when advanced military technology is spreading around the world, America would be forced to make severe cutbacks, eroding our technological advantage. The cuts would include:

• Termination of the Joint Strike Fighter, minimal upgrades to existing forces, and a wider “fighter gap”
• Termination of the new strategic bomber critical to America’s future posture in the Asia-Pacific
• Delaying new submarines and cutting the existing fleet as nations like China expand anti-sub capabilities
• Shrinking America’s aircraft carrier fleet, reducing power projection capability
• Termination of the littoral combat ship essential to defeating anti-access threats from nations like Iran

“The combination of cuts to force structure and advanced technology would lead to a hollow force increasingly uncertain of its ability to defend the nation.”

Jobs, Jobs, Jobs

Cuts to spending for the acquisition of military equipment alone would lead the loss of over 1,000,000 private sector jobs. These cuts could push unemployment back up to 9%. Cuts to active-duty and DOD civilian personnel would amount to over 350,000 jobs lost. The impact will be borne disproportionately by some states. The ten states that will feel the largest pain as a percentage of the state economy are Virginia, Connecticut, Alabama, Arizona, Maryland, Alaska, Hawaii, Wisconsin, Massachusetts, and Missouri.

Economic Impact

Stephen S. Fuller, PH.D., performed a study for George Mason University in 2011 that examined the potential economic impact of proposed DOD spending reductions in 2013. The study is an instructive example of the negative effect on the economy this particular area of government cutting could have.

“Deductions for the acquisition of military Equipment… will significantly exceed the initial dollar value of these spending reductions as measured by lost jobs and personal income …reduced non wage expenditures, and a decreased rate of economic growth…Additionally, the impacts of these losses will extend across the full breadth of the U.S. economy, as this decreased spending will result in reduced spending for consumer goods and services. For each job lost by DOD’s prime contractors and their direct and indirect suppliers within the aerospace and military equipment industry as a result of DOD cutbacks for the acquisition of military equipment, three additional jobs would be lost in other sectors across the breadth of the U.S. economy. These job losses in non-military equipment manufacturing would occur in professional and business services, financial, information and administrative services, retail trade, leisure and hospitality services, education and health services, construction and other manufacturing.”

According to Frank Gaffney, Jr., Director of the Center for Security Policy, the worst impact will be on the national safety of the United States. Reductions due to sequestration could cut $500 billion in planned defense spending over a decade. but the economic impact of the resulting loss of… jobs, 88% of which will be in small businesses, will also be devastating. Additonal problems resulting from reducing loan guarantees from the Export-Import Bank for arms manufcturers will also have dire consequences.

Recommendations

The Alliance for American Manufacturing provides the following recommendations:
1. Increasing long-term federal investment in high-technology industries, particularly those involving advanced research and manufacturing capabilities.
2. Properly applying and enforcing existing laws and regulations to support the U.S. defense industrial base.
3. Developing domestic sources of key natural resources required by our armed forces.
4. Developing plans to strengthen our defense industrial base in the U.S. National Military Strategy, National Security Strategy, and the Quadrennial Defense Review process.
5. Building consensus among government, industry, the defense industrial base workforce, and the military on the best ways to strengthen the defense industrial base.
6. Increasing cooperation among federal agencies and between government and industry to build a healthier defense industrial base. U.S. manufacturing jobs has reduced the size of the workforce skilled in research, development, and advanced manufacturing processes.
7. Strengthening collaboration between government, industry, and academic research institutions to education, train, and retain people with specialized skills.
8. Crafting legislation to support a broadly representative defense industrial base strategy. Congress and the Administration must collaborate on economic and fiscal policies that budget for enduring national security capabilities and sustain the industrial base necessary to support them.
9. Modernizing and securing defense supply chains through networked operations.
10. Identifying potential defense supply chain chokepoints and planning to prevent disruptions.