The city of Detroit can be thought of as a microcosm of the United States in many ways. It is grand central of Democratic socialism with its endless tax and spend policies and labor union politics. Once the center of industry in the United States, the labor unions have completely destroyed the auto industry, and all the jobs have left to go south or have been outsourced to more market friendly locations overseas.
With the state of Michigan taking over Detroit it is moving closer to a hard default – bankruptcy. Detroit owes $14 billion in long-term bonds and pension obligations, which can never be paid with the dwindling tax base. The city cannot even make its current payroll. They are seeking a bailout from either the state (unlikely) or the federal government.
The financial situation for the U.S. government is not much different. Although unlike Detroit they can print money to cover their obligations for a while there will eventually be a Great Default, as Gary North calls it. There is no way the unfunded liabilities of $222 trillion for Social Security and Medicare can ever be paid. There will be cuts – it’s just a matter of when they will happen. Will it be in a controlled manner or in a crisis situation like in Detroit?
Economic policies will have to change or there will be a crisis which most Americans are not prepared to deal with. Don’t be one of them. Be prepared.