One of my partners in crime here at the site wrote:
I’ve been reading a great deal about who and what brought down Detroit, but very few have made the case as clearly as they should have. It was the Progressives, but they used racism and communism to do it.
I’m not going to argue that point because it is largely true – but I also read something this morning that has bothered me all day today – sort of like having a little bitty splinter that isn’t big enough to really hurt but just nags the hell out of you. I finally was able to pull that little sucker out – Joe is right – but there is a mechanism by which the “progressives” brought down the house…There is a “how” to Joe’s “why” and it is the same thing that threatens to bring down America and in turn, the global economy.
That mechanism is the use of public debt as a financing mechanism for “progressivism”.
Even the glorious revolution of the workers seeking liberation from the bourgeoisie must be financed.
Come to think of it, the citizens of Detroit actually accomplished that liberation – but bourgeoisie packed up and blew town…and took the businesses and jobs with them.
Taxes are a necessary evil. Excessive taxation just plain evil. Using public debt to pay for “progressivism” is positively Satanic.
I saw this paper at the Ludwig Von Mises Institute by Andrei Znamenski about Hitler’s favorite mayor of Vienna, Dr. Karl Lueger:
When Dr. Lueger was elected mayor for the first time, he promised the working masses there would be a “new deal,” and he lived up to his promise by initiating a wide range of public reforms and welfare measures. With an iron fist, Lueger dispatched his watchdogs to all corners of Vienna to check up on and ensure that Viennese merchants and businessmen had set “right prices” for their merchandise and services. He had electric power stations built, which brought light to the dark city. In addition to a new large hospital, he had 100 new schools erected, and he ordered that in-kind relief, including free lunches, be provided to the poor children of Vienna. The mayor’s crowning achievement was creating more than 100,000 temporary and permanent public jobs that would employ people at the city’s expense. A large army of bureaucrats emerged to administer this burgeoning “municipality socialism”; under Lueger, the number of such bureaucrats increased fivefold.
Under his guidance, the city’s entire infrastructure was eventually removed from private hands and transferred to the municipality: gasworks, power stations, street cars, waterworks, the slaughterhouse, and even the brewery. As part of this socialization scheme, Lueger set up special municipal banks to combat private “Jewish” banks. Decades later, commending his beloved Vienna’s mayor for building this “municipal socialism,” Hitler wrote, “Everything we have today in terms of municipal autonomy goes back to [Lueger]. He turned those businesses that were private elsewhere into municipal enterprises, which is why he could make the city of Vienna more beautiful and larger without raising taxes even by one cent.”
To finance all these ambitious public ventures, instead of raising taxes, the mayor pioneered the use of a device that is so painfully familiar to current politicians: long-term domestic and foreign debt. By the time Lueger was gone, inflation “took care” of some of this debt. The rest of it had to be paid back to foreign banks in gold, which devastated the weak economy of the young Austrian republic that inherited this “glorious legacy” after 1918. At the turn of the twentieth century, however, these troubles were an unseen future, and the protector of the “little people” was shining.
When Lueger did not get his way or he simply needed to extract more money from private businesses for his projects, he turned himself into a community organizer, mobilizing masses for direct action: rallies, demonstrations, and boycotts against the rich, the rich Jews, the Slavic migrants, depending on the situation. He frequently led these public protests personally. Word about the brave mayor, who sided with the common man of Vienna, spread all over, and soon the entire lower half of Austria followed his gospel of social justice. Understanding the deadly power of democratic voting that he was able to harness, Lueger became one of the major driving forces behind the introduction of universal suffrage in the Austro–Hungarian Empire in 1905.
See any similarities? Even though Lueger died in 1910, this could have been written about Lyndon Johnson, Jimmy Carter, Bill Clinton or Herr Obama.
The effect of taxation is both immediate and limiting. The public feels the bite of the taxman with every paycheck and the government can’t spend more than they take in. Long term debt is like a Ponzi scheme, in the beginning as more people join and few get payouts, it allows new debt to be piled up on top of old until the pyramid flips and there are too few to pay out anything because the money was not invested in growth but taken out to pay for limousine service for members of the school board, and fat pensions for the union members.
If you honestly take a look at Detroit, yes, it was communism and racism but they also did just about everything exactly wrong (Stacy McCain has a good post on that subject).
The only reason they lasted this long was the accumulation of debt. When they couldn’t borrow any more, the merry-go-round stopped.
We are doing the same thing at the national level. Over two thirds of our national budget goes to some sort of entitlement or support program and we have accumulated over 16 trillion in debt to finance it.