Obamacare and the Death of Detroit

[Hgunner]

Well worth a few minuties of you time.

http://www.marketoracle.co.uk/Article18136.html

Obamacare and the Death of Detroit, the First U.S. City To Face Extinction

Politics / US Politics Mar 24, 2010 - 05:47 AM

By: Gary_North

To understand what is going to happen to America's health care delivery system, we must first understand what has happened to Detroit.

Detroit is dying. Yes, I know that there are lots of books on "The Death of. . . ." That word sells books. But Detroit really is dying. It is the first metropolis in the United States to be facing extinction. We have never seen anything like this in American history. It is happening under our noses, but the media refuse to discuss it. To do so would be politically incorrect. Two factors tell us that Detroit is dying. The first is the departure of 900,000 people – over half the city's population – since 1950. It peaked at 1.8 million in 1950. It is down to about 900,000 today.

In 1994, the median sales price of a house in Detroit was about $41,000. The housing bubble pushed it up to about $98,000 in 2003. In March 2009, the price was $13,600. Today, the price is $7,000.

There has never been a collapse of residential real estate values of this magnitude in peacetime history, anywhere. Detroit is dying.

We are unfamiliar with anything like this. The media are silent. The Powers That Be are not interested in reporting on this, because readers might ask the obvious question: "How did this happen?" Obvious questions tend to lead to obvious answers.

Detroit has been killed by flight out of the city. The 2008 Clint Eastwood movie, Gran Torino dealt with this problem. Eastwood plays an 80-something Korean War veteran who will not leave the neighborhood. His children keep bugging him to sell and move into a retirement home. He will not hear of it. He is alienated from them and from his immigrant neighbors: Hmong refugees from South Vietnam. The Hmong have trouble with the Blacks. Every group is essentially trapped in a neighborhood, with the gangs running the show.

There is no surge of buyers to take advantage of fabulously low prices in Detroit. Can you imagine buying a home for cash for $13,600 in 2009 – a house that had sold for $98,000 six years earlier – and losing half your money? It's incredible.

The Wall Street Journal recently ran one of the most creative stories I have seen in years. The journalist told the story of the history of a 5-bedroom home in Detroit, from the land purchase to its recent sale. It was built by one of the most influential man you have never heard of, Clarence Avery. Avery was on the Ford Motor Company team that conceived of implementing an assembly line for Ford's factory. He copied the idea from a hog-slaughtering operation.

His home was a very nice home for the time. The journalist located his daughter, now age 91. She said that she always thought the home was the best home she ever lived in.

As recently as 2005, the home sold for $250,000. It was purchased by a woman who was lent $200,000 to buy it. It was financed by a subprime loan. The asking price was $189,000. Where the other $61,000 went, the woman has no idea. She defaulted.

The deteriorating house was bought by a Christian organization that is renovating it. The house sold for $10,000.

This is simply inconceivable to anyone who is unfamiliar with Detroit since 2005. Nothing like this has ever happened. How can we conceive of a lender lending $200,000 to a woman to buy a $250,000 home offered at $189,000? How can we conceive of a fall in price from $250,000 to $10,000?

This is the sign of a dying city. This does not happen in a normal environment. Even with the mania created by Fannie Mae and Freddie Mac, in conjunction with Alan Greenspan's Federal Reserve, nothing like this has happened anywhere else.

If you had predicted anything like this in 2005, you would have been dismissed as a crackpot on crack. You would not have been taken seriously by anyone. Yet it has happened.

The city planners, the Federal government's subsidy defenders, and the welfare state aficionados are all discreetly silent about Detroit.

The city funds its schools with property taxes. Property taxes have collapsed as sources of revenue. An honest property tax system will generate less than ten cents on the 2003 dollar.

Last week, the school board announced the closing of one-quarter of Detroit's schools. The city is out of money. The central agency of propaganda by the government is in the process of closing up shop. This is not "anti-business as usual." This is collapse. The American public does not perceive what is happening in Detroit.

When a city simply shuts down from the effects of government mismanagement, the media say nothing. Detroit has become the poster child of government regulation, welfare systems, and a population that has given up hope.

The media say nothing because they are caught in a dilemma. If they say that the local government's welfare programs are not really to blame, what does that leave? The unmentionable issue: 82% of the city is Black. So, that means blaming white employers, who discriminate, despite 40 years of Federal anti-discrimination laws. But the main non-employers today are the region's auto companies, and two of the three are partially owned by the U.S. government. One – GM – is mainly owned by the retirement fund of the United Auto Workers. So, the media are not about to blame the auto companies – not now.

That leaves that other politically incorrect issue: the rate of illegitimacy, which is in the 80% range. That social phenomenon represents a moral collapse, but the participants were all educated by the tax-funded schools.

Who ya gonna blame?

The media pundits cannot decide, so they simply ignore the collapse. "Detroit? Never heard of it."

The lesson of Detroit is this: the experts do not see a collapse coming. They assume that next year will be like today, give or take 3%. They do not believe that anything as complex as a city can collapse. So, they believe that things will continue, as they always have. Taxes need not be cut. Spending need not be cut. Schools should be allowed to educate. Tax-funded welfare programs should be increased. When it comes to tax revenues, "there's always more where that came from."

And then, overnight, the system collapses. The assumptions were wrong. Real estate prices collapse, indicating an irreversible flight of capital from the city. The ability of the government to collect taxes collapses.

OBAMACARE

This brings me to the other subject: the health care law. It is not law yet, but it soon will be.

I know what is going to happen.

1. Cost overruns

2. Fraud

3. Additional coverage extended to groups

4. Rising deficits in the program

5. Lower payments to physicians

6. Lower payments to hospitals

7. Delays in payments

8. Rising taxes on the rich

9. Rationing by doctors, hospitals, government

10. Delays in treatment

11. More HMO care: assembly line medicine

12. A search for scapegoats

In 1977, I was involved in an early warning operation. Three teams of physicians and economists toured the country. We hit 30 cities in two weeks. We warned physicians in poorly attended meetings that something like Obamacare was coming. It has now arrived. The physicians we spoke to are mostly retired. They saw some of this happen on a minor scale, but they escaped.

I spoke about the percentage of the GDP (then GNP) devoted to heath care: about 7%. Today, it is 15%. Medicare and Medicaid have increased costs. The care is no better. Except for technology, it is arguably worse.

Obamacare will lead to an expansion of these forms of medicine:

1. Concierge

2. Wal-Mart

3. ER

4. HMO

5. Mexican

CONCIERGE. The rich and very rich hire their own physicians. They pay top dollar. The physicians do not take third-party payments, either from the government or insurance companies. They are independent practitioners. They make house calls. The houses they call on are very large.

For the upper middle class, there are fee-for-service physicians. They take no third-party payments. They do not make house calls.

WAL-MART. These are the walk-in clinics. They are price competitive. They treat minor ailments. They sell services on a one-time basis. They take credit cards. They may or may not cater to the Medicare crowd. They are assembly-line clinics. There are no major surgeries or other high-cost, high-risk services.

ER. Large hospital emergency rooms are mandated by law. The poor get treated there. In a life-and-death emergency, they work. People who would otherwise die in a couple of hours are saved. For walk-in patients, the ERs ration by time. Patients demonstrate their patience.

HMO. This style of medicine is efficient. It cuts costs by cutting services and cutting time. You see the physician on duty. You may not have seen him before. His job is to get you in and out as fast as possible. Time is monitored by the company. Computers make this easy.

MEXICAN. This is off-shore medicine. In Canada, when you can't get treated for months or years, you come to the United States and pay. This will not be possible for Canadians much longer, except for rich ones. Mexico will serve upper middle-class Americans as the USA has served Canadians.

It is possible to get very good surgical care in Asia and Latin America. You have to know who the good practitioners are. Asian hospitals sell for 25% the same level of services. There is less regulation there. Plane fares are cheap. A stay in a hotel is cheap.

There will be entrepreneurs who set up Websites off-shore that direct Americans to practitioners abroad. The Web allows this sort of advertising.

Physicians who practice alone or in small limited liability corporations will find that they cannot compete under the new payment system. Assembly-line medicine will replace the traditional doctor-patient relationship.

TRAPPED

Most physicians are trapped. They cannot sell their practices. The price of practices has been dropping.

Foreign-trained physicians who can pass the U.S. tests are coming to America. They are competitive.

Technical Services that can be digitized are being outsourced to India and other Asian nations.

Young American physicians begin with a lot of debt. They need income fast. They will be hired by the HMOs and clinics. They will not reach the salary level of this generation of physicians. They will be upper-middle-class income-earners.

There will be specialists, of course. Plastic surgeons who specialize in making rich women better looking will not be part of the new system. They will be able to do well. But for the typical practitioner, his career options have been dramatically restricted by the new law.

I think most physicians will stick it out until they retire at age 67. They owe money. They need the income. The law's most restrictive provisions will not kick in until 2014. They will adjust.

Residents of Detroit also adjusted. Then, without warning, the economy changed. Those who were still living in the city saw their capital disappear.

People put up with the devils they know. They do not look for a lifeboat when they hear the ship scrape the iceberg. They assume that it will be business as usual.

Then, one fine day, it isn't.

CONCLUSION

You had better decide which kind of medical care you can live with. Then you had better locate a practitioner soon. This is especially true if you want a fee-for-service physician. People with money will go to them. They are already hard to find. They charge more. It's not easy to become a patient. They are booked up.

If you have an existing physician, do what you can to become an above-average patient.

You had better start getting into shape. You can no longer afford to be vulnerable to the diseases and afflictions of a flabby lifestyle. ObamaCare has changed the risk-reward ratio. Risk has just gone up. It will continue to go up.

There will be no roll-back of this law. It is going to be enforced for as long as the U.S. government has money.

That may not be as long as Obama thinks.

Gary North [send him mail ] is the author of Mises on Money . Visit Gary North -- Specific Answers . He is also the author of a free 20-volume series, An Economic Commentary on the Bible .

LewRockwell.com

© 2010 Copyright Gary North / LewRockwell.com - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

[Guest gts]

Hmm .... interesting...well if the causes of Detroit's decline are any indicator, then Memphis is only a few years away from the same kind of downfall. Which, IMHO, would be the best damn thing to happen to this God-forsaken city...aside from the eventual New Madrid earthquake of course.

Edited March 29, 2010 by gts
spelling

[mikegideon]

I always assumed Detroit was dying because the US auto industry went to hell. At least, that's what my friends from Detroit told me.

[TMMT]

Detroit is a prime example of what happens to a city when Democrats are allowed to run unchecked and rampant.

New Orleans, Memphis are just a couple of other good examples.

[Semiauto]

I can't name one majority black city that is managed well and financially sound. The priorities of blacks are different and they spend their descretionary income far differently than white majority cities.

[enfield]

I always assumed Detroit was dying because the US auto industry went to hell. At least, that's what my friends from Detroit told me.

Detroit is rotting from within, and it's been going on since at least the '60s. It can't be saved because a frank discussion of it's problems is impossible.

It won't be necessary for the last one to leave to turn off the lights -- the lights will already be off.

[G27]

Hmm .... interesting...well if the causes of Detroit's decline are any indicator, then Memphis is only a few years away from the same kind of downfall.

Yah, those in power want to blame everyone but themselves, but the 'white flight' (specifically those with the means to get away from Memphis) has been utterly amazing over the last 15 years. The outlying suburbs of Lakeland, Collierville, Arlington and a few others have seen an explosion of growth of higher income families tired of overpaying for poor services.

For some perspective, I just finished compiling my tax info for my accountant and found this for 2009:

- rental house we own in Memphis, ~1200 ft2, property tax ~$1100.

- residence in an outlying town, ~3500 ft2, property tax ~$700.

We get better services from our town and it's a MUCH safer area, both on a personal level and investment-wise.

While Memphis isn't as bad as Detroit, it may be in a few years. From the numbers I've seen, the city population is on decline (the census results will tell us one way or the other), which is bad news - it means the tax base is continuing to leave...

[mikegideon]

Detroit is a prime example of what happens to a city when Democrats are allowed to run unchecked and rampant.

New Orleans, Memphis are just a couple of other good examples.

Not disputing that a bunch of Democrats can't ruin the economy in a city, but are you saying the auto industry wasn't the cause?

[Hgunner]

Yes, that is what the author is saying.

Edited March 29, 2010 by Hgunner

[mikegideon]

Yah, those in power want to blame everyone but themselves, but the 'white flight' (specifically those with the means to get away from Memphis) has been utterly amazing over the last 15 years. The outlying suburbs of Lakeland, Collierville, Arlington and a few others have seen an explosion of growth of higher income families tired of overpaying for poor services.

For some perspective, I just finished compiling my tax info for my accountant and found this for 2009:

- rental house we own in Memphis, ~1200 ft2, property tax ~$1100.

- residence in an outlying town, ~3500 ft2, property tax ~$700.

We get better services from our town and it's a MUCH safer area, both on a personal level and investment-wise.

While Memphis isn't as bad as Detroit, it may be in a few years. From the numbers I've seen, the city population is on decline (the census results will tell us one way or the other), which is bad news - it means the tax base is continuing to leave...

I did a lot of work in Memphis a couple of years ago. Most of it was moving radio stations. One of my software packages would display population density on a map. Switching between Census '90 and Census 2k showed a dramatic population shift to the east. It was more pronounced in the white demo, but blacks are moving too.

[Guest gts]

I can't name one majority black city that is managed well and financially sound. The priorities of blacks are different and they spend their descretionary income far differently than white majority cities.

My point exactly. Though Democrats tend to spend more erroneously than Repulicans (btw, both parties are proven pitiful), it is not as much of a party issue with Detroit as it is a demographic issue. Neither will it be with Memphis.

[mikegideon]

Yes, that is what the author is saying.

How do you replace the money hole made by the car makers? Again, not defending their local government.

Of course real estate is going to go in the crapper. I was in Houston from '78 to '81 and met a bunch of Detroit folks. There was a mass exodus, and it was all about the auto industry and lack of jobs.

[Guest gts]

It was more pronounced in the white demo, but blacks are moving too.

Which is why Tipton and Fayette counties are growing so quickly now.

Affirmative-Action has allowed for the more affluent blacks to move into the county and it's going downhill fast. Therefore, "white flight" has extended to the surrounding counties over the past several years.

[Guest HvyMtl]

What killed Detroit is not the same as Obama care.

Detroit was killed by a few factors. 1. City was a one horse (one industry) city (US auto makers.) 2. US auto makers were mis-managed. 3. US auto makers did not adjust product to the tastes of their customers, but for a long time built what they wanted to. 4. Global market and the influx of competition 5. The rush to the lowest cost employee in the corporate sector leading to US cars being built elsewhere, including Mexico. 6. Lack of recruiting by the city and state of new industries and businesses. 7. Flight of the middle and upper classes away from the city with the invention of Suburbs 8. The desegregation of public schools (White flight) 9. The Unions being as blind as the corporate execs on the changes in the industry, and their total lack of cooperating.

And those are just a few of the reasons.

What will kill Obama care is the fear of what it can lead to, and the monetary costs.

Edited March 29, 2010 by HvyMtl

[mikegideon]

What killed Detroit is not the same as Obama care.

Detroit was killed by a few factors. 1. City was a one horse (one industry) city (US auto makers.) 2. US auto makers were mis-managed. 3. US auto makers did not adjust product to the tastes of their customers, but for a long time built what they wanted to. 4. Global market and the influx of competition 5. The rush to the lowest cost employee in the corporate sector leading to US cars being built elsewhere, including Mexico. 6. Lack of recruiting by the city and state of new industries and businesses. 7. Flight of the middle and upper classes away from the city with the invention of Suburbs 8. The desegregation of public schools (White flight) 9. The Unions being as blind as the corporate execs on the changes in the industry, and their total lack of cooperating.

And those are just a few of the reasons.

What will kill Obama care is the fear of what it can lead to, and the monetary costs.

Couple of points...

#6: even if they were as successful at recruitment as anywhere else, it wouldn't significantly make up for point #1.

#7&8: Welcome to the US. same as everywhere else with significant minority population

[Mike.357]

If Detroit is dying, why are so many Muslims settling in that area?

How are they making a living?

[enfield]

What killed Detroit is not the same as Obama care.

Detroit was killed by a few factors. 1. City was a one horse (one industry) city (US auto makers.) 2. US auto makers were mis-managed. 3. US auto makers did not adjust product to the tastes of their customers, but for a long time built what they wanted to. 4. Global market and the influx of competition 5. The rush to the lowest cost employee in the corporate sector leading to US cars being built elsewhere, including Mexico. 6. Lack of recruiting by the city and state of new industries and businesses. 7. Flight of the middle and upper classes away from the city with the invention of Suburbs 8. The desegregation of public schools (White flight) 9. The Unions being as blind as the corporate execs on the changes in the industry, and their total lack of cooperating.

And those are just a few of the reasons.

What will kill Obama care is the fear of what it can lead to, and the monetary costs.

You lived in the Detroit area?

I lived in the Detroit suburbs for 33 years. Race politics is what's killing Detroit -- not the auto industry, not NAFTA, not white racism, not Suburbia, not unions. Those are all bogeymen that people blame because they can't talk about Detroit's real problem. You cannot discuss race in this country without somebody being called a racist, and that ends the discussion

This country became hypersensitive about race in the early 60's. That's when Coleman Young became Detroit's first black mayor. He was immune from criticism as have been all of his successors, and he did as he pleased. Taxpayers all over the country footed the bill.

[enfield]

If Detroit is dying, why are so many Muslims settling in that area?

How are they making a living?

They're picking the bones.

Party stores and restaurants - no creation of wealth, just the exchange of it.

[Guest HvyMtl]

Good question, Mike.357, I have no clue. I do know why there is a huge Kurdish population here (Nashville area.) The US government found a locality willing to accept them, had resources which could aid in their placement, and was affordable. Perhaps there is the same there?

Mikegideon, quite true with 7 & 8 being all over the U.S. - Example: Birmingham Alabama - Look at the public school system there - Birmingham/Jefferson Co schools are approx. 97% American-African, while suburbs like Hoover (80% White) and Mountain Brook (95+% White) -

Enfield, I am truly sorry to hear that. I did think that was an issue, and probable cause to the white flight.

How is the racial bias politics ending Detroit? (So the lesson can be learned and averted elsewhere?)

And no, discussion DNE (does not equal) racism... THINKING discussion = racism, on the other hand...

Edited March 29, 2010 by HvyMtl

[mikegideon]

You lived in the Detroit area?

I lived in the Detroit suburbs for 33 years. Race politics is what's killing Detroit -- not the auto industry, not NAFTA, not white racism, not Suburbia, not unions. Those are all bogeymen that people blame because they can't talk about Detroit's real problem. You cannot discuss race in this country without somebody being called a racist, and that ends the discussion

This country became hypersensitive about race in the early 60's. That's when Coleman Young became Detroit's first black mayor. He was immune from criticism as have been all of his successors, and he did as he pleased. Taxpayers all over the country footed the bill.

So we're talking about the City of Detroit, not the entire metro? The city of East St. Louis, IL has been dead for years, and they DO discuss it. Sounds like Detroit may be real similar.

[Mike.357]

I do know why there is a huge Kurdish population here (Nashville area.)

Maybe geographically similar? Dunno?

When I worked retail liquor there were several customers that were from Bosnia, they told me they chose East TN due to geographic similarities.

[Guest HvyMtl]

Ok, East St. Louis (lived in Clayton - suburb on other side of St. Louis) had several issues, quite similar to what I wrote. For long time, East St. L was prosperous, and primarily American-African. Then the manufacturing moved away. Still primarily American-African, but no major business to hang on. High crime, low to no wage area.

(Ironically, my Scottish Ancestors chose Middle Tennessee because it reminded them of the Highlands...) The Kurds are here due to the Feds locating them here - due to the assistance available, and Nashville being considered, "tolerant." Now we are only one of 6 voting locations for Iraqis outside of Iraq due to it.

When Iraq had their elections last month, the Social Security office on Nolensville Rd in front of the former Lowes and Food Lion was used. Amazing the # of buses from Missouri... and how quiet the event was.

Edited March 29, 2010 by HvyMtl

[Tempest455]

If Detroit is dying, why are so many Muslims settling in that area?

Because it looks like Afghanistan!

[Hgunner]

So take as mentioned here, Detroit, East St. Louis,Memphis and what is the prime factor. Welfare entitlement mentality, Obamacare, gimme something for nothing its all coming out of Obama's stash. Taking from the producers and punishing them for produceing and transfering their wealth to the unproductive in the name of fairness and social justice.

[Guest strelcevina]

Ok, East St. Louis (lived in Clayton - suburb on other side of St. Louis) had several issues, quite similar to what I wrote. For long time, East St. L was prosperous, and primarily American-African. Then the manufacturing moved away. Still primarily American-African, but no major business to hang on. High crime, low to no wage area.

(Ironically, my Scottish Ancestors chose Middle Tennessee because it reminded them of the Highlands...) The Kurds are here due to the Feds locating them here - due to the assistance available, and Nashville being considered, "tolerant." Now we are only one of 6 voting locations for Iraqis outside of Iraq due to it.

When Iraq had their elections last month, the Social Security office on Nolensville Rd in front of the former Lowes and Food Lion was used. Amazing the # of buses from Missouri... and how quiet the event was.

actually feds don't care much about what place refugee immigrants will go to.

i work at USCC for 4 years, and it is simple procedure. feds sends official number, say for example this many Kurdish will get a visa "I-94". so those numbers go to USCC or world relief, or other non profit organizations.

so Nashville say can handle 1000 a year. so request is sent to overseas organizations. and part of interview ower there was ,where in U.S. would you like to go.

so first 1000 who say Nashville comes.

since i started to work for them, EX YU population went from less than 100 to couple thousands.