Obamacare & Detroit: Ground Zero For Financial Sinkhole?

The Obama Administration has said the Federal Government isn’t going to bail out bankrupt Detroit. But thanks to Obamacare, they may already be committed to doing so.

“The New York Times reported Monday that the city is proposing a plan aimed at reducing its $5.7 billion in outstanding retiree health costs. In short, they want to take those retirees too young to qualify for Medicare and send them into the ObamaCare insurance markets – which are scheduled to launch next year. Doing so would ease the burden on the Detroit coffers by taking them off city coverage. But it would inevitably increase the burden on the federal government, with subsidies from ObamaCare being provided by federal taxpayers.”

Remember when Obama promised “The Affordable Care Act” would reduce the deficit? How is that going to happen as all these states, having made millions of dollars toward the private fortunes of politicians, now break all their pension promises and shove the people, whom they have lied to and stolen from, onto Obamacare?

Detroit is just one of many such cities and towns. If precedent is set now for Obamacare to be used this way, it will start a landslide. The Economist has pointed to Detroit as a reason to rename our country, the Unsteady States of America. According to the editorial,

“When Greece ran into financial trouble three years ago, the problem soon spread. Many observers were mystified. How could such a little country set off a continental crisis? The Greeks were stereotyped as a nation of tax-dodgers who had been living high on borrowed money for years. The Portuguese, Italians and Spanish insisted that their finances were fundamentally sound. The Germans wondered what it had to do with them at all. But the contagion was powerful, and Europe’s economy has yet to recover. America seems in a similar state of denial about Detroit filing for bankruptcy.”

They also give the reader some numbers:

“American states and cities typically offer their employees defined-benefit pensions based on years of service and final salary. These are supposed to be covered by funds set aside for the purpose. By the states’ own estimates, their pension pots are only 73% funded. That is bad enough, but nearly all states apply an optimistic discount rate to their obligations, making the liabilities seem smaller than they are. If a more sober one is applied, the true ratio is a terrifying 48% (see article). And many states are much worse. The hole in Illinois’s pension pot is equivalent to 241% of its annual tax revenues: for Connecticut, the figure is 190%; for Kentucky, 141%; for New Jersey, 137%. By one recent estimate, the total pension gap for the states is $2.7 trillion, or 17% of GDP. That understates the mess, because it omits both the unfunded pension figure for cities and the health-care promises made to retired government workers of all sorts.”

For the record, once the cascading bankruptcies hit, I am not claiming that the Federal government should allow people to die on the streets. I can see the point that the government created this mess and has some obligation to help as much as it can. What I am saying is that it really can’t help much. What will need to happen, as the Federal spending suddenly drops (which it will because it has to), is to strive to put in place a minimal safety net to help the most desperate elderly. Everyone who doesn’t qualify is going to have to do their best to live with less and to find some way to work for some extra income.

But Obamacare is not such an attempt at triage. Obamacare is one of those hallucinatory spending and taxing binges that is going to hurt the national economy even more. To put retirees into Obamacare is another bailout that is going to make the impending Federal collapse even worse.