“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.
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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
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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. 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.