How Automobiles, Pensions and Economic Obtuseness Destroyed Detroit
Forget the soul and pop influences that defined Motown music. Nowadays the melodies in Murder Town are deafeningly quiet.
- On July 28, Detroit’s state-appointed emergency manager Kevyn Orr filed the largest municipal bankruptcy in U.S. history. How does a city marred by deindustrialization and a loss of population redefine its economy
- As an almost-single-industry town, Detroit was hit hard by the decline of the Big Three: General Motors, Ford and Chrysler. Moreover, The Paris of the Midwest (I’ve never eaten escargot there) estimates that it has 78,000 “abandoned and blighted” structures, roughly one fifth of Detroit’s housing stock.
- Even the lifeblood that moves citizens from one shantytown to the next cannot climb out of the cavernous financial hole. The company that operates the Detroit-Windsor Tunnel filed for a “pre-packaged” (how convenient) bankruptcy to reorganize its debt.
- The Hell on Wheels’ biggest blunder: 21,000 retirees, including police, firefighters, City Hall clerks, trash haulers, and bus drivers who are owed money since Michigan’s Constitution provides that public pensions “shall not be diminished or impaired.” Detroit has underfunded obligations of about $3.5 billion for pensions and $5.7 billion for retiree health coverage.
- From 2007 to 2012, the city’s two biggest pension programs paid out $3.3 billion more in benefits than they took in. I don’t like those odds.
- Fully 99.6 percent of the city’s retiree health-care liabilities are unfunded because there are more carpenter ants per capita than people.
- The city is beholden to the powerful Detroit Federation of Teachers, spending more than $14,000 a student annually. Yet in 2009, Detroit public-school students turned in the lowest scores ever recorded in the national math-proficiency test. Sometimes one plus one does not equal two.
- Republicans have pushed for a measure that would prevent federal funds from being used to “bail out Detroit or any American city that mismanages its public finances.” But the fact is any city is susceptible to a Detroit-style collapse. Heck, we could just as easily be witnessing Seattle’s coffee biz or Vermont’s maple syrup going down the drain.
- U.S. Bankruptcy Judge Steven Rhodes on July 24 granted Detroit’s request to put a permanent freeze on three lawsuits finding that it may be “irreparably harmed” if it had to deal with pension claims in state courts while trying to restructure $18 billion in debt. The thing of it is Detroit has no one to blame but itself.
And The # 1 Thing You Should Know About Detroit’s Monetary Decay is…
- The total lack of fiscal acumen in the 8 Mile city makes former global investment bank and securities trading firm Bear Sterns look stable. Forgive me for sounding apocalyptic, but when Detroit cannot even afford to keep its streetlights on at the same time as a state board unanimously approves plans for a new $300 million hockey arena, we are clearly witnessing a sequel to Night of the Living Dead.