Motor City Runs Out of Gas

Yesterday afternoon, the city of Detroit filed for bankruptcy protection.  The city cannot pay its bills.  The filing means Detroit has become the largest municipality to ever file.  New York City came close in the 1970s, when then Pres. Gerald Ford famously told the Big Apple to (in the words of the New York Daily News) “Drop Dead!”

Detroit’s downfall has been long in the making, with many factors contributing to its failure:  union wages and benefits that made the auto companies unprofitable in comparison to foreign competition; a huge bureaucracy with unionized municipal workers with fat pension systems of their own; a high crime rate; high tax rates; urban and suburban residential flight; and commercial flight.  No companies, no jobs.  No jobs, no residents.  No companies or private sector residents, no taxes.  No taxes, no jobs for government workers.  No government workers, no essential city services.

The fat union pensioners, both from the auto industry and government, are sitting pretty with their life-long benefits.  But the city of Detroit is a disaster, physically and financially.

Here’s the picture, from the Wall Street Journal’s report of the Michigan Gov. Rick Snyder’s assessment:

“Detroit’s bankruptcy petition paints a bleak picture for the Motor City: more than 100,000 creditors, more than $18 billion in accrued obligations and a homicide rate that is at its highest level in nearly 40 years.

“Detroit filed for bankruptcy protection Thursday afternoon, becoming the largest ever municipal bankruptcy case. It becomes the latest in a small but high-profile list of municipalities to file after the recession. The cities of Stockton and San Bernardino in California filed last summer and Jefferson County, Ala., did so in November 2011.

“The city was steered into bankruptcy by an emergency manager, Kevyn Orr, who did not secure agreements with enough bondholders, pension funds and other creditors to restructure the city’s debt out of court. The Wall Street Journal previously reported that creditors such as Bank of American and UBS AG were in discussions with the city.

“The decision to declare bankruptcy ‘comes in the wake of 60 years of decline for the city, a period in which reality was often ignored,’ Gov. Rick Snyder wrote in a memo authorizing the case, which was filed with the bankruptcy petition.

“’I know many will see this as a low point in the city’s history,’ Mr. Snyder continued. ‘If so, I think it will also be the foundation of the city’s future—a statement I cannot make in confidence absent giving the city a chance for a fresh start, without burdens of debt it cannot hope to fully pay.’

“Mr. Snyder said the city cannot meet obligations to its citizens or its creditors. He noted that citizens wait an average of 58 minutes for the police to respond to their calls, compared to a national average of 11 minutes. Only 8.7 percent of cases are solved, compared to a statewide average of 30.5 percent.

“About 40 percent of the city’s street lights were not functioning in the first quarter of the year, and only a third of its ambulances were in service. Its population has declined 63 percent from its peak and there are about 78,000 abandoned structures.

“As a result, Mr. Snyder said, even if the city could raise taxes to pay its obligations, its citizens would not be able to afford it. In any event, Detroit tax rates are at their current legal limits.

“’The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services,’ wrote Mr. Snyder. ‘The city’s creditors, as well as its many dedicated public servants, deserve to know what promises the city can and will keep. The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations.’

What does Gov. Snyder want from Detroit’s creditors?  Obama already bailed out the city once.  Now the taxpayers of the United States are expected to bail this city out of its $18 billion hole.  Again.  If he wants Detroit to rise from the dead, the first thing he and the Michigan legislature are going to have to do is designate Michigan a Right-To-Work, non-union state.  What are the unions going to do?  Burn down Detroit?  It’s a little late for that.

Speaking of fire, Detroit’s going to have to have a fire sale.  The city’s going to do what many failed companies have had to do:  downsize and sell of whatever assets, in terms of land, it has left.  Shrink the city’s limits and sell off its outermost suburbs.  Push the one-third of its poorest citizens (Detroit’s current population is about 700,000 – that’s still a sizable city, about the size of San Francisco, and still bigger than Boston or Miami) in towards the center.  Then build a wall around it.

That many destitute residents (about 240,00 – the size of a city like Boston or Miami) is a tall order for Detroit’s suburbs to support.  Because the unions wanted it all, wanted to live the high-life, they helped run the city into bankruptcy.  Businesses and workers fled.  You don’t have to have been in Detroit to know where the borderlines are.  Where the county college marks end and the country club flags and mall squares start is where the taxpayers are.  Where are the 78,000 abandoned houses located?  According to a Reuter’s article, there are a number of them on Detroit’s east side.  One-fifth of Detroit’s residence are unemployed.  That would be, what – 150,000 unemployed workers.  And then there are their families.

The murder rate is at its highest in 40 years.  The fact that 40 percent of its streetlights don’t work can’t help.   Detroit’s fire engines and ambulances are ancient.   If you call the police, you’ll have to wait an hour for them to respond.  Residents say that political corruption is also a major problem.  No surprise there.

Of course, there are urban professionals who see a bargain in converted lofts.  Think the West Side of Manhattan.  There’s a lot of money there.  The poor were pushed out into the hapless suburbs – first, the Bronx, then Brooklyn.  Queens and sections of Staten Island are now under the gun, as are the counties in Long Island.  There is no end to the reach of blight once it starts.  Uniondale, N.Y., is a splendid example.  Camden, N.J., is another blighted city that had to throw in the towel and merge its police department with the state police.  Camden had some of the lowest school scores in New Jersey.  There’s just so much charity can do to help.

Detroit, a once (and still) massive city has just about crumbled to the ground.  Don’t think that the unions or their Communist backers are crying in their beer or white wine.  They’ve been working for decades towards Detroit’s destruction because it was always such a symbol of America’s industry, ingenuity, and inventiveness.  Detroit was the center of industrial power during World War II.

This is a sad day for Detroit.  But a great day for Tax-and-Bankrupt Progressives.



Published in: on July 19, 2013 at 11:32 am  Comments (2)  

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2 CommentsLeave a comment

  1. As Detroit goes so goes the rest of the nation. I only have to look around the small industrial center where I work at my day job. Empty buildings and large parking lots with only a few cars in them. Many of my friends out of work or only working part time. When will America wake up?

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