Commentary Magazine


Topic: Detroit bankruptcy

The Left’s Evolving Blame Game on Detroit

The Sunday morning political shows got the most attention this week for what appeared to be the collective effort to bury the candidacy of Anthony Weiner. But there was a far more interesting debate over the future of Detroit between George Will and Steven Rattner on This Week. Rattner had earlier published a column in the New York Times that argued for government intervention to bail out the city of Detroit, which has been bankrupted by health and retirement liabilities and corrupt mismanagement.

Rattner had argued that “apart from voting in elections, the 700,000 remaining residents of the Motor City are no more responsible for Detroit’s problems than were the victims of Hurricane Sandy for theirs, and eventually Congress decided to help them.” Will referenced that comment Sunday morning, reminding Rattner that those votes went for “60 years of incompetence, malcontents, and in some cases criminals.” He argued that Detroit had experienced a “cultural collapse” and is now reckoning with the consequences of their decisions. Rattner, in an illuminating and noteworthy response, said:

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The Sunday morning political shows got the most attention this week for what appeared to be the collective effort to bury the candidacy of Anthony Weiner. But there was a far more interesting debate over the future of Detroit between George Will and Steven Rattner on This Week. Rattner had earlier published a column in the New York Times that argued for government intervention to bail out the city of Detroit, which has been bankrupted by health and retirement liabilities and corrupt mismanagement.

Rattner had argued that “apart from voting in elections, the 700,000 remaining residents of the Motor City are no more responsible for Detroit’s problems than were the victims of Hurricane Sandy for theirs, and eventually Congress decided to help them.” Will referenced that comment Sunday morning, reminding Rattner that those votes went for “60 years of incompetence, malcontents, and in some cases criminals.” He argued that Detroit had experienced a “cultural collapse” and is now reckoning with the consequences of their decisions. Rattner, in an illuminating and noteworthy response, said:

So that’s fine. And so what do you want to do, do you want to leave them sitting in exactly the situation you just described, or in the spirit of America trying to help people who are less fortunate, whether their (sic) victims of natural disasters or their own ignorance or whatever, do you want to reach out and try to help them and try to reinvent Detroit for not a lot of money. We’re talking about a couple billion dollars here, this is small potatoes in the great scheme of life, or else you have your scenario, just leave them all sit (sic) with feral dogs for the rest of their lives.

This is significant because it makes clear that the left will not see Detroit as evidence of the need for fiscal sanity. Even after liberal policies drive a major U.S. city to bankruptcy and collapse, the left will argue not only that the city should be bailed out by taxpayers but that it’s really a minor incident–just a couple billion dollars, which is, in Rattner’s words, “not a lot of money.” To do otherwise, Rattner says, would not be “in the spirit of America.”

So there you have it. Liberals will argue that it is imperative to promise unaffordable pension and health benefits to government workers, and once that predictably ends in financial ruin, that it isn’t in the “spirit of America” not to fork over billions more. At no point is a consideration for sustainable economic policymaking introduced into the process.

But there’s another element to this evident in Rattner’s remarks: the question of victimhood and culpability. This was more fully fleshed out in a Salon column published on Saturday. The column, by Andrew O’Hehir, follows the classic model of blaming racism (real and imagined) for Detroit’s woes. O’Hehir is “tempted” to offer an alternative theory for the collapse of Detroit, which is probably the most ridiculous thing yet written about the Motor City’s financial meltdown:

As payback for the worldwide revolution symbolized by hot jazz, Smokey Robinson dancin’ to keep from cryin’ and Eminem trading verses with Rihanna, New Orleans and Detroit had to be punished. Specifically, they had to be isolated, impoverished and almost literally destroyed, so they could be held up as examples of what happens when black people are allowed to govern themselves.

It’s unconscious, he believes, as he assures readers he is no conspiracy theorist. Most of O’Hehir’s column was ignored because of the sheer effort and self-discipline required to read beyond that paragraph which, for racial thinking, may have even surpassed Timothy Noah’s classic column classifying the Wall Street Journal’s discussion of President Obama’s skinniness as “a coded discussion of race.”

But O’Hehir’s linking of Detroit’s collapse and Hurricane Katrina is instructive. In the column, he reviews several causes of Detroit’s bankruptcy, including that “investment capital flowed away from the Rust Belt and into low-tax, non-union jurisdictions in the Sun Belt and around the world.” Later, he repeats that the city’s residents “have already been victimized by several generations of high crime and failing services and the flight of capital.” He closes by asking what the rest of the world thinks “when they see country-club denizens of the leafy suburbs a few miles away, most of them people who grew up in Detroit and made their fortunes there, angrily protest that they have no common interest with the inhabitants of the city and no responsibility for their plight?”

Beyond the ridiculous accusations of racial animus lies a belief commonly held on the left: the rest of the country should pay to bail out Detroit, because this is (at least partly) their fault. That is, those who choose to govern themselves more responsibly and successfully than Detroit have helped cause Detroit’s collapse because if they didn’t create sustainable communities the people and businesses fleeing Detroit would have no where to go.

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Can the Free Market Save Detroit?

When Detroit’s bankruptcy was announced last week, the analysis from the left followed a peculiar trend: the more time passed, the less informed their commentary became. That’s because the government-centric causes of the city’s financial collapse were obvious, and had been in motion for decades. When bankruptcy was finally declared, everyone already knew the unfunded pension and benefit liabilities the city held were unsustainable and unrealistic, and most simply acknowledged that reality had finally caught up with the city.

But if you wanted to absolve the liberal approach to governance of blame for Detroit’s woes, you had to get pretty creative. Challenge accepted, responded some Democrats. So by the end of the weekend Paul Krugman had come up with a particularly unconcerned dissection of Detroit’s crisis. The crowd at MSNBC first tried blaming Republicans for … well it wasn’t exactly clear. Then Michael Eric Dyson proposed the city had been bankrupted by racism, because the city contains a large number of minority residents. (If Dyson thinks it is racist to give minorities generous retirement and health benefits, he has a very unconventional definition of the term.)

Plenty of liberal writers did not stray nearly so far from reality. And in fact some of the initial responses from the Washington Post’s Wonkblog hold up pretty well, and are now being echoed by more conservative voices. The group blog offered “Six crazy ideas for saving Detroit.” Some of them were actually wacky, while others were merely free-market and small-government oriented (which may seem “crazy” to the left, but that’s another topic). The first suggestion was to get rid of all the taxes and regulations:

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When Detroit’s bankruptcy was announced last week, the analysis from the left followed a peculiar trend: the more time passed, the less informed their commentary became. That’s because the government-centric causes of the city’s financial collapse were obvious, and had been in motion for decades. When bankruptcy was finally declared, everyone already knew the unfunded pension and benefit liabilities the city held were unsustainable and unrealistic, and most simply acknowledged that reality had finally caught up with the city.

But if you wanted to absolve the liberal approach to governance of blame for Detroit’s woes, you had to get pretty creative. Challenge accepted, responded some Democrats. So by the end of the weekend Paul Krugman had come up with a particularly unconcerned dissection of Detroit’s crisis. The crowd at MSNBC first tried blaming Republicans for … well it wasn’t exactly clear. Then Michael Eric Dyson proposed the city had been bankrupted by racism, because the city contains a large number of minority residents. (If Dyson thinks it is racist to give minorities generous retirement and health benefits, he has a very unconventional definition of the term.)

Plenty of liberal writers did not stray nearly so far from reality. And in fact some of the initial responses from the Washington Post’s Wonkblog hold up pretty well, and are now being echoed by more conservative voices. The group blog offered “Six crazy ideas for saving Detroit.” Some of them were actually wacky, while others were merely free-market and small-government oriented (which may seem “crazy” to the left, but that’s another topic). The first suggestion was to get rid of all the taxes and regulations:

Jack Kemp, the former congressman and housing secretary, 1996 Republican vice-presidential nominee and 1988 presidential candidate, had an idea for America’s inner cities. He wanted to make them “enterprise zones,” where federal taxes and regulations were greatly relaxed, to spur outsiders to come and do business. That’s been tried to varying degrees, including a federal program creating “empowerment zones,” but why not go all the way? Eliminate all taxes for year-round residents of Detroit, with the federal government paying the cost of the abolition of state and local taxes. Get rid of zoning, parking requirements, occupational licensing and other cumbersome regulations while you’re at it. See how many businesses come.

Today the Competitive Enterprise Institute’s Bill Frezza makes a similar argument, that Detroit can be rebuilt as an American version of Hong Kong. Cut regulations and taxes to spur economic growth and investment. Frezza explains:

Imagine what would happen in a city where both the personal and corporate federal income tax rates were set to zero. Imagine, further, if all federal labor laws were suspended-hire whomever you want to do whatever job you want at whatever pay they will accept without having to ask the National Labor Relations Board and Citizenship and Immigration Services for permission. Start any business you please-no Interstate Commerce Commission, Equal Employment Opportunity Commission, or Federal Trade Commission to get in your way. Only the laws, rules, and regulations of the State of Michigan would apply to protect citizens from acts of force or fraud.

The reason this is such an intriguing idea is also the reason it’s unlikely to be enacted if Democrats in the state (and nationally, since the White House and Congress would have to oversee elements of it) have a say in the matter. When she tried to blame Detroit’s downfall on Republican policy, MSNBC’s Melissa Harris-Perry was reduced to claiming that the end result in Detroit’s meltdown is actually the goal of conservative policymakers.

Detroit’s fiscal woes, Harris-Perry explained, were exacerbated by population flight that reduced the tax base and that “this lack of tax base is also exactly the kind of thing that many Republicans would impose on us, even when our cities have sufficient populations, even when our communities have sufficient populations.”

There is an important distinction, of course, between the productivity of a city with a high tax burden that drives out private-sector workers and entrepreneurs causing a narrowing of the tax base, and a city with a light tax burden that draws those same people back into the city. Conservatives would no doubt love the opportunity to help MSNBC’s economics experts understand that distinction.

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Why Liberals Won’t Face Facts on Detroit

After the initial shock, liberals have responded to Detroit’s bankruptcy crisis with their usual vigor while attempting to answer conservatives who have rightly asserted that what happened to the Motor City was an inevitable result of liberal policies. What’s more, some, like Steven Ratner in the New York Times, are claiming that rather than forcing the city to face the consequences of misgovernment and reckless spending, the federal government should step in and bail the city out in much the same way it did with the auto industry. If, as I wrote last Friday, most Americans were under the impression last November that Barack Obama had already “saved Detroit” from the bankruptcy that he claimed Mitt Romney wanted to force upon it, the goal now should be to finish the job. But while that dubious proposal is at least rooted in a sense of obligation to the beleaguered retirees and workers of Detroit who are the chief victims of this debacle, Times columnist Paul Krugman is unafraid to confront conservative doomsayers head on and declare the whole thing an insignificant blip on the radar.

While Krugman is dismissed by many on the right as an ideological extremist, his point of view about the mess actually goes straight to the heart of not only the crisis in Detroit but the impending tragedy of debt that threatens every other American city and municipality. If liberals won’t face facts about Detroit, it is not because they aren’t paying attention so much as because they see the sea of debt that their policies have created as merely the natural order of things that must be accepted. As far as he is concerned, if some people are talking about Detroit being “the new Greece,” that ought to be a signal for Democrats to stop listening because he doesn’t even think the problems of that bankrupt European nation are worth worrying about. The “deficit scolds” that he now regularly flays from his perch at the Times and his sinecure at Princeton University are, he says, trying to sell the country on an austerity mindset that is not only wrong but unnecessary. But try as he might, the example of liberal governance that Detroit (and Greece) provides shows that the liberal social welfare project is a one-way path to insolvency with desperate consequences not only for taxpayers and bondholders but to the ordinary citizens that liberals purport to want to help.

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After the initial shock, liberals have responded to Detroit’s bankruptcy crisis with their usual vigor while attempting to answer conservatives who have rightly asserted that what happened to the Motor City was an inevitable result of liberal policies. What’s more, some, like Steven Ratner in the New York Times, are claiming that rather than forcing the city to face the consequences of misgovernment and reckless spending, the federal government should step in and bail the city out in much the same way it did with the auto industry. If, as I wrote last Friday, most Americans were under the impression last November that Barack Obama had already “saved Detroit” from the bankruptcy that he claimed Mitt Romney wanted to force upon it, the goal now should be to finish the job. But while that dubious proposal is at least rooted in a sense of obligation to the beleaguered retirees and workers of Detroit who are the chief victims of this debacle, Times columnist Paul Krugman is unafraid to confront conservative doomsayers head on and declare the whole thing an insignificant blip on the radar.

While Krugman is dismissed by many on the right as an ideological extremist, his point of view about the mess actually goes straight to the heart of not only the crisis in Detroit but the impending tragedy of debt that threatens every other American city and municipality. If liberals won’t face facts about Detroit, it is not because they aren’t paying attention so much as because they see the sea of debt that their policies have created as merely the natural order of things that must be accepted. As far as he is concerned, if some people are talking about Detroit being “the new Greece,” that ought to be a signal for Democrats to stop listening because he doesn’t even think the problems of that bankrupt European nation are worth worrying about. The “deficit scolds” that he now regularly flays from his perch at the Times and his sinecure at Princeton University are, he says, trying to sell the country on an austerity mindset that is not only wrong but unnecessary. But try as he might, the example of liberal governance that Detroit (and Greece) provides shows that the liberal social welfare project is a one-way path to insolvency with desperate consequences not only for taxpayers and bondholders but to the ordinary citizens that liberals purport to want to help.

Rather than confront the problem, Krugman merely says what happened in Detroit is “one of those things” that just happen in a market economy that always creates victims. He also claims that the underfunded pension obligations that threaten the future of virtually ever state, city, and municipal government in the country are no big deal. The trillion-dollar shortfall may strike Krugman as a mere detail, but Detroit may be just the first of many other large cities that will find themselves in similar predicaments. As Nicole Gelinas writes today in the New York Post, even New York, which unlike Detroit faced and overcame not altogether dissimilar problems involving debt and urban blight in the last generation, may eventually be put in the same position unless something is done to deal with a bill for retiree medical benefits that dwarfs that of Detroit. Though, as she points out, New York has a smaller bond debt, Detroit’s sea of red ink was created by a similar confidence that they could keep borrowing money indefinitely.

Krugman is right to say that there are always winners and losers in a free economy. Every city has its own story and Detroit’s is one that is particularly heavy on bad luck as well as mismanagement. But his Adam Smith-style warning that anyone could wind up being the buggy-whip manufacturer of the future ignores the factor that powerful unions and their political protectors play in exacerbating such problems. His claim that Detroit’s situation is the result of chance rather than primarily the result of “fiscal irresponsibility and/or greedy public employees” simply isn’t credible.

A bailout of Detroit sets a precedent that can’t be repeated elsewhere because there just isn’t enough money to pay for every city that will eventually face similar problems. The wake up call that Detroit is sending Americans is one Krugman and other liberals would like us to ignore because they are confident that the federal leviathan, controlled by Democrats and fed by liberal assumptions, will always be able to squeeze enough cash out of productive citizens to pay for the left’s follies. They won’t face the truth about this because to do so would require Americans to do some hard thinking about a society where virtually everyone has their snouts in the collective trough of big government and thereby is a stakeholder in its survival in its current form. But what Greece showed Europe and what Detroit tells Americans is that sooner or later the well of public funds will run dry if obligations to liberal constituent groups continue to grow unchecked. And when that happens it is exactly the little guys who are hurting in Detroit who will be forced to suffer for Krugman’s ideology.

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The Detroit Disaster

Great disasters are usually the product of a concatenation of happenings that synergistically interact with tragic results.

Had April 14, 1912, not been a moonless night with a completely calm sea (unusual in the north Atlantic), had the binoculars that were supposed to have been in the crow’s nest but were instead locked up in a locker to which no one on board had a key, had the wireless operator on board the Californian not gone to bed, had the captain of the Californian not, out of habit, tried to communicate with a Morse lamp instead of the wireless, and half a dozen other minor matters, the Titanic’s maiden voyage would have been ordinary or, at least, most people would have been rescued.

It’s the same with the great urban disaster of today, Detroit. This once-mighty city, with 1.8 million in population and the highest per capita income of any major American city, is now a waste land, its parks closed, its streets unlit, its crime rate astronomical, its population only a third what it was in 1950. As Michael Barone, a Detroit native, wrote, looking at Hiroshima and Detroit today it’s easy to wonder which country won the war.

What happened? Several things. Here are four:

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Great disasters are usually the product of a concatenation of happenings that synergistically interact with tragic results.

Had April 14, 1912, not been a moonless night with a completely calm sea (unusual in the north Atlantic), had the binoculars that were supposed to have been in the crow’s nest but were instead locked up in a locker to which no one on board had a key, had the wireless operator on board the Californian not gone to bed, had the captain of the Californian not, out of habit, tried to communicate with a Morse lamp instead of the wireless, and half a dozen other minor matters, the Titanic’s maiden voyage would have been ordinary or, at least, most people would have been rescued.

It’s the same with the great urban disaster of today, Detroit. This once-mighty city, with 1.8 million in population and the highest per capita income of any major American city, is now a waste land, its parks closed, its streets unlit, its crime rate astronomical, its population only a third what it was in 1950. As Michael Barone, a Detroit native, wrote, looking at Hiroshima and Detroit today it’s easy to wonder which country won the war.

What happened? Several things. Here are four:

1) Even by big city standards, Detroit’s government has been both wildly corrupt and wildly incompetent for decades. At least in Chicago, the Daleys knew how to run a city.

2) The mainstay of Detroit’s economy, the auto industry, faced so little competition in the decades after World War II, that it became effectively a cartel, and fat, dumb, lazy and uninnovative, as cartels and monopolies always are. It generously shared its easy profits with the workers. But when foreign competition arrived in the early 1970s it proved unable to adapt to the new marketplace, while the UAW refused to surrender benefits that had become unsustainable. The auto industry began to move to the burgeoning, and non-unionized, South.

3) Public service unions, which should never have been allowed in the first place, used their political power to force contracts on Detroit that the economically challenged city could not afford.

4) The suburbanization that followed World War II caused the middle class to leave the old central cities and their population (and tax base) began to decline. Every city that had a major-league baseball team in 1950, which is to say the big cities of the northeast quadrant of the country, has had a significant decline in population since then, except New York (which is always an exception).

Put that together with the tendency of politicians to kick difficult problems down the road so that they become someone else’s problem, and the bond market’s willingness to buy high-coupon Detroit municipal bonds, confident that the state of Michigan or Washington would bail Detroit out, and make them whole, and you have the greatest urban disaster that didn’t involve nature or war.

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Didn’t Obama Already Save Detroit?

The news that the city of Detroit is declaring bankruptcy may not surprise many observers who were aware of how economic decline, shrinking population, the burden of huge public employee contracts and political corruption was leading inevitably to this outcome. But it might come as something of a shock to the vast majority of Americans whose only thoughts about the subject prior to today were framed by the demagoguery on the issue that came from President Obama’s reelection campaign. As we all recall, Democrats spent a good deal of 2012 telling us that “General Motors is alive and Osama bin Laden is dead” and hounding Mitt Romney for saying that Detroit would be better off going bankrupt rather than being bailed out by the federal government. But yesterday we learned that all the sunny talk about what Obama had accomplished did nothing to save the city.

Of course, Democrats will say that when they were talking about “Detroit” last year, they were just using the word as shorthand for the automobile industry and not referring to the Motor City itself. But the memory of the way the president pounded Romney on the issue should do more than point out Obama’s hypocrisy. The collapse of what was once one of America’s great cities should also inform us about the way the liberal project is dooming municipal and state governments around the country as well as Washington to a sea of debt that cannot be sustained. Detroit isn’t just the most spectacular example of urban blight. It’s the poster child for the consequences of liberal governance.

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The news that the city of Detroit is declaring bankruptcy may not surprise many observers who were aware of how economic decline, shrinking population, the burden of huge public employee contracts and political corruption was leading inevitably to this outcome. But it might come as something of a shock to the vast majority of Americans whose only thoughts about the subject prior to today were framed by the demagoguery on the issue that came from President Obama’s reelection campaign. As we all recall, Democrats spent a good deal of 2012 telling us that “General Motors is alive and Osama bin Laden is dead” and hounding Mitt Romney for saying that Detroit would be better off going bankrupt rather than being bailed out by the federal government. But yesterday we learned that all the sunny talk about what Obama had accomplished did nothing to save the city.

Of course, Democrats will say that when they were talking about “Detroit” last year, they were just using the word as shorthand for the automobile industry and not referring to the Motor City itself. But the memory of the way the president pounded Romney on the issue should do more than point out Obama’s hypocrisy. The collapse of what was once one of America’s great cities should also inform us about the way the liberal project is dooming municipal and state governments around the country as well as Washington to a sea of debt that cannot be sustained. Detroit isn’t just the most spectacular example of urban blight. It’s the poster child for the consequences of liberal governance.

Some liberals are telling us today that Detroit’s experience is so unique that what has happened there can’t be compared to any other city’s problems. It’s true that there is no more absolute example of urban collapse. But Detroit isn’t the only place where the decline of labor-intensive manufacturing and white flight caused a collapse. While other large cities, such as New York and Philadelphia, underwent crises that were met and overcome in the last generation before undergoing revivals, Detroit has been going downhill for more than 60 years. While Detroit had particular problems that may not have been faced elsewhere, the basic conundrum is not unique. But rather than face up to the need to change the old liberal formula of expanding government and letting corruption go unchecked, this bastion of liberalism refused to alter its course. Decades after leaders like Ed Rendell and Rudy Giuliani showed how it was possible to govern places that were thought ungovernable, Detroit continued acting as if the old boodle theory of politics could continue as mayors as well as other politicians were involved in criminal conspiracies rather than reform.

The lesson here is that a government that continued to overpromise and create unfunded liabilities to please political constituencies cannot survive indefinitely. And that goes straight to the glaring problem that was the foundation of President Obama’s false boasts about “saving Detroit” that caused Romney so much trouble last fall.

Detroit’s bankruptcy shows that federal bailouts for industries can’t solve all the country’s problems, especially when cities are sinking under the weight of generous municipal contracts for public employees. It’s true that many other cities that are facing shortfalls because of debts they’ve signed off on to pay off unions are working better than Detroit, where 40 percent of the street lights don’t work and it takes nearly an hour for police to arrive at an average high-priority emergency.

But unless the power of unions to bankrupt municipalities and state governments is cut back—much as Wisconsin’s Governor Scott Walker and New Jersey Governor Chris Christie have tried to do—everywhere, Detroit won’t be the last city to go bankrupt. The accumulation of debt to pay off the promises made by liberals is a problem that threatens cities all over the country, even some that are seemingly in much better shape than Detroit.

The Obama paradigm of building more entitlements like ObamaCare and throwing federal money at regional problems is based on the liberal assumption that the government piper will never have to be paid. Democrats have blasted their Republican counterparts as heartless Tea Party extremists and obstructionists for refusing to play along and let the system go on as it has for decades building debts that can’t ever be met. But unless someone or some group is able to enact real change, Detroit is America’s future, not, as some are telling us, an exception to the rule.

This week we got a wake up call that tells us that Obama didn’t save Detroit from bankruptcy. He is merely one more in a string of liberal enablers that helped create the situation there that may well be replicated elsewhere eventually, even in cities that are not in as dire straits today as Detroit is. It’s time for America to sober up and realize that without government reform based on the end of liberal illusions, Detroit will become a metaphor for how America became like Greece: bankrupt, corrupt, and a shadow of its past faded glories.

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