WASHINGTON, September 17, 2013 ― The City of Detroit is bankrupt. Could that have been avoided?
The city’s fiscal failures go back to the late 1950’s, when its elected officials consistently miscalculated and purposely mismanaged financial decisions that could have saved Detroit from economic ruin today. These executive decisions of over-compensating on union pensions and gaining union support eventually led to the departure of millions of Detroit residents, thousands of abandoned homes whose owners have simply walked away from their properties, and collapsing tax revenues.
Even if mayors of Detroit attempted to raise tax rates, they obviously didn’t collect enough to balance their municipal budgets. They knew that they were giving union officials and retirees bonuses that the city could barely afford, but they did it anyway.
One strategy for balancing the budget would have been to quickly reform pension benefits for city workers, telling laborers the harsh truth about Detroit’s real fiscal health. Instead, political pressure from the United Auto Workers and special interest groups forced the hands of Detroit politicians. Detroit City Council meeting minutes from past adminsitrations, long buried deep in the halls of Detroit’s Historical Society, reveal the honest facts behind Detroit’s real economic problems ― how they started, and how these budgets could’ve been fixed by responsible executives.
Playing the blame game is politics as usual, and Detroit is no exception. For years, Wayne county residents believed that Detroit’s first black mayor, Coleman A. Young, is to blame for Detroit’s economic woes and most of the city’s economic slowdown since 1974. Some critics believe that white flight as a result of the 1967 race riots was aided by the creation of interstate freeways, which gave middle-class whites the opportunity to leave Detroit for good.
To make matters worse, racial tensions instilled imaginary racial barriers and resentment between surrounding counties: Wayne, Macomb and Oakland, resulting in fiscal neglect from Michigan’s state capitol to surrounding neighborhoods. Millions of dollars in state and federal aid from Lansing used to consistently flow from Michigan Governor’s into Detroit neighborhoods—not the case anymore.
Perhaps all of the above led to the demise of Motown. Even Washington played a hand in sucking the life from manufacturers, alternately through corporate tax rates on America’s auto-makers, then by protecting them from foreign competition.
As city revenues steadily declined, Detroit’s city council continued to raise taxes when limited funds were available. Laborers and political favors received lavish contracts for short-term fixes which crippled the city’s ability to pay its bills on time, passing each fiscal shortfall to the next administration to avoid making touch fiscal cuts.
Public records tell us that Detroit’s mayors were fully aware of the city’s fiscal inadequacies, so why were they complicit in the destructive financial politics that would eventually bring the city to its knees? Plan after plan, nothing ever changed, and things got progressively worse after 1957, when Mayor Albert Como first told to the city council that Detroit would leave great fiscal deficits for future generations.
The facts of how Detroit’s failure happened are becoming clear, but it is still hard to understand why Motown sank into bankruptcy. Some Detroit council-members, like former council president Charles Pugh, have tried to push the city towards fiscal accountability. Detroit’s petition for bankruptcy still hasn’t changed life in the Motor City.
Michigan Governor Rick Snyder’s plans to improve Detroit’s services haven’t changed the quality of life for residents who don’t support the Republican governor, according to recent polls. Metro-Detroiters have distrusted Lansing’s attempts to save them from fiscal demise for years, and promises on both sides have been repeatedly broken.
Losing approximately 5 million residents since 1957 should have told everyone that Detroit needed emergency management long before the city filed for bankruptcy. Now future mayors of Detroit will have to face the facts that the city is broke, the state now has a hand in Detroit’s economic decisions, and ignoring the costs of largesse to the unions is no longer an option.
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