When Cities Die.

July 22, 2013

In 1957, Detroit was America. A beacon of productivity. Progress. Strength. And cool...
Motown vibrated with positive energy. Employees worked hard. Then flooded into the city's innumerable clubs to hear the best live music in the nation.

The city's size and economic status included the nation's highest per capita GDP. Justified four professional sports franchises. Its auto industry defined industry.
Detroit's greatness? A distant memory. Today's Motown looks more like a dystopian dead zone from a science fiction novel. Like the ramshackle Starnesville, home of the Twentieth Century Motor Company from Ayn Rand's eerily prescient Atlas Shrugged (click here).
What the hell happened, you ask? Great cities don't just implode on such a grand scale. Collapse like sand castles amid the onrushing tide.
Well, Detroit did. Declaring bankruptcy last week.
Detroit spent too much. Borrowed too much. Raised taxes. Grew government. Entitlements. Drove away business and employers as the city government became a banana republic for the government unions.
Detroit is $18 billion in debt. Most is accounted for by the public sector's salaries and pensions. Money that used to provide public services now meets pension's payments. Accordingly, it takes Detroit's police department an hour to respond to the average 911 call. Two thirds of its ambulances sit idle. God forbid your apartment catch fire.
Detroit's urban population has left. Its wealth has fled. The vast prairie-like areas of its inner city stand like a dystopian divination of what can become of any mismanaged city. State. Country.
This failure is not on the private sector, but on the state. And still, amidst all the evidence, the city government fights to preserve the spoils of corruption.
Consider the public forces aligned against Kevyn D. Orr, the turnaround specialist tasked with the herculean effort of saving whatever might be left. A court struck down his original bankruptcy application, noting that it would "lessen the pension benefits of public employees."
Orr faced massive consternation as he tried to gain concessions from creditors and pensioners. The 9,700 city employees. The 20,000 city retirees. All stand to lose money and benefits. Victimized pawns of a government run amuck.
Detroit teaches us that debt matters. Detroit borrowed against current assets and future revenues, trying to sustain a budget that was perilously large and inefficient. Over the last year, as everyone realized the city could never meet its debt obligations, the city government spent over $80 million in borrowed funds. Still trying to pay entitlements.
Detroit spends 25 percent of its funds on debt service, alone. That amount is projected to grow to 70 percent if left unhandled.
Detroit teaches us that we must confront systemic problems early. Before reaching crisis levels. Detroit saw its problems coming 25 years ago. But, city elders ran the town like a private fiefdom. Lavishing spoils on those who kept them in office. Making promises they could not keep.
Increasing pension funds even as projections showed a tipping point.
When your pensioners grow to be larger than your active workforce, you're done. Well, Detroit's politicians didn't care. They lived large, even as the financial tsunami bearing down on them began to block out the sun. Instead of adjusting, the city kept borrowing. Writing checks. Refusing any reforms whatsoever.
Public safety, education, transportation - all deteriorated. The core mission of any government is the provision of such services. Yet, that was no longer the case. So, residents fled. Took their jobs. Their wealth. Their tax dollars. Problems grew worse.
All of which leads to the obvious, 900 pound allegorical gorilla in the room. Does dystopian Detroit foretell our future?
Detroit is a cautionary tale. For every municipality, city, region and state. But, especially for our Federal government. Which seems to be repeating all of Detroit's mistakes on a larger scale. Overspend. Over borrow. Over promise. Under deliver. Rinse and repeat. Right up to a crisis.
Is it lost on everyone that the nation's wealthiest city based on income per capita is Washington D.C.?
That, as the rest of the nation's economy collapsed, the economy in the D.C. metro area thrived?
That the nation's public sector has grown, often at the expense of the private sector, since the economic recovery began?
That the nation's second-largest employer is temporary staffing firm Kelly Services?
That over 101,000,000 Americans are currently receiving welfare via government food programs?
That the government continues to talk about our improving economy? That the government will soon change the metrics by which we view the economy?
Is the Federal government tackling our oncoming insolvency any more effectively than did Detroit?
How long will we naively sit in the back of this car. Racing towards the approaching cliff. While our political elders drunkenly sit, half asleep behind the wheel, mumbling half-baked promises and turning up the radio's volume in order to drown out our annoying cries?
Learn from Detroit, or die like Detroit. We'd best decide quickly.

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