The Collapse of Detroit

This went out a week ago, but you really should read this article from the Detroit Free Press about the implosion of the city. Complete with animated graphs, it documents how, especially in the last decade, Detroit was the author of its own decline. Contra Krugman, this didn’t “just happen”. It was made. And the people who made it were Democrats.

A few choice quotes.

The total assessed value of Detroit property — a good gauge of the city’s tax base and its ability to pay bills — fell a staggering 77% over the past 50 years in today’s dollars. But through 2004, the city cut only 28% of its workers, even though the money to pay them was drying up. Not until the last decade did Detroit, in desperation, cut half its workforce. The city also failed to take advantage of efficiencies, such as new technology, that enabled enormous productivity gains in the broader economy.

Pension officials handed out about $1 billion in bonuses from the city’s two pension funds to retirees and active city workers from 1985 to 2008. That money — mostly in the form of so-called 13th checks — could have shored up the funds and possibly prevented the city from filing for bankruptcy. If that money had been saved, it would have been worth more than $1.9 billion today to the city and pension funds, by one expert’s estimate.

Contrary to myth, the city has not been in free fall since the 1960s. There have been periods of economic growth and hope, such as in the 1990s when the population decline slowed, income-tax revenue increased and city leaders balanced the budget. But leaders failed to take advantage of those moments of calm to reform city government, reduce expenses and protect the city and its residents from another downturn.

One event that that precipitated the current crisis was a complex debt deal that Kilpatrick engineered. Praised at the time, the deal ended up putting Detroit nearly three billion in the hole. I’ve commented before about cities and municipalities engaging in these complex financial deals that end up bankrupting them, particularly here in Pennsylvania. As I mentioned before, the city also negotiated lucrative deals to lure businesses to Detroit, which both drove non-rent-seeking businesses away and cost them. Chrysler’s Jefferson North Assembly Plant, funded by taxpayers, ate up $250 million all by itself.

This didn’t have to be. Pittsburgh survived the collapse of the steel industry by reinventing the city. It’s now one of the vibrant cities in America. But Detroit failed to see the problem coming, made decisions that made a bad problem worse and has now completely imploded.

Ah, I’m sure there’s nothing to learn there. Things like Detroit “just happen”. Why here’s the Krug himself, comparing Pittsburgh and Detroit and deciding that Pittsburgh taking “better care of its core” was the difference. Detroit was just a victim of people fleeing the city, which has absolutely nothing to do with crony capitalism, out of control spending and skyrocketing taxes. No sir. It had nothing to do with Pittsburgh having one public employee per 94 residents compared to Detroit’s one per 60 (and even that is misleading, since Detroit pays out more to retirees than to current employees). No, sir. It all has to do with protecting your core, whatever that means.

(In his full article, Krug hilariously states that Detroit is a result of the creative destruction of capitalism. But cities are generally large enough that the creative destruction balances out — new businesses thrive as the old ones fail. When “creative destruction” is that widespread, it’s usually a different kind of destruction.)

Yeah, I know the Free Press has done their research, poring over 10,000 first-hand documents to reach their conclusions. But the Left thought really hard about this one night and came to different conclusions. So who you gonna believe? The excuse-makers? Or the facts?

Comments are closed.

  1. Seattle Outcast

    The left will never admit that they had anything to do with Detroit collapsing, but not only was it Democrats in charge, it was black Democrats, the super special group that can’t be criticized unless you want to smeared as racist. Like a group of women trying to determine where to place blame for something they screwed up when there isn’t a man around to throw under the bus, they will endlessly spin their wheels trying to somehow force any number of groups to fit the description of “evil conservative anti-union racist white people”… you know, everything they claim to not be.

    So far they’ve tried blaming “white flight” due to “racism”, capitalism in general, evil conservatives destroying the government so it can “drowned in the sink”, not spending enough money, and some sort of “union jobs would have saved us all” blather. Absolutely the last thing that will happen is an honest self-assessment of what they did all by themselves, to themselves.

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  2. Mook

    Why here’s the Krug himself, comparing Pittsburgh and Detroit and deciding that Pittsburgh taking “better care of its core” was the difference.

    No surprise Krugman is full of shlit. Pittsburgh suffered through the decline of their core steel industry but adapted and changed to become a hub for high tech robotics, and the steel producers moved to higher margin specialty products. Pittsburgh has had one of the lowest unemployment rates in the country for a good 15 yrs. or more now.

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  3. Mook

    I’ve commented before about cities and municipalities engaging in these complex financial deals that end up bankrupting them, particularly here in Pennsylvania.

    I do recall you writing something about selling off/privatizing taxpayer assets (toll roads?) in PA, but as you know, that can actually be a backdoor for bloated corrupt bureaucrats to keep their gravy train flowing. Bankrupt govts.sell full office buildings, jails, toll roads etc. to get a short term cash bump, while making things more costly for the municipality down the road. Sell a couple of buildings and get a big check to fund the pension bonuses, but sale that forces the to pay rent for the office building which had previously been paid for. It’s a shell game.. another way politicians are sticking it to us.

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  4. AlexInCT

    I do recall you writing something about selling off/privatizing taxpayer assets (toll roads?) in PA, but as you know, that can actually be a backdoor for bloated corrupt bureaucrats to keep their gravy train flowing.

    You mean shit like this?

    Whenever the scumbags in government decide who gets to win and who gets to lose, we the American people, always end up losing out.

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  5. Hal_10000 *

    Mook, I’ve been to Pittsburgh often and it is an awesome city. Very under-rated place to live, especially if you’re young. The way they’ve turned that city around is amazing. I’ve written about it before:

    http://archives.right-thinking.com/index.php/weblog/comments/pens_steelers_and_pittsburgh/

    The deals I’m talking about are one like the one my city engaged in that left them millions in debt over money they never borrowed because of weird derivatives. And Harrisburg is teetering on bankruptcy over financial deals involving an incinerator.

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