In the past few years, I wanted to take a trip to Detroit. I’ve seen all the pictures and read all of the horror stories about the once-great Midwest metropolis turning into an impoverished shell of its former eminence, but I haven’t made it yet.
A couple of weeks ago, Detroit’s unelected city manager decided the city would file for bankruptcy to help alleviate its crushing $18 billion debt. It seemed only fitting that Detroit would be the first major American city to seek debt relief. The city, after all, was a monument to capitalism and capitalists like Henry Ford. It was different from Wall Street and the stock exchange in Chicago. Detroit was a place of creativity, where the birth of new models of transportation were hatched. To bring those ideas to fruition, armies of workers put together the engines and bodies of cars, trucks, vans and SUVs.
When the auto industry began to constrict in the early 1980s, layoffs and factory shutdowns abounded. Detroit, the conventional wisdom goes, just wasn’t ready for the rise of Toyota following the OPEC gas scare in 1973.
But there was something more nefarious afoot. The car companies did switch to compete head-to-head with Toyota’s more economic models, but mostly the Big Three elected to take the easy way out to maintain profits they might lose to the Japanese upstart. They shipped production to low-wage countries and left American workers stranded.
Conservatives lay Detroit’s demise on unions — first the United Auto Workers for demanding too much from the automakers, and now the pensions due public retirees, which amounts to only $3 billion of the $18 billion total.
Michigan Gov. Rick Snyder — a Tea Party favorite after signing the GOP-dominated legislature’s fast tracked right-to-work bill— brought in a lawyer, Kevyn Orr, to take over Detroit, leaving Mayor Dave Bing standing in the hall with his ear cupped to Orr’s door. Both Snyder and Orr agreed to file bankruptcy.
Snyder has no desire to bail out Detroit, which is 85 percent black. He won’t get any votes there. Whites left Detroit for the suburbs years ago so as not to associate with poor, desperate blacks. Even middle-class blacks left so as not to be associated with poor, desperate blacks. The Obama administration, too, won’t entertain a bailout, though it was quick to funnel money to GM and Chrysler four years ago.
Apparently Detroit was not too big to fail.
The public employee unions have already filed suit to stop the bankruptcy because they fear free-marketer Orr — who wants to cut corporate taxes to bring in more businesses, a ploy that never works but keeps the city poor — will slash their pensions with a scythe and not a scalpel and go easier on the bondholders who only have a financial stake in the matter, not a livelihood stake.
This looks like doom for Detroit, or at least a massive hole that will take generations to crawl out of. Pension reduction will increase poverty and paying back bondholders will do nothing to help Detroit.
The state should give the city $300 million to arm entrepreneurs with start-up capital for local businesses. The money would be used to put people to work, creating goods and services for Detroit. Some of the money could go to alleviating the blight and rebuild Detroit.
Why $300 million? That’s the sum of public money Snyder and Orr want to spend on a new $650 million stadium for the Detroit Red Wings, which will do absolutely nothing to help the people of Detroit.
Has Michigan’s economic insanity — which is symptomatic of the entire country where the GOP is in charge — really gone that far off the rails?
Stephen Dick is a CNHI News Service columnist. He can be reached at email@example.com.