How taxes and spending killed Detroit
The Detroit Free Press has an extensive autopsy on the failure of that tormented city, complete with charts and figures. Not much remains of the Left’s panicked efforts to somehow pin the blame on Republicans by the time the corpse of Detroit is sewed up and passed along to the undertakers of history:
Detroit is broke, but it didn’t have to be. An in-depth Free Press analysis of the city’s financial history back to the 1950s shows that its elected officials and others charged with managing its finances repeatedly failed — or refused — to make the tough economic and political decisions that might have saved the city from financial ruin.
Instead, amid a huge exodus of residents, plummeting tax revenues and skyrocketing home abandonment, Detroit’s leaders engaged in a billion-dollar borrowing binge, created new taxes and failed to cut expenses when they needed to. Simultaneously, they gifted workers and retirees with generous bonuses. And under pressure from unions and, sometimes, arbitrators, they failed to cut health care benefits — saddling the city with staggering costs that today threaten the safety and quality of life of people who live here.
After observing that divisive Mayor Coleman Young wasn’t really that bad of a money manager, while supposedly technocratic Kwame Kilpatrick was even worse than conventional wisdom holds, the Free Press gets down to the bottom line: it was decades of tax-and-spend liberalism, mixed with political corruption, that killed the city.
Decades of mismanagement added to Detroit’s fiscal woes. The city notoriously bungled multiple federal aid programs and overpaid outrageously to incentivize projects such as the Chrysler Jefferson North plant. Bureaucracy bogged down even the simplest deals and contracts. In a city that needed urgency, major city functions often seemed rudderless.
When all the numbers are crunched, one fact is crystal clear: Yes, a disaster was looming for Detroit. But there were ample opportunities when decisive action by city leaders might have fended off bankruptcy.
If Mayors Jerome Cavanagh and Roman Gribbs had cut the workforce in the 1960s and early 1970s as the population and property values dropped. If Mayor Dennis Archer hadn’t added more than 1,100 employees in the 1990s when the city was flush but still losing population. If Kilpatrick had shown more fiscal discipline and not launched a borrowing spree to cover operating expenses that continued into Mayor Dave Bing’s tenure. Over five decades, there were many ‘if only’ moments.
“Detroit got into a trap of doing a lot of borrowing for cash flow purposes and then trying to figure out how to push costs (out) as much as possible,” said Bettie Buss, a former city budget staffer who spent years analyzing city finances for the nonpartisan Citizens Research Council of Michigan. “That was the whole culture — how do we get what we want and not pay for it until tomorrow and tomorrow and tomorrow?”
That might serve as a fitting epitaph for the entire United States in a couple of years. There’s nothing sadder than watching the Left systematically loot and pillage young people, cashing out the future to finance today’s vote-buying schemes, picking their pockets with crazy boondoggles like ObamaCare… and still racking up the lion’s share of the vote from their victims, using celebrity endorsements and the rhetoric of fashionable libertine abandon. (In reality, the foot soldiers of Big Government are marching right into your bedroom, clipboards at the ready.)
To those who pile up maddening amounts of debt while assuring us tomorrow will never come: tomorrow has been delivered to Detroit, and the rusted UPS truck of History is now bumping and creaking along to its next destination, a skeletal hand firm upon the steering wheel. The Congressional Budget Office just released a new long-term debt study that concluded federal public debt will surpass our national GDP in just 25 years… if you make a lot of absurdly rosy assumptions and completely ignore the “harm that growing debt would cause to the economy,” something the CBO admits it cannot reliably estimate. So 2038 is sort of an absolute maximum best-case date for the entire American system to go the way of Detroit.
Everything Barack Obama and his allies say today, the corrupt Democrats who destroyed Detroit were saying yesterday. Spending restraint was delayed until it was far too late to make a difference… a point that was reached some years before outright collapse. Benefit entitlements accumulated until there was no way for the private sector to keep its public overlords in the style to which they had become accustomed. Do you like those special ObamaCare subsidies handed out to rich Congressional representatives and their six-figure staffers? Detroit politicians have been looting the city’s treasury like that for decades. Games were played with the growing mass of Detroit’s debt until Kwame Kilpatrick rolled snake eyes.
Certainly the fortunes of the auto industry played a role in all this, but one of the big problems was the general acceptance of the Left’s mythology about postwar prosperity. It wasn’t the New Deal that put American industry on top of the world; it was the saturation-bombing destruction of all other industry. The rest of the world was going to rebuild eventually. No one seemed ready to meet the challenges of that day. The fruit of the boom was treated like an endlessly renewable resource, and devoured by ravenous government. Any government – or, for that matter, private entity – is liable to get in deep trouble once its financial commitments leave it without flexibility to meet new crisis. Once everything is mortgaged to the hilt, and the inheritance of all children has been spent, the next crisis becomes an unstoppable catastrophe.
Then you’ve got the process the Detroit Free Press sums up elegantly as “Cause and effect: People leave, taxes go up, more people leave.”
As population declined, the city instituted new taxes or raised existing ones to try and keep up with falling revenues.
The total property tax burden for city homeowners, including county and school taxes, rose from 44.79 mills per thousand dollars of value in the mid-’60s to 88.178 per thousand by 1991.
“It’s almost like every decade we got a new source of income to keep our ass on the ground,” said Ed Rago, Young’s budget director.
But the problem with using taxes to raise revenue was that it made the city a more expensive — and less attractive — place to live and do business. People and corporations kept leaving.
That will happen to America as a whole. It’s happening now, of course – who in their right minds would move a major business venture into the United States, placing capital and profits within the grasp of a predatory ruling class backed up by legions of dependents? And it’s possible to drop out of the private sector economy without physically leaving American soil – just ask the entrepreneurs who have closed up shop, or the people dropping completely out of the workforce. Eventually a significant mass exodus of human and financial capital will hit. That’s why it’s pointless to compute the precise date of fiscal Armageddon. Doomsday will come shortly after the smart, rich people conclude doomsday is at hand, and leave.
One of the excellent animated charts prepared by the Detroit Free Press pinpoints the year in which the number of people collecting pensions exceeded the number of active workers paying for them. That happened in 1991. It’s now almost a 2 to 1 ratio. All that talk of what people “deserve,” what they were “promised,” what they’re “entitled” to… eventually none of that matters any more, because there just aren’t enough horses willing to pull the government cart any more, no matter how urgently the ruling class cracks its whips and screams about “obligations.” It might not be too late for the rest of America to learn a few lessons from Detroit, but the point of no return rapidly approaches, well in advance of the cliff’s edge.