Two of
America’s major cities have been hit with major disasters in recent years: New
Orleans and Detroit.
One was
hit by nature, the other, by human character.
Our
friends in the Crescent City were given only a few days’ notice before Katrina
struck. Our friends in the Motor City have seen their financial storm coming
for years.
Yet –
odd as it seems, for as poorly as things went in New Orleans – folks there
actually prepared better than in Detroit.
Last
week, after decades of decline, denial, division and decadence, Detroit filed
for bankruptcy – the largest municipality in the country to do so.
Now,
bankruptcy is not in itself a disgrace. The question is what caused it and
whether any learning has gone on.
In
Detroit’s case, we’re afraid the answers are not encouraging.
Even as
American automobile manufacturers were outmaneuvered and outdated, the city
that depended on the industry so heavily failed to adjust properly. Just like
the auto industry, Detroit is now shackled to fat union pensions and other
unfunded liabilities adding up to $20 billion – the bill for decades of
unrealistic promises to unions and retirees.
Corruption
and negligence helped make the math even worse. Today, the city that was once
America’s fourth largest has bled over 60 percent of its population. As one
report noted, it’s as if the entire population of Dallas, Texas, had up and
moved out of Detroit.
If
Detroit were a nation, it might be considered Third World. Besides the crushing
debt, there are nearly 80,000 abandoned houses – and a report a couple years
ago said 47 percent of the population there is “functionally illiterate.” It’s
said that 40 percent of the streetlights are dark. The official unemployment
rate is some 16 percent, double the nation’s – and truth be known, that’s
probably understating the case.
In 2012,
Detroit topped the list of America’s most dangerous cities for the fourth year
in a row, with a violent crime rate five times the national average.
“Almost
a third of the city’s 140 square miles is vacant or derelict,” London’s Daily
Mail wrote in 2011.
A recent
conference was titled “Are We Rome?” – as in, is America in danger of
collapsing?
Well,
look at Detroit for a clue.
“What
the average Detroiter needs to understand is that where we are right now is a
culmination of years and years and years of kicking the can down the road,”
city Emergency Manager Kevin Orr said recently.
The same
could be said about the country as a whole. The federal government is doing the
same thing as Detroit – with $17 trillion in actual debt and likely over $100
trillion in unfunded future liabilities – while The Pew Center for the States
reports that public pension plans were underfunded by $1.4 trillion in 2010.
All told, states are said to have unfunded liabilities of over $3 trillion.
Detroit
may just be ahead of the dead-man’s curve much of America is on.
But boy,
is it ahead of the curve.
“Detroit
earned its bankruptcy the easy way – through greed, the desire for political
power and poor planning,” writes Douglas A. McIntyre, a financial editor and
child of Detroit.
There
are two cautionary tales for the rest of America.
One:
stop doing what led to Detroit’s collapse.
Two: Don’t
even think of bailing out such irresponsible cities and states.
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