This may be a bit of an overstatement, but the outcome of the Detroit bankruptcy filing could have a huge impact on the future of our nation.
Detroit was dealt a bad hand and played it even worse. The decline of the auto industry wasn’t the fault of Detroit city officials past and present. But what is their fault is their unwillingness to deal with the problem before it became a $20 billion hole that they no longer could put off to another day.
Predictably, there are calls for a federal bailout. That would be a disaster for two reasons. First, taxpayers in Wisconsin and around the country shouldn’t be on the hook for a municipal bankruptcy largely due to government officials either too incompetent or too beholden to unions and other special interests that benefited from borrowed money.
Second, officials in other cities and states – California and Illinois come particularly to mind – who likewise have done an abysmal job protecting their bottom lines, must be salivating over the prospect of a federal bailout. And, after all, if Uncle Sam bails out Detroit, how can he say no to any other local or state government similarly underwater financially?
This is Exhibit A of why people resent government. In private industry, if revenues begin to fall, changes are made quickly to protect the company’s future. It doesn’t take a genius to figure out that as Detroit population fell from a high of nearly 2 million in the 1950s to its current 700,000, that dramatic changes were needed in expenditures. Instead, Detroit kept borrowing, and as the things deteriorated further, anyone who could afford to leave the city did so.
There’s not much left to cut service-wise. According to the New York Times, 40 percent of the city’s streetlights don’t work and half of the city’s parks have closed since 2008. Decades of decline, mismanagement and legacy costs that can’t possibly be paid leave a city badly in need of a fresh start, but that can’t happen unless its creditors, including current and former city workers, revise their expectations of what level of pay and benefits an enterprise $20 billion in debt can provide. The Times’ article described Detroit’s health care and pension costs as “overwhelming.”
Federal aid should be limited to helping demolish the tens of thousands of abandoned buildings in the city and providing incentives for businesses that want to help rebuild the city and provide badly-needed jobs.
But it’s up to city officials and employees to work through their own financial problems. Otherwise it would send a clear signal to other mayors and governors that they don’t have to worry about balancing budgets or protecting the bottom line because the unwitting American taxpayer will be there ready to clean up their mess.
Some advocating federal intervention compare Detroit’s demise with a natural disaster.
No, this was clearly man-made.
[by Don Huebscher, writing as editor of the Eau Claire (Wisconsin) Leader-Telegram]
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NORM ‘n’ AL, Minneapolis