Economics

Dave Bing's Last-Second Shot

Can the former Piston save Detroit?

|

On November 3, voters in Detroit trudged to the polls and re-elected 65-year-old Mayor Dave Bing, giving him five new city council members to accomplish a mission impossible: bring Michigan's biggest city back from near death. There's no clear prescription that will work, and Detroit's recalcitrant public-employee unions will resist the fiscal therapy that will necessarily be a part of any recovery.

Last year, Mayor Kwame Kilpatrick headed off to prison for using city funds to cover up an affair with a staffer. After a few months of an interim mayor, Bing stepped in to finish Kilpatrick's remaining time in office neither out of political ambition (he's announced he won't seek two terms) nor to get rich (he is donating his salary to the police department). The former Detroit Piston basketball legend who later made a fortune as an auto supplier genuinely wants to use his business acumen to save the city. But Detroit is much closer to the brink than many people acknowledge.

Detroit has been in trouble for decades. It has the highest taxes in Michigan, the highest murder rate in the country, and a dreadful public school system. Only 25 percent of high school students graduate each year. Its tens of thousands of abandoned homes offer safe haven to drug dealers and criminals. All of this has produced an exodus of businesses—there is no longer a single major department store in the city—and residents. Detroit's population is less than half of its peak of two million in the 1960s.

With the collapse of the auto industry over the past year and a half, things have gotten a lot worse. Unemployment is now touching Depression levels of around 30 percent—three times the national rate. Businesses that depend on the auto industry are shutting down and more residents are hitting the exits. This is accelerating the erosion of the city's tax base, producing a fiscal crisis that seems impossible to escape. The city's accumulated deficit is currently somewhere between $300 million and $400 million. No one knows for sure because the city has yet to submit its 2008 audit; its annual budget is about $3 billion.

Joe Harris, a former chief financial officer of Detroit, notes that when Bing took office this summer, the city had enough cash on hand to make payroll, pay vendors and meet other day-to-day needs for about 11 days. To make ends meet, Bing is planning to issue "tax anticipation" notes to lenders to raise $94 million against expected tax revenues. This money, along with the biannual property taxes that the city collected in August, might keep Detroit running through the end of the fiscal year next June.

But that won't address the underlying fiscal imbalances. For that problem, Bing wants to squeeze $5 million in savings every month by asking the city's roughly 13,000 workers to take a 10 percent pay cut, a 10 percent benefit cut, and a 10 percent staff cut. He also wants to privatize or outsource many city services and consolidate various departments. "Our people [city workers] need to understand that entitlement is gone," Bing told the Detroit News in August. "There are people who think we are job providers. We're service providers."

Bing is going to have a very hard time making the city's entrenched unions play ball. John Reihl, president of the American Federation of State, Council and Municipal Employees (AFSCME) Local 207, regards Bing's talk of cuts as a personal insult. "It is just a way to mess with the unions," he told the Detroit News in July. "It's not our role to give anymore concessions."

So far Bing has shown little indication that he'll stand up to the unions. For the third time on Friday, Bing backed off on his threat to lay off more workers if unions don't accept a wage cut. Yet a recent study by the Mackinac Center for Public Policy found that if state and local government employee benefit packages in Michigan were limited to what is typical for Midwestern private sector workers—including those in unions—taxpayers would save as much as $5.7 billion annually.

The fiscal mess puts Bing in a Catch-22. He can't cut the city's taxes because the short-term hit to cash flow would leave the city unable to pay its bills. But without tax reform the city can't lure businesses back.

Detroit may simply not be viable in its current form. Political and economic leaders need to rethink the notion that the city can regain its former status as a major American metropolis capable of luring large companies with tax breaks—which was Kilpatrick's failed strategy.

Detroit now more closely resembles a frontier town that needs not flashy stadiums and art institutes but basic services: police, firemen, and good schools. Bing needs to confront the hard reality that the city needs to pare back its liabilities, identify infrastructure it can no longer afford to maintain, and (though this is anathema to Detroit's political class) perhaps auction off portions of its 140 square miles to neighboring counties, shrinking to a size that its diminished population base can support.

Short term, Detroit's best hope may be to go bankrupt. However, given Michigan law, which has never been tested because no city has ever filed for bankruptcy, it's unclear if even bankruptcy will fully release Detroit from the clutches of its unions and allow it to start over. The only thing certain is that fate is not kind to a city that allows unions to run amok.

Shikha Dalmia is a senior analyst at Reason Foundation and lives in metro Detroit. This article originally appeared in The Wall Street Journal.

NEXT: Cold Crush the Opposition

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Waiting for me, huh?

    I’m a bit inebriated right now and will wisely forego commenting on the state of my beloved city till the AM.

    1. I am catching up with you, but your city is not beloved to me. Have fun with that.

    2. Nah, let ‘er rip, drunk and all. Some cities (and politicians) can’t be described with the robust full flavor of derision they deserve unless one is fully snockered.

  2. nothing can save detroit, except maybe a giant asteroid hit or ‘accidental’ nuclear bombing.

    1. Nuke it from orbit. It’s the only way to be sure.

      1. They’re in some real pretty shit now, man.

        Really, Detroilet should just agree to disband and go their separate ways, take the midnight train going anywhere.

  3. Why does the author keep calling California “Detroit”?

    1. It’s too big to fail!

      1. No, it’s too shitty to succeed.

  4. The US should just cut its losses and let Detroit go.

    The city is such a piece of shit it is embarrassing to tell foreigners that it is actually a part of the United States. Detroit is the perfect example of what happens when you keep electing the same people back into office simply because they have a D behind their name. And given the racial make-up of Detroit, that is never going to change, ever, no matter how bad the city gets.

    1. We could always sell it to the Chinese.

      1. I’m in China right now. I asked around and the best we could get would be they will take if off our hands if we give them $500,000,000.
        I also offered to trade both Clintons, Bush, and Obama in exchange for Hu Jintao or Wen Jiabao, but my friends here only laughed at me. “The days of the west exploiting China are over”, they told me.

        1. Hmm. It’s weird, I mean, they keep buying T-bills.

  5. However, given Michigan law, which has never been tested because no city has ever filed for bankruptcy, it’s unclear if even bankruptcy will fully release Detroit from the clutches of its unions and allow it to start over.

    Bankruptcy law is federal and under the jurisdiction of the federal courts.

    However, I’m sure there would be some Michigan state law questions raised should Detroit become insolvent.

  6. Can we give it to Canada without Canada knowing it is part of our bigger plan?

    You didn’t hear that from me.

    1. Shhhh I think that is on page 1112 of the senate health care bill.

  7. i tried hard and the only thing I could think of as a positive for detroit is the Red Wings and that’s only cause they’re an original six team and they currently have my favorite defenseman.

    1. Oh come on, Nipplemancer, you must not be from around here. Yeah Detroit is in some pretty deep do-do, but how about Wayne State University? There’s a definite shining jewel there for sure!

      1. i also believe that because of hockey and it’s vacinity to canadia, the correct pronunciation should be De-Twa like the french Roy.

      2. Does it have a school of economics that’s even remotely libertarian? Detroit could be a class project.

      3. Speaking of WSU, someone else suggested a interesting idea in another post
        https://reason.com/archives/200…..nt_1393839

  8. You know its bad there isn’t a real OCP-like corporation like there was in the Robocop movies, because maybe they buy Detroit and turn it into Delta City. If they could afford to do that in this economy. Come to think of it, I’d buy that for a dollar!

  9. So, judging from all the comments, Detroit’s version of “hope and change” is not working out too well, then?

  10. “John Reihl, president of the American Federation of State, Council and Municipal Employees (AFSCME) Local 207, regards Bing’s talk of cuts as a personal insult. ”

    I wonder how “insulted” he’s going to feel on the day the bank returns his paycheck marked “Insufficent Funds”

    1. No fucking shit. The public employee unions in Motown are completely divorced from the reality od a city that has financial obligations than far exceed their ability to pay.

      I am beginning to believe that bankruptcy and all that entails* is the only way out for Detroit. That said, I do think Dave Bing is the most honest mayor we’ve had in decades. The just elected city council has a lot of new faces that have at least mouthed the words of fiscal dicipline.

      For all the people who live in Bumfuck, Iowa and Trashcan, New Mexico bad mouthing a city you’ve never visited much less lived in – Kiss my
      ass. Ignorant pontification on subjects that you know little of just puts your ignorance on Front Street.

      * What public employee pensions? Let the avail themselves of Social Security and Pelosi’s beloved public option.

  11. A good article as far as it goes, but the fate of Detroit is a lesson that goes beyond the havoc that unions can wreak.

    My extended family is from Detroit, my dad worked in the auto industry, and I grew up in the suburbs. It was a major city in many ways for many decades, but the ’67 riots were a huge blow. The post-war flight to the suburbs got even worse. The middle class (not just whites) left the city and the inner suburbs: lots of people didn’t want to live anywhere too near rioting black people.

    By the ’70s auto industry management was at its peak of arrogance and cluelessness (the conventional wisdom was “nobody will want those little Jap cars”). The unions were getting fatter and more selfish and short-sighted: UAW members had top wages and benefits and juicy pensions that most recent college graduates could only dream about, but everybody wanted more. The negative effects of the ’60s hit hard: illegitimacy, drugs, crime. Local government became a one-party liberal affirmative-action affair, with the associated bloat, inefficiency and corruption. Continue all these trends (plus others) for 40 years, and you have Detroit today.

    So what can we learn? 1) Wagner Act-style unionism has nearly killed the American auto industry. Yes, management shares some blame, but managers are easy to fire, and can change their behavior relatively easily. Unions cannot. Without freedom to easily change work rules and reassign and fire workers, companies can’t adapt to foreign competition. All libertarians and conservatives should be pointing out that the reflexively pro-union liberal left bears most of the blame for the destruction of the Big Three, and that Democrats and unions still pushing the same “solutions” to “protect workers.” If the SEIU and ACORN and the Democrats and the New York Times get their way, the same thing will happen in other businesses.

    2) Big city Democratic politics has become increasingly left-wing, politically correct, and so obsessed with race that all criticism is deemed racist. The city spends increasingly vast sums on “education” and “public safety” to little effect, yet always claims the problem is lack of money. All libertarians and conservatives should be hanging the blame for the bankrupt, dangerous, ill-educated mess the city has become around the neck of the Democratic party. It should be a core, national point that Democrats are even now advocating the same statist “solutions” and “reforms” for the nation as a whole, that they never work as well as planned, and that the worship of “diversity” above efficiency and competence is ultimately destructive.

    I believe libertarian economic principles can save a city dying of leftist statism, but I don’t know what the exact steps would be. If the mayor and city council were libertarians and not worried about getting reelected, exactly what should they do? If Virginia Postrel were still editing Reason, I can imagine her commissioning an article like that, but Hit & Run has lots of bright and knowledgeable commentators, so let’s see more than snarky comments. I’m not being sarcastic or rhetorical when I ask: if you were in charge, what would you do?

    1. “Big city Democratic politics has become increasingly left-wing, politically correct, and so obsessed with race that all criticism is deemed racist.”

      Which is exactly why Baltimore is fast becoming another Detroit.

  12. “Only 25 percent of high school students graduate each year.” – would that be the senior class or just sloppy math?

    1. Depending on which estimate you use (DPS doesn’t keep trustworthy stats) only 25-48% of children who enter the ninth grade in Detroit public schools graduate from a high school somewhere within 5 years. DPS can’t tell you if a student transferred out of the district or just stopped attending. That would invole recordkeeping.

      Any of the figures you are willing to accept as accurate is shameful. An indictment of both the public schools system and the ghetto culture which discounts and even denigrates education. LBJ’s great society programs have contributed greatly to perpetuating said culture.

      1. There wasn’t a ghetto culture that denigrated education before LBJ. One of the biggest drivers that made Southern black folks move to Northern cities was the opportunity for better education. Even now, I’m not sure how accurate it is to talk about a culture that denigrates education; I went to a pretty good public high school and felt like my time was being wasted; if I was going to a Detroit school I just don’t think I would take it seriously. And if I saw my friends dying around me all the time, I’d probably consider spending the next four years of my life in school to be a waste; there’s no guarantee that I would live long enough to see the benefits.

  13. FTR, the unattributed comments at 10:41AM and 10:53AM are mine, J sub D’s.

    Near as I can tell, if the comment block lacks a preview option your comment will appear unattributed.

    Squirrels are gonna die a horrible death at the hands of Major* if they don’t fix this.

    * The cat featured in Footrot Flats.

    1. FTF(Further)R, Major was the pig dog. Horse was the cat.

      My bad.

  14. As a Detroit ex-pat, this has always been one of my favorite Onion stories, and gets closer to reality every day.

    http://www.theonion.com/conten….._for_scrap

  15. I went to Detroit (from Dallas) in September and yeah..umm – that city is in critical condition!

  16. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets…in order to really get the Books of the Bible, you have to cultivate such a mindset, it’s literally a labyrinth, that’s no joke

  17. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on.

  18. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane.

  19. , on credit repair maine, links to this page. Here’s an excerpt:

    I am going to add this website to my diggs!

Please to post comments

Comments are closed.