The big issue before Detroit right now is whether its mayor and city council can agree on a plan to balance its books and avoid a takeover by a state-appointed emergency financial manager. An audit by Ernst & Young found that the city is on track to run out of cash even for its daily operations by April—and this is after Mayor Bing maxed out the city's credit cards.
But Detroiters are worried about the wrong thing when it comes to a state manager, notes Reason Foundation Senior Analyst Shikha Dalmia in her latest column at The Daily. That's because even though a recent state law gives the manager sweeping powers to put Detroit's fiscal house in order, s/he can't cure Detroit's dysfunctional political system that has produced this fiscal mess in the first place. She notes:
He or she cannot root out entrenched political corruption; cut taxes (the highest in the state); eliminate red tape; loosen the chokehold of the public unions that could once again saddle the city with unsustainable legacy costs; fight crime or improve schools. These are classic Third World problems that have produced classic Third World results: an unlivable and economically depressed city.
To address that, Detroit ought to consider an idea that New York University's brilliant economist Paul Romer is recommending to fix governance in Third World countries: charter out governance of portions of the city to other governments that have a more successful track record in managing their cities. She explains:
Bing has been talking about downsizing Detroit by withdrawing services from thinly inhabited areas. If his plan moves forward, vast tracts of the city could become completely uninhabited. Rather than turning them into farmland, as some propose, it might be better to turn them over to, say, Houston, whose government has successfully revived its city, especially since Detroit has the assets to thrive — a great freeway system, a sparkling riverfront, a world-class port and lovely housing stock.
Read the whole thing here