Bailouts

Reason Writers Around Town: Shikha Dalmia in Bloomberg on the State Takeover of Detroit's Books

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Over at Bloomberg.com this morning, Reason Foundation Senior Analyst Shikha Dalmia explains what will happen if Michigan bails out Detroit, a city 60 days away from bankruptcy, by giving it the $220 million that Detroit's elected leaders are demanding without tackling the central problem at the root of Motown's malaise: A large, unproductive class of city employees living large at the expense of a (vanishingly) small base of productive citizens. She notes:

Detroit's unions have fought tooth and nail to protect jobs and pay even as Detroiters, reeling from their demands, have rushed to the exit doors. Detroit has lost two-thirds of its population since its peak of 2 million in the 1960s, but the rolls of city employees had until recently shrunk by only about one-third. The city government is the largest employer—Detroit's schools next. Employee benefits alone make up half of the city's general fund costs.

What's more, Detroit's public-sector legacy costs are astronomical. They include $5 billion to cover health care and other promises for retirees in decades to come and a billion for the unfunded liabilities to pension funds. This is not surprising given that the city has twice as many retirees as employees. And retirees get deals virtually unheard of in the private sector. For example, firefighters can retire at the ripe age of 55 with 70 percent of their salaries and automatic cost- of-living adjustments along with nearly full health-care benefits.

It would be futile to give Detroit any money without razing this opulent entitlement edifice. Otherwise, a year from now, Detroit will be back rattling its tin cup in Lansing, and Michigan voters will have far less patience for extending any more largesse.

Read the whole thing here.

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  1. Looks like those God damned Libertarians ruined another city. Nihilists!!

    1. As Margaret Thatcher said, eventually you run out of other people’s money.

      1. It is interesting how it is only the most liberal cities and countries who seem to be going bankrupt. Reckless capitalist places like Texas and Singapore seem to not do that.

        1. I’m sure one of our resident leftists will be along to explain how that’s not really true, and ‘red’ states are really worse off than ‘blue’ states, it only appears that the red states are doing better. Or if they are doing better it’s because of leftist policies, or some crap.

          1. Count on it. I’m from the Wheeling, WV area, and got into a discussion about it’s decline on Facebook with some leftists. No, it wasn’t the steelworker with 16 weeks paid vacation that had anything to do with the decline, it was the evil corporations.

      2. Actually it’s that they are running out of people. People will vote with their feet if nothing else.
        Ask Randi Winegarten.

        1. Coming soon to a city/state/country near you – exit taxes

          1. Building a wall around the whole thing and paying people to patrol it to keep people from escaping to a better life would create a lot of jobs.

            1. Kurt Russell approves of this

            2. Can we have the President’s jet crash in there afterward?

              1. Yes, just so long as we don’t send anyone in to get him.

          2. Bailing out Detroit with money collected from suburban taxpayers isn’t much different than an exit tax, anyway.

  2. Sounds like a great place fore another Apple factory.

    1. Any company would lose a lot of money setting up shop there. Hell, the people they employed from the area would likely steal half of the supplies off the assembly line. The government would steal the rest.

        1. “You don’t even know what that means.”

          1. But they DO!

  3. I’m sure the OWS movement will be along anytime now to protest this bailout.

    Drum circle? ASSEMBLE!

    1. Ah, We had to purge the drum circle because they were not sharing their tips with the collective. We now have a homeless guy who plays the spoons.

      1. Where is Eric Cartman when you need him? He knows how to deal with goddamned hippies!

      2. Bah! They got rid of the drum circle because no mere collections of humans can feed a drum circle when they are drum circling at the peak of their drum circlet prowess.

        It’s like trying to keep Episiarch from an all-you-can-eat cock buffet. It just can’t be done.

  4. The bankruptcy process has a legitimate purpose in the economy and it would benefit Detroit to go through the process.

    In a real bankruptcy, Detroit could shed the costs that got it there – unfunded pensions, union contracts, properties, and debts. A sustainable city government would emerge.

    The politically connected don’t want it because it’s their gravy train that would be tossed out by the courts.

    1. You describe bankruptcy when what we have here is welfare.

  5. Subsistence farming: The wave of the future.

    Ground’s kind of hard to plow, though ….

  6. THIS TOWN NEEDS AN ENEMA!

    1. . . . or just a better class of criminal.

  7. In a way, this is fascinating. There’s no reason to think more people won’t keep leaving that shithole city and state. It’s all very Atlas Shrugged. It would be neat to see what happens when it’s all parasites.

    1. Detroit: Galt’s Gulch in the 21st Century

      1. More like the reverse.

  8. I do agree that bailouts do nothing but prolong and even worsen the problem. I don’t know everything about the city, but from what I read here and other places, the place is in such deep shit that nothing will solve its problems, perhaps everyone should leave and the city should simply cease to exist.

    1. Oh god, no!

    2. I don’t see why cities still exist at all. Once upon a time they were needed as forts and ports, but not anymore. The cost of living is higher in cities than outside of cities which is pretty good empirical evidence that cities are a *less* efficient way of living.

      1. I realize that cities do have cultural amenities that rural areas lack like ballet companies and symphony orchestras and public art installations and mass transit and random street crime and homeless panhandlers. I guess some people think those expensive things that constitute a higher standard of living are worth the (heavily subsidized) price.

  9. Sounds prettty rock solid to me dude, I like it.

    http://www.anon-resources.tk

  10. I work in the city (in fact I’m working there now as I write this) and I’m not planning to leave (although I do live in a suburb).
    Ms. Dalmia has it mostly right, although the first commenter on the Bloomberg site also correctly notes that the conflict between a city with 800K inhabitants and a 2 million person infrastructure won’t entirely be solved by cutting back on firefighter pensions.
    I must admit, however, as I’ve watched the sparring between the Mayor and the Governor, that I’d love to see what the city actually spends money on. Libertarian or not I don’t think Detroit needs to fire policemen or firemen, but I wonder who else is on the payroll, and exactly how essential they are.

    1. Bah. End the war on drugs and you could reduce police forces across the nation by 15% easily.

      The government will find work for idle cops. THAT is the problem.

  11. We need a takeover by OCP to fully privatize Detroit. Create the Majestic Delta city.

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