A Tale of Two Detroits: What Union Leaders See Vs. What History Shows

The loss of jobs and development is the symptom, not the disease


No renaissance in sight
Credit: paul bica / Foter / CC BY

A pair of Detroit Free Press stories over the weekend highlighted the pretty large gap between how union leaders see the nature of the city's municipal crisis and how everybody else sees it.

On Friday, union leaders visited the White House to stump for help:

Labor leaders took their turn visiting the White House on Friday to talk about what can and should be done for bankrupt Detroit, while also cautioning the Obama administration that the financial problems experienced in southeastern Michigan may soon be felt in many other metropolitan areas across the U.S.

Calling for a plan that would not only address Detroit's concerns but also serve as a playbook for future crises, the group — which included the UAW's Bob King and others — left the hourlong meeting touting few specifics but saying the groundwork was laid for a response that could help address Detroit's issues by attracting new jobs and development.

"They are very much aware of the problem," Lee Saunders, president of the American Federation of State, County and Municipal Employees, said after the meeting. "This is not only a Detroit problem. … This is an issue that confronts urban centers across the country."

Yes, this is absolutely true. Some folks (like Paul Krugman, for example) may want to paint Detroit as an extreme outlier, but many of Detroit's fiscal problems are present in many municipalities. Unfortunately, these people seem to think the loss of jobs and development are the cause of the problem and not a symptom.

The meeting was one in a series that administration officials have been engaged in as they attempt to give voice to the various groups impacted by the largest municipal bankruptcy in U.S. history. While a federal bailout has been ruled out, the Obama administration has still been trying to coordinate a response to the crisis.

Agency and department heads have been asked to scour their grant programs for those that could help the city, while administration officials try to coordinate efforts between local politicians, business leaders, charitable organizations, labor and more to help stimulate economic investment and job creation in hard-hit Detroit.

Don't call it a bailout! It's just federal money from grants being directed toward the city! That's totally different.

Then on Sunday, the Free Press used math and graphs to get to the real root of Detroit's fiscal nightmare: runaway debt, high taxes, and uncontrollable pension costs. Some highlights:

  • Detroit's debt began skyrocketing in the '90s until it hit $9 billion in 2006, even as revenues were dropping to around $1.5 billion a year. This does not include future debt liabilities like pensions or bond interest.
  • In 1960, police and fire spending took up 17 percent of the city's budget. Now it takes up 47 percent.
  • In 1960, pension costs took up 10 percent of the budget. Now combined with health care costs it takes up 18 percent of the budget. Health care expenses are actually double pension expenses.
  • Detroit has some of the highest taxes in the state, but city revenue is at a 60-year low. The city now gets more revenue from its local casinos than it does from property taxes.
  • Detroit has twice as many people on its pension rolls than it does actually working.
  • The amount of money the city spends on pension benefits for police and fire employees is equal to 126 percent of the city's payroll.

Read (and view) the whole thing here. The graphs are illuminating, and the lengthy explanation of how ex-mayor (now convicted of corruption) Kwame Kilpatrick's award-winning plan to borrow money to pay down the pension debt went terribly wrong is too complex to summarize with a bulletpoint.

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  1. were you expecting the union folks to have a different reaction?

  2. Damn it, we were trying to vote ourselves rich! Is that so wrong?

  3. the groundwork was laid for a response that could help address Detroit’s issues by attracting new jobs and development.

    A federal Supermax?

    1. In the science fiction series Wearing the Cape, that’s precisely what Detroit did. They build the maximum security prison for breakthrough superhuman criminals.

  4. “Despite a new income tax in 1962, a new utility tax in 1971 and a new casino revenue tax in 1999 ? not to mention several tax increases along the way ? revenue in today’s dollars fell 40% from 1962 to 2012.”

    Why do progs think the Laffer curve is Voodoo when it explains so many of their worst failures. I cannot even contemplate the willful ignorance it takes to start this sentence with “Despite” instead of “Because of.”

    1. That’s one of the fun parts of the city, too. The people fighting against the bankruptcy.

      What would they suggest? Get rid of police and fire protection, just put all revenue to pensions?

      They already can’t borrow any more, they’re in default.

      Raise taxes? Guess what? everyone that can leave the city, will (they probably already did.)

      They’ll probably try to get more from the state, or from the metro Detroit area. Guess what? We, in the metro Detroit area will bail, too, if they try that.

      1. That is the best part of the city. How long before Detroit tries to print its own money in the form of IOUS?

        1. No one will take it now.

          Businesses have (to some extent) started demanding cash in deals with the city, as they weren’t getting paid. No Net 30 or Net 60 terms. Detroit was still paying those late, even with terms like that.

          1. Yeah, I can’t believe any business would take a check from the city of Detroit. I don’t see how they are operating at all.

      2. Seems impossible to get less police protection given the 1hr response time average. I had a girlfriend that lived downtown when I lived in MI. She drove to a police station to escape the gang members waiting for her at her appartment – guys running around her car yelling about what they were going to do to her. They followed her to the station, so she called 911 and no one would bother even coming out the door. She moved north the next day.

        1. That’s what Uzis are made for.

  5. The sad fact is that if Detroit would ever hit rock bottom it could come back. The cost of living there has gotten so low and the wages needed to live is so low, it would have a real competitive advantage over other cities. That is the beauty of the free market, the seeds of renewal are planted by the fires of destruction.

    Sadly, the progs will keep napalming the city hoping for better results this time.

    1. Cost of living isn’t low in the city. Property taxes are huge (on par with or higher than some of the rich suburbs like Livonia.)

      Schools are atrocious, so if you have kids, you need a private school. Police are useless/corrupt/overcommitted, so you need private security. Also, less than half of the streetlights work. Your insurance for car and home are huge, because cars get stolen all the time. Prices in stores are high because of shrinkage. Throw on a half percent income tax for living in the city, and another half percent for working in the city.

      The progs are mostly just aiming for looting anything productive in the city.

      1. The cost of living should be low, except for the fact that the progs tax the place like someone would want to live there.

        That was my point. If they would ever hit rock bottom and walk away from the pension and resize the government and taxes, the place would come back.

        1. I’m hopeful that will come out of the bankruptcy, but it’s hardly certain.

          It really needs a clean sweep of local government, too. Get all the incompetents out, replace with a handful of smart, qualified, ambitious contracting agents. Everything contracted out.

          Detroit News has a story this morning about a homeowner who paid his property tax bill and the city still hasn’t cashed the check.

          Earlier this year (in the winter?) they lost a paper check for a million dollars.

          1. Total and complete incompetence. What is sad is that the media is so dogmatic and ignorant they will never hang that around the necks of the progs. Detroit is the end state of every single prog run government.

        2. walk away from the pension

          How? Somebody has to pay for it.

          1. Like somebody had to pay for the pensions of white-collar Delphi employees?

      2. Not “on par” – consistently higher. (Data here is 2011, but gives a decent overview):

        Assuming you live in Detroit and the Detroit school district, your millage rate is 68.18 (86.2 for non-homestead).

        Livonia/Livonia Public Schools is 36.1 (54.1)

        Of course, if you go all the way up to Macomb Township and Utica schools, you’ll pay a 22.47 (42.4). So one-third the property tax rate on a home, half the property tax rate on other property, and no income tax rate (versus Detroit’s 2.4%).

    2. There’s only one way: Detroit must be broken up.

  6. In 1960, police and fire spending took up 17 percent of the city’s budget. Now it takes up 47 percent.

    I just read a piece by Matt Labash from a couple of years ago about Detroit. He spent most of his time attached like a Lamprey to the nutsack of those noble firemen. The poor, poor, things. It’s a horrible life. They have to go out and, you know, DO THE FUCKING JOB THEY’RE PAID TO DO. You would have thought they were enslaved by some evil megakkkorp, chainganged together and thrown directly into the center of a raging inferno for the amusement of a live television audience.

    Of course, the entire thing was a soupy morass of, “They oughtta”. They oughtta knock down those abandoned houses. They oughtta fix up that old Packard plant. They oughtta give everybody a free pony.

    1. It would suck to be anything in Detroit. But at least being a fireman apparently paid well.

    2. That statistic is especially ludicrous when you consider that Detroit was a boomtown in 1960, and today nobody lives there.

      What more do Americans need to see? Detroit is the definitive model of American leftoidism and collectivism, and like the USSR it is an unmitigated disaster. How much longer will they let the lamestream intellectuals get away with selling rot, destruction and collapse as “social progress”?

    3. Does that 47% include the pensions?

  7. “Labor leaders took their turn visiting the White House on Friday to talk about what can and should be done for bankrupt Detroit, while also cautioning the Obama administration that the financial problems experienced in southeastern Michigan may soon be felt in many other metropolitan areas across the U.S.”

    Yes, the financial problems will be felt elsewhere as a result of those same labor leaders.

  8. 13th check is just embezzlement. If a pension fund is up after a few years of good returns, you should expect regression to the mean. Not spend all the extra money. The pensioners deserve to have their pensions cut over that.

  9. I used to live in Chicago proper. Then one day in 1998 I read that city pension costs require more than 100% of the city’s property tax.

    I started looking for housing outside of the city the next day.

  10. How can police and fire be so bad and take up nearly half the budget? The firetrucks are dilapidated and I remember reading here that cops-new ones at least-get paid $30,000 year? Where is all that money going?

  11. Funny how Tony never appears in these threads….

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