Two of America’s major cities have been hit with major disasters in recent years: New Orleans and Detroit.
One was hit by nature. The other, by human nature.
Our friends in the Crescent City were given only a few days’ notice before Katrina struck. Our friends in the Motor City have seen their financial storm coming for years.
Yet – odd as it seems, for as poorly as things went in New Orleans – folks there actually prepared better than in Detroit.
Last week, after decades of decline, denial, division and decadence, Detroit filed for bankruptcy – the largest municipality in the country to do so.
Now, bankruptcy is not in itself a disgrace. The question is what caused it and whether any learning has gone on.
In Detroit’s case, we’re afraid the answers are not encouraging.
Even as American automobile manufacturers were outmaneuvered and outdated, the city that depended on the industry so heavily failed to adjust properly. Just like the auto industry, Detroit is now shackled to fat union pensions and other unfunded liabilities adding up to $20 billion – the bill for decades of unrealistic promises to unions and retirees.
Corruption and negligence helped make the math even even worse. Today, the city that was once America’s fourth-largest has bled over 60 percent of its population. As one report noted, it’s as if the entire population of Dallas, Texas, had up and moved out of Detroit.
If Detroit were a nation, it might be considered Third World. Besides the crushing debt, there are nearly 80,000 abandoned houses – and a report a couple years ago said 47 percent of the population there is “functionally illiterate.” It’s said that 40 percent of the streetlights are dark. The official unemployment rate is some 16 percent, double the nation’s – and truth be known, that’s probably understating the case.
In 2012, Detroit topped the list of America’s most dangerous cities for the fourth year in a row, with a violent crime rate five times the national average.
“Almost a third of the city’s 140 square miles is vacant or derelict,” London’s Daily Mail wrote in 2011.
A recent conference was titled “Are We Rome?” – as in, is America in danger of collapsing?
Well, look at Detroit for a clue.
“What the average Detroiter needs to understand is that where we are right now is a culmination of years and years and years of kicking the can down the road,” city Emergency Manager Kevyn Orr said recently.
The same could be said about the country as a whole. The federal government is doing the same thing as Detroit – with $17 trillion in actual debt and likely over $100 trillion in unfunded future liabilities – while The Pew Center for the States reports that public pension plans were underfunded by $1.4 trillion in 2010. All told, states are said to have unfunded liabilities of over $3 trillion.
Detroit may just be ahead of the dead-man’s curve much of America is on.
But boy, is it ahead of the curve.
“Detroit earned its bankruptcy the easy way – through greed, the desire for political power and poor planning,” writes Douglas A. McIntyre, a financial editor and child of Detroit.
There are two cautionary tales for the rest of America.
One: stop doing what led to Detroit’s collapse.
Two: Don’t even think of bailing out such irresponsible cities and states.