Detroit is the USA (and Vice Versa)

Dick-Baynton-Print-MugSixty years ago, Dwight D. Eisenhower was inaugurated 34th President of the United States. Dr. Jonas Salk developed a polio vaccine. The Federal Department of Health, Education and Welfare was created. Detroit started its decline without any fanfare. The spiral terminated on Thursday, July 18, 2013 with a Chapter 9 bankruptcy filing by Kevyn Orr, Detroit’s emergency manager. What was a thriving metropolis of 1.85 million people is now home to about 700,000.

With $18 billion in debt, Michigan Governor Snyder brought in Orr from Washington, D.C. to try to iron out the problems. After several months of negotiations mostly with more than 40 unions, the emergency manager filed bankruptcy so that the courts could help isolate the problems and sort out the priorities.

The financial status in Detroit is dire; there are 100,000 creditors. Overall debt is $18 billion of which $11 billion is unsecured and includes $6 billion for retiree healthcare benefits, $3 billion for 20,000 retiree pensions and $530 million in general obligation (GO) bonds. The bankruptcy court has broad authority to change the terms of union contracts and the repayment schedules of GO bonds.

The city’s business and real estate situation is well beyond immediate repair. There are 78,000 abandoned buildings. Just 60% of the streetlights are in operating condition, only one-third of its ambulances are available for calls. Twenty percent of bus routes have not been operating because of shortages of repair parts. Five million dollars is lost annually due to broken collection boxes on the buses. And 80% of the 1,400 DDOT employees are qualified for medical leave absences, allowing workers to be absent with virtually no notice.

This is a poignant case of social, political, financial, economic and structural decay. It seems that pride and self-determination have been all but wiped out. The city of Detroit was an economic powerhouse and the nation’s fifth largest city. Now, 47% of Detroit residents are illiterate, daily murders make the city marginally safe for human habitation, unemployment stands at 16.3%, 10,000 students in 15 city schools are under state supervision, nearly half of the homeowners are tax delinquent, merchants in some areas have hired security officers and since 2008 residential real estate has fallen in value from about $8 billion to $4.2 billion. City hospitals turn out new citizens daily to add to the welfare rolls alongside their unwed mothers and unemployed fathers.

The almost worthless GO bonds have affected the market for municipal bonds nationwide and several Michigan counties have withdrawn their issues of needed local bonds due to the taint of Detroit’s bankruptcy. European investors with holdings in Detroit bonds may be repaid a few cents on the dollar.

What were the forces that caused this cataclysmic failure? Some say it started with abuse of young black men by police. The corruptive influences of Mayor Coleman Young from 1974 to 1994 may have contributed to dissent and descent. The ‘race’ riots of 1967 are recognized as an event that contributed to the city’s deterioration. A demographic shift called ‘white flight’ reduced the city’s diversity and population.

Perhaps the tectonic slide was the result of two reticulated political habits, unrelenting pandering and corruption. Liberal Democrats at all political levels have dedicated their careers to exchanging votes for entitlements. Residents have been taught how to fill out welfare forms instead of job applications. Free money without effort breeds habits of government dependence as a career and a culture.

Vulnerable workers are enticed to join public sector unions with work rules that encourage languid effort, increased overtime, extensive benefits and lavish entitlements. The symptoms that brought Detroit to bankruptcy are pandemic in the U.S. and in many areas of the world. If the deterioration of our nation’s economy and culture continues, people of goodwill and good conscience will be trampled. And corrupt politicians and union bosses will be riding herd, intensifying the stampede.

– Dick Baynton

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