Perhaps the most ominous words in public policy discussion these days were published by the Huffington Post on Monday: “We are all Detroit.”
Thankfully, the statement (made by The American Prospect editor Robert Kuttner) is demonstrably false. The city of Tyler boasts a balanced budget, no general obligation indebtedness, and one of the most transparent administration in the state and the country.
But as a sentiment and a rallying cry for a big bailout of the failed city, “We are all Detrout” is disturbing.
First, Kuttner rewrites history to reduce Detroit’s responsibility for its own predicament.
“Detroit is partly the victim of economic trends far beyond its control, the downsizing and outsourcing of the auto industry and the collapse of the sub-prime bubble, to name just two,” he says. “And yes, the city has suffered from corrupt and inept local government. But leaving Detroit to a bankruptcy process that favors investment bankers over local pensioners will neither provide a fair outcome nor contain the damage.”
Let’s pause for a moment and look at those initial claims.
Detroit’s decline began long before the “downsizing” of the auto industry (there’s never been an “outsourcing” of the industry; we’re now making more cars than ever before, and lots of cars with foreign names are actually built here, albeit in non-unionized states).
The city was largely a ghost town decades before the sub-prime bubble collapse of 2007. The real question is why people left. Poor city services, a hostile business environment and high taxes, and inadequate public schools surely played a part. None of those factors are driven by anyone but city officials.
Detroit has a debt of $18 billion (or more, depending on who’s counting). Much of that comes from unfunded pension liabilities (the “local pensioners” Kuttner mentions).
When pensions and pay for current employees are combined, they account for more than 75 percent of the city’s budget. And it still can’t field enough police or maintain its streets or parks.
The city also imposes an income tax on residents and businesses.
“The income tax burden on residents is significantly higher than that for those who live in the surrounding area, which helps drive more affluent and successful residents out of the city,” explains the Cato Institute’s Michael Tanner. “And Detroit is the only city in Michigan that has an excise tax on utility users.”
The schools are abysmal; though they spend $14,000 per student each year, three out of four schools fails to provide even an “adequate” education.
These problems are symptomatic. Detroit’s problems aren’t the result of too little government, they’re the result of too much.
“In many ways, Detroit is a model of tax-and-spend liberalism,” notes Tanner. “The city’s per-capita tax burden is the highest in Michigan. Detroit has the country’s highest property taxes on homes, the top commercial property tax and the second-highest industrial property tax.”
And this is why we aren’t all Detroit. Kuttner’s call for a bailout must be ignored.