Free Markets, Free People

Detroit


What happened in Detroit? Well, frankly, “Atlas Shrugged”

You have to read this article by Bill Nojay in the Wall Street Journal.  Nojay was hired as the COO of the Detroit Department of Transportation, on contract, for 8 months.  His litany of woes is, as Insty notes, almost straight out of Ayn Rand’s “Atlas Shrugged”. 

It is all but an article of faith on the left and certain pseud-intellectuals that Rand was a crackpot.  Yet here we are watching what she wrote become reality:

Micromanagement by the council was endemic; I once sat for five hours waiting to discuss a minor transportation matter while City Council members debated whether to authorize the demolition of individual vacant and vandalized houses, one by one. There are over 40,000 vacant houses in Detroit.

Union and civil-service rules made it virtually impossible to fire anyone. A six-step disciplinary process provided job protection to anyone with a pulse, regardless of poor performance or bad behavior. Even the time-honored management technique of moving someone up or sideways where he would do less harm didn’t work in Detroit: Job descriptions and qualification requirements were so strict it was impossible for management to rearrange the organization chart. I was a manager with virtually no authority over personnel.

When the federal government got involved, it only made things worse. A federal lawsuit charging that the DDOT did not fully comply with the law in accommodating disabled riders had dragged on for years because of idealistic but painfully naïve Justice Department attorneys seeking regulatory perfection. I felt like a guy in the boiler room of the Titanic, desperately bailing to keep the ship afloat for a few more hours while the DOJ attorneys complained from their first-class cabin that their champagne wasn’t properly chilled.

Detroit’s other municipal departments had similar challenges. I would often compare notes with managers trying to run the city’s street lights, recreation programs, police departments and smaller offices. All of us faced similar gridlock.

The “government is the answer” crowd have a lot to answer for when considering Detroit.  In that city, government was as much of the problem, in fact, likely the biggest problem the city faced.  It couldn’t get out of its own way.  And as the city deteriorated and taxes skyrocketed in an attempt to offset the deterioration, the producers finally fled.  They shrugged.  They said, “no more.”  This country is headed in the same direction.

It just may take a little bit more time to reach the depths of Detroit and suffer the same result – but there’s little if any question it’s on the same road as Detroit.  It has passed through the stop sign, busted through the road closed sign and is headed toward the cliff.  The only control anyone may have now is how fast the whole contraption reaches the edge.

~McQ


If you are still wondering why Detroit is bankrupt …

Here’s a perfect example, one which occurred after the bankruptcy filing – because, you know, Detroit doesn’t have enough problems of their own:

The Detroit City Council on Tuesday unanimously passed a resolution calling for a federal investigation to see whether civil rights charges are warranted against George Zimmerman, who was acquitted July 13 of second-degree murder and manslaughter charges in the killing of Florida teen Trayvon Martin.

The resolution, sponsored by Councilwoman JoAnn Watson, sparked a discussion over the need for city leaders and others to focus more on violence in Detroit.

“We need to have that same level of outrage with respect to the black-on-black crime that takes place in our community,” Councilman Kenneth Cockrel Jr. said. “How many people were shot — maybe even shot and killed this past weekend in the city — mostly likely by folks who look just like them?”

Well yeah.  And, how about trash pickup, potholes, streetlights, Detroit’s bills, yatta, yatta, yatta.

Instead you have a councilwoman playing for headlines and pushing the agenda of an equally bankrupt “civil rights” organization because … well you tell me why.  Because I don’t get it.

~McQ


Detroit: The dead canary in the debt mine

Zero Hedge has a very pointed article about Detroit’s decline.  In it are listed 25 reasons it’s bankrupt (that, as ZH claims, will leave you shaking your head when you finish).  Here are the first 12:

1) At this point, the city of Detroit owes money to more than 100,000 creditors.

2) Detroit is facing $20 billion in debt and unfunded liabilities.  That breaks down to more than $25,000 per resident.

3) Back in 1960, the city of Detroit actually had the highest per-capita income in the entire nation.

4) In 1950, there were about 296,000 manufacturing jobs in Detroit.  Today, there are less than 27,000.

5) Between December 2000 and December 2010, 48 percent of the manufacturing jobs in the state of Michigan were lost.

6) There are lots of houses available for sale in Detroit right now for $500 or less.

7) At this point, there are approximately 78,000 abandoned homes in the city.

8 ) About one-third of Detroit’s 140 square miles is either vacant or derelict.

I know, you look at that and say, "these have me shaking my head already … there’s more"? Oh, yeah. Read ‘em all. But here’s the important part. It’s not just Detroit:

9) An astounding 47 percent of the residents of the city of Detroit are functionally illiterate.

10) Less than half of the residents of Detroit over the age of 16 are working at this point.

11) If you can believe it, 60 percent of all children in the city of Detroit are living in poverty.

12) Detroit was once the fourth-largest city in the United States, but over the past 60 years the population of Detroit has fallen by 63 percent.

“Oh my”, you’re saying, “I’m already shaking my head.  There’s more”?  Oh, yeah, much more.

But here’s the important part – a part we’ve been talking about for quite some time”

A while back, Meredith Whitney was highly criticized for predicting that there would be a huge wave of municipal defaults in this country.  When it didn’t happen, the critics let her have it mercilessly.

But Meredith Whitney was not wrong.

She was just early.

Detroit is only just the beginning.  When the next major financial crisis strikes, we are going to see a wave of municipal bankruptcies unlike anything we have ever seen before.

And of course the biggest debt problem of all in this country is the U.S. government.  We are going to pay a great price for piling up nearly 17 trillion dollars of debt and over 200 trillion dollars of unfunded liabilities.

All over the nation, our economic infrastructure is being gutted, debt levels are exploding and poverty is spreading.  We are consuming far more wealth than we are producing, and our share of global GDP has been declining dramatically.

We have been living way above our means for so long that we think it is "normal", but an extremely painful "adjustment" is coming and most Americans are not going to know how to handle it.

I agree completely.  As I said in my first post about Detroit it is just the dead canary in the debt mine.  It was simply the worst off of the bunch.  But, remember, we were told this sort of stuff couldn’t happen and to quit worrying about.   That debt wasn’t really that important.  Well, in a microcosm, Detroit is the end state we can expect for any number of governmental units in this country (and others).  It is where everyone is headed, it’s just a matter of the speed in which they get there.

You cannot live as we’ve been living and expect there to be no consequences.  Let me modify that.  You can “expect” whatever you wish, what’s delivered will be delivered by reality, not your expectations.

~McQ


Observations: The QandO Podcast for 21 Jul 13

This week, Bruce, Michael, and Dale discuss Detroit, the NLRB, and police militarization.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here.


Why is Detroit bankrupt?

Well there are a lot of contributing reasons, but Brad Plumer hits on the major one:

Detroit is sagging under decades of bad governance. “The city’s operations have become dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption,” Orr wrote in May. “Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st-century government.” (Detroit has been a one-party city run by Democrats since 1962.)

Now I didn’t write that or suggest that.  In fact, it comes from Ezra Klein’s “Wonk Blog” in the WaPo.  Some things just can’t be denied or spun.  Detroit is and has been the exemplar of the blue model city for decades.  And this is the result.

Of course, Detroit isn’t the only blue city in dire straits.  It’s simply the one in the worst shape of all.  It has literally imploded.  It’s population dropped as people fled the exploding crime and high taxes.  78,000 buildings have been abandoned or have become blighted. Unemployment is rampant.  And, uncooperative unions and huge pension debt doomed any recovery.

Over the past few months, Orr has tried to convince the city’s various creditors, including the city’s unions and pension boards, to take far less than they were owed in order to restructure the city’s finances (in some cases, pennies on the dollar). But he was unsuccessful, so now the city is filing for bankruptcy protection.

So now they’re all at the mercy of the bankruptcy court, assuming the Obama Administration’s misnamed “Department of Justice” doesn’t try to take a hand in the restructuring as it did in the auto bankruptcy proceedings.

Looking back at the first cite,  Kevyn Orr, the city’s temporary emergency manager makes an interesting point – he claims it is time to move government into the 21st century.  Doing so would also include much less power for unions and much less generous payouts for pensions, if a city is to have a chance at fiscal solvency.  Not that Detroit is going to get there easily:

“But city retirees, facing the prospect of sharply reduced benefits whether in bankruptcy or under Detroit’s restructuring proposal, think they stand squarely on the moral high ground because despite the poverty of many current and retired members, they have already offered big concessions.”

You can stand on the highest “moral ground” you can find, but reality says if there’s no money, it really doesn’t matter, does it?

That is, of course, unless the fed tries to involve itself in the mess and subsidize pensions and unions – something not at all far fetched. 

Detroit is the canary in the coal mine of blue model governance.  How many other cities will fold before it is finally kicked to the curb?

~McQ

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