Detroit didn’t go bankrupt overnight
By Donald Kaul
The other shoe finally dropped in Detroit.
The once-proud city — variously known as “Motown,” “the Arsenal of Democracy,” and “the City of Champions” — filed for bankruptcy. There’s a local effort to head off the filing, but most people don’t think it will get anywhere.
Detroit’s the largest American city ever to do this, and it’s been coming for a long time. Detroit’s been a mess for decades, but that shouldn’t blind us to how astonishing the event is.
How does a city that was once the nation’s fourth-largest go bankrupt? How does a city that was the first to make “working class” a synonym for “middle class” become the equivalent of homeless?
Some of its wounds were self-inflicted, largely by the long string of incompetent and corrupt politicians its voters kept electing.
No one elected the man who filed for the bankruptcy, however. He is Kevyn Orr, the well-regarded bankruptcy attorney Gov. Rick Snyder made emergency manager of the city. The state legislature bestowed czar-like powers on him, which he’s clearly using.
Detroit now owes nearly $20 billion to 100,000 creditors, mostly banks and pension funds, yet is unable to even keep up with current expenses.
It has long since cut services to the bone, with many city offices manned by a skeleton staff. It hasn’t been enough.
The average response time to a 911 call (in a city with one of the highest murder rates in the nation) is so long that many residents have given up using it altogether. Confronted with an emergency (like a heart attack for example), they simply deal with it on their own.
It’s what happens when virtually all of the people with any resources whatsoever decide to abandon a city en masse.
Detroit had many problems, but the chief one was that it was a one-industry town. It made cars. When that industry, unable to keep up with foreign competition, began to leak jobs and the leaks eventually became a flood, Detroit’s vitality ebbed away.
Then there was the problem of race. The city was always a racial tinderbox (it’s been the scene of three major race riots in the past 150 years), but the riot of 1967 was particularly ill-timed and destructive. It turbo-charged the ongoing middle-class flight.
Before you knew it, a city built to accommodate nearly 2 million people had only 700,000 inhabitants rattling around, many of them destitute or close to it.
Moreover, as much as two-thirds of the tax revenue being brought in by its reasonably prosperous downtown area was being sucked up by pension payments to retired government workers.
That’s the way you get to be Detroit.
Czar Orr wants to solve the city’s problems by making its creditors take a haircut that amounts to a scalping, settling debts for as little as 10 cents on the dollar.
Some of the creditors want the city to first sell its assets, which include the multi-billion dollar contents of its world-class art museum and Belle Island, the crown jewel of the city’s once iconic park system.
Who knows where it will end? The only sure result is that armies of lawyers will make bales of money.
The federal government says it will not bail out the city. The state won’t either. Understandable, perhaps, but tragic.
A hundred billion dollars for Iraq, but not one red cent for Detroit. That’s our motto.
Donald Kaul grew up in Detroit and now lives in Ann Arbor, Mich. He wrote this for OtherWords.