Opinion

Felix Salmon

When should we aid Detroit?

By Felix Salmon
July 29, 2013

John Cassidy and Steve Rattner agree that the destruction which has been visited upon Detroit, in recent decades, is at least as devastating, and as worthy of federal support, as the chaos which was wreaked by Hurricane Sandy in richer parts of the country.

Cassidy and Rattner disagree, however, on how they would like to spend Uncle Sam’s billions. Rattner, you won’t be surprised to hear, concentrates on financial engineering, and he singles out Detroit’s pension plans: he calls them “grossly underfunded” (which is highly debatable), and calls for “shared sacrifice by creditors, workers and other stakeholders”. Beyond that, he wishlist seems to consist simply of the “$1.25 billion in reinvestment spending that Detroit’s emergency manager, Kevyn Orr, has included in his proposed budget”.

Cassidy, on the other hand, goes further:

What is needed is a comprehensive and adequately funded plan to stabilize the city’s finances, repair its public infrastructure—almost half the street lights don’t work—and raze its semi-abandoned neighborhoods, consolidating its population into a smaller, more manageable area. (At the moment, Detroit sprawls across a hundred and thirty-nine square miles, more than Boston and San Francisco combined.)

What Cassidy is talking about here, under the happy euphemism of “consolidation”, is a massive program of destruction, displacement, and forced relocation — one affecting hundreds of thousands of families. It’s the kind of thing one can maybe imagine in China, or possibly even in New York City circa Robert Moses — but both of those examples involve acting with the tide, as it were, a government helping to expand cities which are growing fast and which will in any case require a vast new infrastructure.

In Detroit, by contrast, it’s much harder to orchestrate any kind of big rebuilding program: it’s much easier to tame and shape existing economic forces than it is to try to conjure them up from scratch. And while there is a certain degree of gentrification in downtown Detroit, it’s on such a small scale, compared to the city as a whole, that its role in any city-wide urban regeneration plan is always going to be limited.

Rattner is, depressingly, entirely correct when he says that “while logical, the potential for downsizing Detroit is limited because the city’s population didn’t flee from just one neighborhood”. Detroit is too big; it must get smaller; it can’t get smaller. That’s the real tragedy of Detroit, and it’s one that no amount of federal funds can solve.

It can seem heartless for Washington not to step in and help save Detroit. Cassidy’s plaint is clear and simple: “Shouldn’t one of America’s iconic cities be rebuilt, rather than picked apart? If so, it is going to require the leadership, and the financial support, of the federal government.” It’s infuriating to watch the government stand idly by as Detroit sinks into a fiscal and economic morass. But at the same time, the government should never act on the basis of “something must be done; this is something; therefore let’s just throw some money at the problem and hope for the best”. Whenever that happens, failure is pretty much guaranteed.

Over the long term, there are good reasons to be bullish on Detroit. North America is becoming increasingly urban, which should benefit all of its cities. Michigan, more broadly, is one of the few parts of the world which will see a real benefit from global climate change, and it needs a healthy Detroit to thrive. To the city’s east and west, both Toronto and Chicago are booming, and in general the big US border cities — Seattle, Detroit, maybe Buffalo — can’t help but benefit from Canada’s continued oil-fueled expansion.

But for the time being it’s hard to anticipate exactly how those forces are going to align to reshape Detroit. The city’s emergence from bankruptcy should absolutely be structured so that the city has every opportunity to grow and thrive over the long term. But it’s not necessarily the best possible time for the federal government to start providing the kind of “leadership” which, as far as I can tell, has been asked for by neither Detroit nor the state of Michigan.

The lesson of Japan’s fiscal mega-projects over the past 20 years or so is that even with effectively unlimited funds, it’s impossible for government alone to change the economic destiny of a major city. The federal government should absolutely keep a close eye on the economy of Detroit, and stand ready to help if and when such aid will have the greatest positive effect. I just find it hard to believe that right now is that time.

Comments
26 comments so far | RSS Comments RSS

Years ago a competitive newspaper to Reuters (it shall remain nameless) did a fascinating analysis between Detroit and Toronto. Way back when (in the 1950s) Toronto was considered to be the sleepy loser to glamourous, thriving Detroit. Well we saw how that turned out. So how did it all change? Toronto continually invested in urban infrastructure and maintained quality public primary and secondary schools and public safety in the city so a strong middle class remained as taxpayers, even though the Greater Toronto Area experienced it’s own version of suburban sprawl. In other words you could move out to the burbs if you wanted to, but you didn’t HAVE to in order to maintain a civilized middle class lifestyle. Toronto faces its own pressures of gentrification now but the model still generally holds.
As for Chicago “thriving,” well maybe yes for certain sectors and neighborhoods but the sickening murder rate certainly casts a pall of President Obama’s hometown, doesn’t it?
And Buffalo for decades has tried to figure out how to benefit from a strong neighboring Canadian economy but never seems to find the trick. It is finding some modest success now reconfiguring itself from Rust Belt left-over to a regional medical research and higher education center. But it still badly needs more “regular” jobs, like most American cities.

Posted by bluepanther | Report as abusive
 

The political entity of the city of Detroit is bankrupt; the broader region, though perhaps not as well-to-do as some areas of the country, is in much better shape, and this is the case in many areas around the country. Rather than figuring out a way to throw more dollars at the city, why not try to integrate the city into the richer areas of the region? To me, political (and thus tax base) consolidation is a much more sustainable solution.

Posted by MitchW | Report as abusive
 

If Detroit is unmanageable in its present form, consider breaking it up into pieces? The outer neighborhoods could see a revival as suburban towns if not weighed down by the whole. The city center needs to take another path — investment and rebuilding — but that might be more manageable as a smaller entity.

Posted by TFF | Report as abusive
 

“North America is becoming increasingly urban, which should benefit all of its cities.”

This is only true for American cities that have invested into creating a walkable, bikable downtown and a connected public transit. When you look at Street View level, it’s a scene out of the Walking Dead.

Detroit was manufactured for the car, and promoted as a car city, by the Big-3. Multiple wide lanes and every other block in downtown is a parking lot. You can’t undo car culture in the heart of car city, in a few decades.

In terms of amenities, Detroit’s a long ways away from seeing a revitalization.

Posted by GRRR | Report as abusive
 

According to a National Adult Literacy Study, as of 1993 47% of the adult residents of the City of Detroit were able to read only at Level 1 functionality. Level 1 readers are expected to have considerable difficulty understanding a bus schedule and/or properly following the instructions on prescription medication.

Do what you want to re-engineer the city, its buildings, its pensions, whatever. So long as the households are broken and the citizenry cannot read or write, plans that do not include massive, coerced eviction will fail.

Posted by solotar | Report as abusive
 

Alternately, one could just as easily say that Detroit has a slightly smaller land area than Raleigh, NC – 139 sq. miles vs. 143 sq. miles for Raleigh – despite a much larger population (701k for Detroit versus 404k for Raleigh).

Look at this list of U.S. cities by land area -
http://en.wikipedia.org/wiki/List_of_Uni ted_States_cities_by_area – and Detroit hardly stands out as covering a shockingly large area or as shockingly underpopulated. I would phrase it a bit differently, as I would assume that Detroit has a housing stock that would support much more than its current population.

Similarly, I’ve never seen any comprehensive analysis of how much Detroit spends per resident compared to other similar-sized cities, either in total or on specific services. I looked at Detroit’s police spending compared to Austin, Texas. In the latest fiscal year, Detroit spent $340 million ($485 per resident) while Austin (population 843,000) spent $301 million ($357 per resident). I understand that Detroit is a tougher and therefore more expensive city to police, When, however, I read stats like Detroit’s police response time is 1 hour – versus a national average of about 10 minutes – I question whether lack of money is the true problem so much as inefficient spending of money.

Hopefully Detroit will not only use bankruptcy to reduce its legacy debt, pension, and health care obligations to a manageable level, but also take the opportunity to restructure its city government. I think that someone basically needs to start with a blank sheet of paper and ask, “What’s the right structure for this city of 700,000 people?” Because I strongly suspect that as the city has shrunk, the entire city government has gotten progressively more top heavy while making disproportionate cuts to the rank and file.

Posted by realist50 | Report as abusive
 

As other commenter’s have already started nibbling around the edges I’ll through political correctness to the wind and state the obvious:

Detroit is a glaring example of the end game of both the modern welfare state and collective bargaining against mathematics. Massive spending on public housing… check. Growing population of non-workers able to subsist indefinitely check. Productive working class disgusted, resentful, and afraid of non-working class gradually leaves. Ratio of workers to non-workers becomes unbearable. Unstoppable tailspin ensues.

Lots of successful livable cities have wide streets and sprawl. (I’m not saying sprawl is good… but sprawl is not to blame for Detroit or Atlanta having lower upward mobility.

Posted by y2kurtus | Report as abusive
 

So…you want a bankrupt nation to step in, and save a bankrupt city? Why? Have you gone mental?

The nation is bankrupt…because its economic engine has stalled. Its economic engine has stalled due to a plethora of reasons.

Giving the city a bailout is like giving a man a fish…it will feed the man for a day, in much the same way that it will keep the city functioning in its current form for a period of time, but then the man / city will, on the next day, be hungry again, and come looking for another bailout / fish. The city needs to learn how to be a fisherman itself, if it is to be free of a horrific fate.

Instead, that’s not what will happen. In all likelihood, the city will make some tired noise about people not paying enough taxes, of people failing to pay those taxes, or that they aren’t high enough; this is nothing more than the typical mumblings of the staffed bureaucrats that, having never had to acquire their food through any other means, cannot fathom how money is acquired save through taxation, and business itself must then be through lawful mandate. Frankly, it’s cannibalism, and some of the worst of it…I should know, I’ve walked on the darker side of the street medicine enterprises once upon a spell, and have seen the same thing there as I see here in the municipal, state, and federal houses. I’ve seen the darkness there…and I’m seeing it here. It’s the same frenzied, “I’ll sell most things to get a fix” that various types inflict on a person…but in this case, it’s on a city…and it’s worse.

Honestly, I do not know the name of this particular drug that has tainted our cities, our states, and our nations. It’s similar, as I’ve said, to street drugs with humans…but cities aren’t human, merely constructs made out of them. So what exactly are they addicted to…what is its name…that they can’t say no to? Must be something hard, and it obviously is having a deleterious effect on them…bankrupting them…but they have no easy way off of it.

Posted by rossryan | Report as abusive
 

I dunno. You don’t think that with enough money, they could pay people to move? Pay a variety of developers to build new modern housing closer to the core, then offer to trade them to folks, along with a moving allowance, for their old crappy houses. And mention that if they stay, they’re getting no services.

Posted by Auros | Report as abusive
 

Detroit needs to sell off land and become smaller. There are too many fixed costs associated with being a huge city. Detroit should deaccession 3/4 of its area and reincorporate as a smaller city.

Posted by mfw13 | Report as abusive
 

Why not build a giant NSA datacenter there? Or a drone factory? I’m not kidding. The feds still spends hundreds of billions on infrastructure, so why not put it in Detroit? You would give people the option to take a buy-out of their current home, and it would be the quickest area to fully sell-out would get the project.

Think of the money we spent building things in Iraq and Afghanistan. Whenever someone talks of the difficulty of a problem, I point to how we simply walk into countries and do some major things. I know many of the things we do are negative, but there are positives, and it is more a question of will. If we really want to do something, it gets done.

As per a prior commenter, Obama probably doesn’t want to seem like he’s bailing out some welfare-class city. Bringing jobs to build something, staff something, clean it, coupled with a real plan on what to do with housing, with some restructuring of public services could get a lot done.

Posted by winstongator | Report as abusive
 

I think we should have been investing in the cores of declining cities for a long time. You have Detroit, St Louis, Baltimore, Cleveland, Buffalo.

We have explicit programs to help rural areas, why not do some short-term improvement projects for cities.

Posted by winstongator | Report as abusive
 

Our economy was partially driven by the migration to the suburbs in recent times. It was growth, and not well planned growth. Detroit had the same thing happen, and it was even the auto industry who was one of the big supporters since more miles driven by the typical follower commuter was good for the industry (auto) and the oil companies. Remember, the car companies, and mostly GM, bought and dismantled public transportation. Well, suburban sprall was the next thing after that. I don’t think we should do anything with Detroit. There are many reasons for it’s decline but most don’t want the answer to be complicated, instead taking this opportunity to make political gain. You see, the perpitrators here are the industries, the government and the people. There are no victims, it was a collaborative effort. They all got together and lied for money and power. Or, alternatively were really stupid. But then what does it matter whether they were inept because of corruptness or whether they were inept because of stupidity? It seems impossible to tell the difference really, and neither should be rewarded.

Posted by brotherkenny4 | Report as abusive
 

@mfw13 – again, see this link. The notion that Detroit is some huge area relative to all or event most cities with a similar population is false – http://en.wikipedia.org/wiki/List_of_Uni ted_States_cities_by_area

@winstongator – we have had various urban renewal programs for a long period of time, since at least the ’60s. The efforts have generally been somewhere between negligible prestige projects (having 3 of out of its 4 major sports teams playing in the city limits hasn’t done much good for Detroit, how much difference has the Rock and Roll Hall of Fame made in Cleveland or the Arch in St. Louis ) and actively harmful (e.g., the large housing projects built in the ’60s and ’70s, or the Detroit/Hamtramck GM plant for which Detroit used eminent domain to buy and demolish a 4,000 person neighborhood).

Posted by realist50 | Report as abusive
 

*even

And here’s the working link – http://en.wikipedia.org/wiki/List_of_Uni ted_States_cities_by_area

Posted by realist50 | Report as abusive
 
 

rossryan has a point about bailouts and dependency, but we did bail out the banks and financial sector. I agree that this was a terrible idea, but why not bail out a city? We can probably offer the same terms, and offer the same money per capita.

Posted by Kaleberg | Report as abusive
 

@Kaleberg the money we gave to the banks has already been paid back. That happened because banks make money. Cities always spend more than they take in because they are service centers to the poor who much prefer subsisting in cities than in the countryside where there are no social services to be had.

Detroit should be forced to offer their creditor group all city owned property, including all abandon property. This property should then be developed free of any zoning requirements with the proceeds flowing to detroits creditors. The world would be shocked at how much the urban property would be worth without government restrictions on it.

Posted by y2kurtus | Report as abusive
 

I personally won’t go quite as far as y2kurtus’s plan, but he does highlight an interesting point. Let’s say that Detroit uses its bankruptcy both to lessen its legacy debt, pension, and healthcare obligations and to restructure how the city government is organized. (It arguably could and should have done the latter outside of bankruptcy, but Detroit now has an emergency manager with tremendous power and bankruptcy provides more scope to renegotiate public union contracts.) If Detroit does that, it at least has a chance to remake itself into a city with decent public services and a decent business environment. Having Dave Bing (or a like-minded successor) as mayor rather than Coleman Young or Kwame Kilpatrick should help dramatically with that process.

My point being, if Detroit can reach at least OK for public services, safety, and business environment, then having a lot of cheap, unoccupied land can be an advantage rather than just a negative. It would be wonderful if Detroit could be great in these areas, but just being OK should at least get some momentum in the right direction.

A rather surprising stat I’ve run across (Bruce Katz of the Brookings Institution, quoted by both the Economist and Matt Yglesias at Slate) is that 70% of the jobs in Detroit are held by people who live outside the city and also that 61% of Detroit residents who work do so outside the city. I would surmise that, on average, the former are higher paid than the latter – downtown office workers, Wayne State University employees, hospital employees, and the like in the former group while the latter tend to hold lower-paid jobs including a substantial portion employed in retail and restaurants. It does indicate, however, a level of regional economic integration. That suggests to me that there’s scope to convince some of the former group to move into Detroit if it’s even marginally more appealing. If that happens, some of the latter group at least benefit from more job opportunities close to home.

Posted by realist50 | Report as abusive
 

Adding to my prior post with a couple thoughts on what the federal government could or should do near-term for Detroit, what about directly addressing some of the discrete problems that we read about as examples of Detroit’s decline? Police response rates are an hour, so offer up a couple hundred federal law-enforcement officers to assist the local police. Too many of the street lights are out, so run a federal program to return them to working condition, whether that be via the use of local contractors or bringing in Army (or federalized National Guard) engineers to do it directly. (Not intending to militarize the project, but I can’t think of any other sizable group of federal employees who’d be available and qualified to do the work.)

The key would be that any such programs are limited in both scope and duration. Where possible, bypass the dysfunctional local government – based on a formal request from the state of Michigan and the emergency manager – and just get things done. Law enforcement should almost certainly operate under local or state control based on U.S. laws and traditions, but federally-paid officers could be deputized and directed by the city, county, or state. The message would be – “these problems need to be solved locally, but we understand that they can’t be solved overnight, so for a period of time (say 2 or 3 years at the outside) we will help on an emergency basis. After that, don’t screw it up again.”

I don’t know if I fully support my own proposal and the precedent it would set, but I find short-term aid to be preferable to throwing federal money at grandiose redevelopment ideas. As I said earlier, I dispute the notion that Detroit’s public services problems are wholly or even primarily due to lack of spending versus inefficient spending. I can also accept, however, that fixing those problems will take some period of time. This idea also strikes me as politically plausible, if the president emphasizes the public safety aspect of it.

Posted by realist50 | Report as abusive
 

Too many politicians have traded votes for increased pension benefits and higher union wages. Politicians all too often think in the here and now and don’t concern themselves with the ramifications of poor planning as they are worried themselves about the next election. We also see that recipients of those benefits are naturally conflicted when it comes to weighing their own benefits vs the cost to the tax-payer.

We need to avoid moral hazzard here, and any bail-out if it comes should be more reorg than bail-out with pain felt equally amongst all. The 50 year old retiree collecting a pension while continuing to work a second job can’t walk away unscathed. This is what is ruining pensions across the country, this and not properly funding and accounting for those promises.

Posted by Sechel | Report as abusive
 

The bond holders should take a 100% hit. They’ll just go whining and squealing to Uncle Sam and get reimbursed by the Fed. Sure, there’s moral hazard, but that’s the policy these days. If a retiree starves to death in the street, that’s his or her problem, but if a corporate investor has to endure single digit profits, that’s something the government needs to fix.

Posted by Kaleberg | Report as abusive
 

Can we sell Detroit to the Chinese…or some other country that we give funds to but desire our destruction..?

Posted by rikfre | Report as abusive
 

It is not hard to aid Detroit, and it should happen. Detroit is the direct consequence of US policies to deindustrialize and financialize our economy, and the perverse incentives of our political system, that even on the state level allow rural areas to starve our far more productive urban areas of funds and other support. Michigan is the most egregious example, but these days the Republican governments in Wisconsin, Pennsylvania and Missouri are also trying as hard as they can to kill the goose that lays their golden eggs.

The Feds should step in and provide substantial funds in return for certain actions to shore up the community.

These could be 1) urban consolidation and renewal; 2) establishment of enterprise zones; 3) reform of service and business processes; 4) rehabilitation of the schools; 5) direct federal placement of facilities. The NSA thing is a good idea, for example, but there are many others.

Detroit does have the assets of 1)large areas of land well served by rail, land and water transport; 2)heavy local industrial concentration; 3) central location on the continent; 4) local, low wage, high industrial skill population. Fix these problems and the city could thrive.

Posted by Dollared | Report as abusive
 

The Obama administration will bail out Detroit at the last hour, for political gain, to the tune of $20 billion. This will occur close to Republican Governor Rick Snyder’s re-election campaign, who has orchestrated the Detroit bankruptcy. The bailout will make Snyder look like a mean-spirited moron.

Posted by two_opposite | Report as abusive
 

Washington cannot bail out Detroit. Discretionary spending is permanently sequestered, and bailing out Detroit is not high on John Boehner’s wish-list. Plus the Us has been “investing in our cities” for 50 years, and Detroit is the outcome. Paging Lyndon Johnson.

Posted by nixonfan | Report as abusive
 

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