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Tuesday, August 6th, 2013

Root Causes of Detroit’s Decline Should Not Go Ignored by Scott Beyer

[ Continuing the discussion on Detroit, here's Scott Beyer with his take on the causes of its decline - Aaron ]

Recently Detroit, under orders from a state-appointed emergency manager, became the largest U.S. city to go bankrupt. This stirred predictable media speculation about why the city, which at 1.8 million was once America’s 5th-largest, declined in the first place. Much of the coverage simply listed Detroit’s longtime problems rather than explaining their causes. For example a Huffington Post article asserted that it was because of “racial strife,” the loss of “good-paying [sic] assembly line jobs,” and a population who fled “to pursue new dreams in the suburbs.” Paul Krugman, who has increasingly become America’s dean of misguided thinking, downplayed the city’s pension obligations, instead blaming “job sprawl” and “market forces.” The implication is that Detroit’s problem just arose organically from structural economic changes, and within decades somehow produced a city of abandoned homes and unlit streets.

But a closer look suggests that Detroit’s problems, which include 16% unemployment, 36% poverty, and 60% population decline, were self-inflicted by a half-century of government excess. Thomas Sowell nicknamed this excessiveness the “Detroit Pattern”, and defined it as the city’s habit for “increasing taxes, harassing businesses, and pandering to unions.” These three problems have proven as instrumental to decline as the “Big Three” automakers once were to Detroit’s rise. Analyzing their background, and potential for reform, could expedite the city’s turnaround.

The foremost measure would be addressing taxes. Currently Detroit has one of America’s largest tax burdens for major cities, offering notoriously bad services in return (police response times average 58 minutes, and 40% of streetlights do not work). Its property tax rates are the nation’s highest, exceeding 4% for some buildings. This has caused particular disinvestment in the city’s large stock of abandoned homes, some of which sell for below $1000, but are avoided since they get assessed at far above their actual worth, leaving owners with inflated tabs.

Detroit could also help its cause with a business climate that better encouraged entrepreneurship. For decades it has done the opposite, championing a growth policy that mirrored the city’s overly-centralized private sector. It has gambled—with tax breaks, subsidies, and extensive eminent domain—on stadiums, casinos, office towers, factories, and a downtown monorail, only to find that these didn’t produce nearly the anticipated benefits. Meanwhile it has squelched small businesses, which are generally better at creating jobs, with a cobweb of protectionist regulations—on food trucks, taxis, movie theaters, and so on. This was summarized in economist Dean Stansel’s recent “economic freedom” study, which ranked the regulatory and tax climates of U.S. metro areas. In a field of 384, Detroit placed 345th.

These regulations have emanated from Detroit’s vast, union-controlled public bureaucracy. Recent debate about this bureaucracy has focused on retirement benefits, which apologists note are far less generous than in other big cities. But this does not detract from the sheer number of retirees, which at 20,000 are nearly twice Detroit’s existing public workforce, and account for obligations of potentially half the city’s $18 billion debt.

Less discussed is the way unions protect existing workers also, by stifling needed service reforms. When a philanthropist offered $200 million in 1999 to open the city’s first charter school, which would require changes to state law, the Detroit Federation of Teachers organized a work stoppage to protest in Lansing, ultimately causing withdraw of the donation. Various other city unions (which total 47) have resisted reduction or privatization of water utilities, trash-pickup, street lighting, and transportation. This is despite the city having proven wildly incompetent at providing these services itself, a point made recently in the Wall Street Journal by a former transportation chief. He claimed that unionization of the 1,400-employee DDOT had ensured worker protections for rampant absenteeism and poor performance, thus creating a climate in which 20% of scheduled buses did not arrive. Similar protections from firings and layoffs existed in other city departments, he wrote, perhaps explaining why Detroit, at over 10,000 workers, remains one of the most overstaffed big cities in America, while managing to do so little with them.

Of course many would argue that Detroit’s post-World War II racial conflicts were the real reasons for decline. More plausible is that these conflicts were inflamed by that era’s top-down government policies, which became all the worse when enforced by seemingly prejudiced officials. Throughout the 1950s and 1960s white mayors steamrolled roadways through functioning black neighborhoods like Black Bottom, and housed the displaced in dangerous, high-rise government projects. Funding for this and other “urban renewal” came from federal programs like President Johnson’s Model Cities, and using Detroit as a flagship, was meant to modernize aging urban communities. But the programs instead fragmented them, including a Detroit black population that, according to Sowell, then had 3.4% unemployment and “the highest rate of home-ownership of any black urban population in the country.” For them this “renewal” created a housing shortage, and along with discrimination and police brutality, inspired riots in 1967.

These riots killed dozens, injured nearly 1,200, and along with the ones inspired by Martin Luther King’s assassination, immediately spurred a mass white exodus. This cemented the demographic changes needed for both the 1973 election of Detroit’s first black mayor, Coleman Young, and subsequent policies that instead targeted the city’s whites. A paper by economist Edward Glaeser argues that this was done intentionally by Young as a way to further drive political rivals to the suburbs, and increase the share of his poor black voting base. He did this, writes Glaeser, by cutting off services in white neighborhoods, imposing onerous taxes, and displacing thousands of Polish households for a GM factory in the Poletown neighborhood. This led to further white exodus and diminishment of the tax base.

All these are examples of rampant abuses, under both black and white leadership, that have resulted because of Detroit’s notorious governing “pattern.” But one silver lining of its bankruptcy is the opportunity for structural change. This could occur by channeling the urban reforms—from charter schools, to defined-contribution pensions, to looser permitting, to plain-old lower taxes—that have helped other U.S. cities the last two decades. If these reforms can thrive in the Motor City than they probably can anywhere, turning it at the very least back into a functioning city, and at best into a reemerging economic star.

Scott Beyer is now crossing the country to write a book about how “market urbanism” can revive U.S. cities. He also writes weekly columns on urban issues for his blog BigCitySparkplug.com.

34 Comments


34 Responses to “Root Causes of Detroit’s Decline Should Not Go Ignored by Scott Beyer”

  1. bemclau says:

    These Detroit post-mortems are predictable. Everybody with an opinion on Detroit simply sees what they want to see: Repubs see bad govt, Dems see sprawl, Repubs see high taxes and bad unions, Dems see underfunded services and bad CEOs…on and on. So tell me the bias the author has, I can tell you pretty much what is in the article. Seems to me, all of it is partially true. Detroit has many unique factors and many all-to-common factors.
    But I already see it “(insert city) is the next Detroit unless we do (insert bias)!” Doubful.

  2. CJ says:

    I agree with bemclau. The issues are quite complex, and anyone offering “an answer” for the multitude of problems is guilty of drawing on ideology. Detroit has been a declining city since WWII, after which all new auto plants save for Poletown were constructed in the suburbs. Unable to physically expand, the city that had been built on a single industry was doomed. The politics, race, physical decline all stemmed from the disinvestment of its sole industry. Blaming politicians for failing to manage catastrophic decline is a simplistic answer.

  3. CJ says:

    One more note: If we look at this problem through the lens of race, as Sugrue does, and consider the City of Detroit as a kind of Apartheid-era township, the current condition of Detroit also becomes quite reasonable.

    Capital, in the form of White bodies, bank accounts, and businesses, fled the city after 1960, but particularly after the riots. Blacks were, to a great degree, unable to leave the city like Whites. Blaming public housing is also a farce; watch the recent Pruitt-Igoe documentary to see how the GOP refused to fund basic maintenance for these investments, leading to their rapid decline in just about every city save parts of New York.

    Left behind, with little capital, shuttered factories that could support no families, and extremely limited opportunities to invest in housing that would appreciate in value, White racism and its political infrastructure should be seen as a much more reasonable explanation than the politicians in Detroit who inherited this mess.

  4. Dave says:

    I see absolutely nothing in this post regarding what Detroit is supposed to do with its current pensioners, other than a lot of whining that it has a lot of them. As a city that used to be 3-4x its current size only a few decades ago… it’s quite reasonable to expect that the number of former Detroit city workers would be both absolutely and relatively high to its current workforce and tax base. The same thing is true of many unfashionable, outdated cities and suburbs where the population has declined… bringing up this factoid is just scare-mongering, as this fact is true of virtually every struggling municipality in the country… it reminds me of how people complain that we have too many people not speaking English in the US and Something Must Be Done, even as we continue to hire people not speaking English to do jobs that English-speakers apparently won’t do at current wages. It solves nothing to merely tsk-tsk the (perceived or actual) problem.

    Assuming the ratio of retirees to current workers or taxpayers is too high in Detroit – and it likely is – what does the author propose to do about this, other than lament that all these workers were individually promised (possibly over generously but still promised) a pension that collectively amounts to a big burden of $9B? These workers settled for the salaries that they earned back then based on this promise… decades ago, Detroit saved what would have been higher upfront wages by offering pensions. These workers made their lifelong retirement plans based on this particular combo of wages + pensions… had they known Detroit was going to bail on them in 2013, they might have demanded a lot more in wages in 1983.

    The only policy prescription put forth by the author is a conversion to defined contribution retirement plans for Detroit – which is definitely a big part of the LONG-TERM solution of pulling the city out of the hole. But that’s not going to be much help for Detroit in the immediate fiscal future, as current and near retirees don’t have the time to build a retirement nest egg. What exactly should the city do to its current retirees, Mr Beyer? Your article implies it should stiff them. You should come out and explicitly say that, if that’s what you believe… otherwise, as Krugman would probably agree, tsk-tsking Detroit for already having a bunch of retirees and pushing it to shift to defined contribution will have no effect on Detroit’s fiscal misery until maybe 10-30 years from now.

  5. Steve says:

    The title says “Root Causes of Detroit’s Decline Should Not Go Ignored by Scott Byer”. Apparently the root causes have indeed gone ignored by Scott Byer.

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  7. Daniel Hertz says:

    Scott, I’m sympathetic to the idea that overregulation and government hostility to cities is responsible for a good deal of urban decline in the second half of the 20th century. But when you write things like this:

    Of course many would argue that Detroit’s post-World War II racial conflicts were the real reasons for decline. More plausible is that these conflicts were inflamed by that era’s top-down government policies…”

    …you’re really doing yourself a disservice. Is it really *more plausible* that government produced racial conflicts than, say, that racial conflicts were driven by grassroots racial animus in a country that only three generations earlier had sanctioned race-based chattel slavery (or was that a result of big government, too?), in a city that was one of many where explicitly racist referenda were overwhelmingly approved by whites into the 1960s, and where an explicitly segregationist presidential candidate, George Wallace, swept every single white-majority ward as late as 1972?

    You’re confusing cause and effect. The racist government policies of the postwar era were, in fact, devastating for Detroit. But they didn’t emerge out of thin air, and they aren’t inherent to government activism. You’re making an argument not against big government, but against using big government to destroy minority communities.

    Moreover, when you write:

    “But the programs instead fragmented them, including a Detroit black population that, according to Sowell, then had 3.4% unemployment and “the highest rate of home-ownership of any black urban population in the country.” For them this “renewal” created a housing shortage, and along with discrimination and police brutality, inspired riots in 1967.”

    …you’re ignoring the fact that Detroit, even before World War Two, and before urban renewal, already had a massive housing shortage for blacks. This wasn’t because the government had torn down their homes–although when that eventually happened, it certainly didn’t help–but because white people terrorized any black person who moved into their neighborhood. The black housing market, as a result, couldn’t grow as its population grew, and became massively overcrowded, just as it did in Chicago, New York, and countless other northern cities that experienced the same dynamic.

    And, finally, the idea that the 1967 riots “immediately spurred a mass white exodus” is a very incomplete picture of what happened. Between 1950 and 1960, Detroit lost 363,000 white residents, or about a quarter of its entire white population. That decimation was obviously not the result of the 1967 riots, which had not yet happened.

    Race wasn’t the only thing that killed Detroit–deindustrialization was a big one, obviously, and mismanagement was also important–but pretending that all that needs to be fixed is over-generous pensions and high taxes is pretty ridiculous. It doesn’t help the cause of deregulating cities where it’s necessary to whitewash history like this.

  8. Alon Levy says:

    Honestly, I should’ve stopped reading at the first paragraph. The sentence, “Paul Krugman, who has increasingly become America’s dean of misguided thinking, downplayed the city’s pension obligations, instead blaming ‘job sprawl’ and ‘market forces’” just shows how you can scare-quote anything. I might as well write articles defending kidnapping as no different from imprisonment and writing “rule of law” in scare quotes.

    So, instead of just saying mean things about Krugman that make you feel better (“yay, I manage to make myself feel smarter than Krugman, derp derp”), you deal with what he actually said? If you think it’s not the sprawl, then fine, go run correlations with sprawl yourself. Or go find some other issue that was there before Detroit started declining. If it’s property taxes that were raised only after housing prices crashes to about zero, it’s not the source of the actual problem; the source has to at least start before the 1960s.

    But against my better judgment I read the whole thing. And then the last paragraph – the one that without any connection to the rest of the article just advocates the usual boilerplate of charter schools and cutting pensions by subterfuge. “Defined contribution” is a euphemism for pension cuts – at equal average employer spending on benefits, the only difference is that defined contribution offers workers less certainty in case they live very long; defined benefits offers a life insurance element, which a large employer can self-insure whereas an individual worker can’t.

  9. May says:

    http://citiwire.net/columns/why-your-city-might-be-the-next-detroit/?utm_source=newsletter&utm_medium=email&utm_campaign=dispatch
    Why Your City Might Be the Next Detroit

    http://sandiego.urbdezine.com/ 2013/07/27/7-ways-portland-is- better-than-other-cities-an- outsiders-perspective/
    7 ways Portland is better than other cities – an outsider’s perspective.

    I blame the state. There was refusal to monitor local finances. Its neglectful conduct has left with a growing mess. By the way job sprawl in Detroit metro is so bad, it is putting off people from moving there.
    http://dc.streetsblog.org/ 2011/03/14/a-metro-detroit- business-owner-on-the-talent- repelling-effect-of-sprawl/
    A Metro Detroit Business Owner on the Talent-Repelling Effect of Sprawl

  10. James says:

    Detroit is an endless font of passions and punditry, even from people who have apparently never been there.

  11. It’s funny and sad how every Detroit article basically says:

    “I acknowledge all the various issues that have befallen Detroit, and which many other people have written about extensively. They’re all looking for a magic bullet answer to what happened, but there simply isn’t one. However, MY is the one magic bullet answer to what happened.”

    All the while conflating cause and effect, and using the article as a soapbox to bash opposing political views.

  12. *ugh* the quote was supposed to read:

    “I acknowledge all the various issues that have befallen Detroit, and which many other people have written about extensively. They’re all looking for a magic bullet answer to what happened, but there simply isn’t one. However, MY {insert pet grievance} is the one magic bullet answer to what happened.”

  13. I didn’t write this and it’s part of my effort to provide a variety of perspectives on Detroit. But I find it curious that there’s little substantive criticism of the actual truth of the claims made.

    The unique racial dynamics of Detroit have been a staple other analysts. Detroit: A Biography, which was was clearly written as a far-left polemic, makes almost exactly the same claims Beyer makes regarding it, though without noting the way that when blacks achieved political power they engaged in similar ways as whites of previous generations. (Pete Saunders labeled this an “it’s our turn” mindset).

    Clearly, unions (private and public sector) played a major contributing role in the city’s downfall. It’s especially difficult to identify many public benefits anywhere to public sector unionization (as opposed to merely worker benefits). Public sector unions in the US have made service delivery highly inefficient and often not that great (a point even Alon has made re:transit) as well as rendering municipalities financial unstable if not insolvent. If places like NYC and SF have avoided Detroit’s fate, it’s only because they’re so rich they can throw money at labor problems to make them go away. But as even a rich city like Chicago teeters financially, the limits of this are clear. It’s dittos for taxes and small business regulation.

    This is where the left has to take ownership of its share of the blame for urban failure. Whether these are the sole causes can of course be disputed, but clearly items like unionization are contributors to urban dysfunction in lots of places.

  14. AIM says:

    If public unions were a primary cause of Detroit’s downfall, wouldn’t that be true in every other major urban center, not just in the US but worldwide? As Alon properly notes, Detroit’s decline started in the 1960s – some may even argue the 1950s – so any analysis that can’t account for factors that existed then are incomplete at best. Even your claim Aaron that unions have rendered cities like Detroit “financial unstable if not insolvent” is a bold claim that you haven’t backed up with any direct evidence to support it.

  15. @AIM, I didn’t say unionization is the sole cause, but clearly a contributor. I think powerful employee unions have in fact created negative results in many places other than Detroit. It’s simply that other places have had more dynamism and money to keep them going down the tubes complete. (Again, unions aren’t even close to the sole force, but clearly a major factor making it hard to deliver effective services in lots of places).

    By the way, unions like the UAW were at their peak of power in the 50s and 60s and through shutting down production were able to pretty much obtain any demand they wanted. No surprise, that’s when the corporations started moving elsewhere and disinvested (as again people like Scott Martelle blamed for the city’s problems). That’s the other side of the disinvestment argument. Why was Detroit a place no one wanted to invest? (I think the auto companies had terrible management too, so there’s plenty of blame for their approach too).

  16. Tone says:

    This site has become a joke.

  17. George Mattei says:

    There’s no way that either Paul Krugman or Scott Beyer has the true answer to Detroit’s failures. It’s more likely all of the above, plus some more items. Many cities have the same issues and yet aren’t in as bad a shape, so clearly there was a “perfect storm” of events in Detroit that made it different.

    I am continually amused when people take their own inner political compass and “paint” it on the latest crisis as a way to justify their vision.

  18. Joe Beckmann says:

    What’s really quite amazing about both the article and the responses is that none of them address the key unique economic feature of Detroit, among all large American cities: a single industry, automobiles, dominated the labor, housing, banking, transport, and education environment for over 50 years, and it was undermined and ultimately defeated by its own globalization. It wasn’t black people who “destroyed” Detroit, nor regulation, nor even politics as we know it. It was Toyota, Honda, BMW, Mercedes, and other “victors” of World War II industrial development. And “blaming” Hitler or the Japanese Empire is about as inane as blaming pension funds.

    Other industrial cities – Pittsburg is probably the clearest example, and it’s even near – managed to diversify before their primary industry collapsed. Detroit was less dominated by the unions than by Henry Ford! And this comes from watching what happened when Ford killed their Edsel car: the tiny, 4.2 square mile city of Somerville, Massachusetts, became the Mafia’s chop shop, since 4000 auto workers were dumped on the street all at once. THAT wasn’t a product of unions, nor even of economics – alone – but, rather, the result of highly centralized decisions made without regard to their larger economic impact. And Detroit is but an echo of that same mentality – whether union, corporate, or international trade.

  19. Andy says:

    “I find it curious that there’s little substantive criticism of the actual truth of the claims made.”

    Actually, there’s been plenty of substantive criticism of the claims made, in comments 1-4, 7,8, and 11.

  20. Daniel Hertz says:

    Open question to Aaron or anyone else who knows: is there a more conservative, but non-polemical, counterpoint to a book like Sugrue’s “Origins of the Urban Crisis”?

    I can only think of “Blueprint For Disaster,” Brad Hayes’ history of public housing in Chicago, which isn’t conservative but does place major blame on well-intentioned but seriously flawed liberal policies.

    The thing is, I’m sure there is a very good argument that mismanagement and cronyism played a large role in Detroit’s problems. But if it minimizes the race issue–which white observers *at the time* acknowledged was one of the worst in the country–or attributes it, incredibly, to “big government,” it’s hard to trust the rest of the piece.

  21. James says:

    “But I find it curious that there’s little substantive criticism of the actual truth of the claims made.”

    Did you even read the article? It claims “Much of the coverage simply listed Detroit’s longtime problems rather than explaining their causes” but then goes on to commit the same sin. Detroit’s government was corrupt and mismanaged. Is this a new revelation? Hardly. Yet it doesn’t explain why Detroit’s government was so bad. Actually Pete Saunders comes closest to answering Scott Beyer’s query; that it is due to the city council’s electoral system and lack of wards.

    Other than displaying KDS (Krugman Derangement Syndrome) what new has Scott written? Nothing.

  22. John Strok says:

    I love how people see/read what they want to. Like with #20. This article clearly attributes white flight to the factor, but points out that the policies and actions of the gov’t had a clear and direct causation to this period. Actions by the gov’t caused real and justified outrage by the black community, which in turned scared or gave excuse to whites to leave. Additionally there is evidence that once in power it was to the best interest of the black leadership to make sure that the white community (who he viewed as unwilling to vote for him) were run out directly or indirectly through gov’t action.

    These situations are real and logical causal factors for the emptying of the city.

    It isn’t a party thing, both parties have acted this way for a century in all big Midwest and Eastern cities. Spending to pay off your backers and punishing your political rivals. Tax the residents and visitors to the city until they bleed. Onerous regulations to control competition from established firms.

    To dismiss so called free market views as simply biased opinions is to bury your head in the sand. Unlike the criticisms from the liberal account, the so called conservative (which in no way correlates with the republican actions while in power) critique at this time actually points to factors that DRIVE people out of the city as well as random acts of violence.

    Underfunded hand outs to help the poor don’t drive away the middle class. Poor services do, high taxes do, cantankerous regulations and home inspections do. Unsafe neighborhoods do.

    The failure of crony gov’ts in major US cities are the prime reason for the demise of great communities. Until it gets through our societal thick heads, and something is done to change the shenanigans in city hall, none of these cities will ever be saved.

  23. Chris Barnett says:

    Yesterday I almost wrote a comment combining George’s thoughts #17 above and John’s #22:

    In a perfect storm, it is very difficult to untangle cause and effect. Each little thing provokes response, and pretty soon the whole system is sub-optimal…but people still make relatively rational “local optimum” decisions every day.

    In the spinning storm, all the little things tend to reinforce the downward spiral because no one actor or set of actors has a clear economic motive to act altruistically.

    The closest to an explanation is that everyone was playing “to get mine” in a rational-for-them-at-the-time way, whether the “mine” was a bigger pension, a bigger paycheck, more power, or a half-acre in the suburbs: the story in many cities, such as NYC in the 70s when it teetered on the brink. Throw in a long history of overt racism and it is much, much worse: the story in Detroit.

  24. wkg in bham says:

    @ Daniel Hertz says: Open question to Aaron or anyone else who knows: is there a more conservative, but non-polemical, counterpoint to a book like Sugrue’s “Origins of the Urban Crisis”?

    I liked “The Seamless City…..”, by Rick Baker. Mr. Baker was the mayor of St. Petersburg, Fla. The word “consrvative” is in the title somewhere. I would describe what he proposes as “realistic”.

    btw: Mr. Baker was born and raised in Indy and has lots of very nice things to say about it.

  25. Alon Levy says:

    By the way, another huge flaw in the article is the part that brings up Detroit’s 4% property tax. It sounds high, but it’s 4% of a very low property value; the actual cost to the homeowner is a lot lower than in other cities, where property taxes might be just 1.5% but property values are an order of magnitude higher. This is why I bring up the chronology: if Detroit had hiked property taxes to 4% in 1960 to pay for public pensions and subsequently the city had crashed it would provide evidence for the conservative theory of city decline. But that’s not what happened – property taxes are only high in percentage terms because property values are so low.

    Ultimately, all taxes are on income. The affordability of property taxes in the short term is about people’s incomes, not property values. For example, Prop 13 came in response to rising property taxes as a percentage of income (especially fixed income), as property values rose rapidly. Detroit is poorer than the national average, but it’s not one tenth as poor, while its median housing price is around one tenth the national median. If the mean is also one tenth the national mean, then the city’s property tax rate as a percentage of income is actually lower than the national average.

    Also, as a note to people saying that because government was racist, it’s fine to blame government in general: no. Just, no. Modern conservative opposition to government is not and has never been about local government efforts to disenfranchise blacks; on the contrary, Buckley supported those efforts, and more recently the Manhattan Institute has supported urban police brutality toward minorities. It’s always been about opposition to government programs to help the poor, and beginning in the 1960s to government programs to fight racism such as affirmative action and the Voting Rights Act. The sort of government problems relevant to conservative critiques of city government is things like CUNY’s open admissions and Lindsay’s reaction to riot threats rather than a combination of private- and public-sector redlining.

  26. The article is unpersuasive for two reasons. First, plenty of other places have high taxes and powerful unions, and yet are far more prosperous than Detroit (such as New York City where I live). Second, even if left-wing politics are responsible for Detroit’s decline, such politics were caused by the very pro-sprawl policies Kotkin no doubt supports. Government built highways to make it easier for people to move to suburbia, so when white middle-class voters left town, the only people left were lower-class blacks, who tend to favor economically liberal Democrats.

  27. Nathanael says:

    1) Charter schools are bullshit, and anyone selling them is a bullshit peddler. They have an atrocious record, and appear to mostly be a scam to steal public funds for the enrichment of school executives, while providing inferior education.

    His advocacy of “charter schools” alone made me suspicious of the author. Oh, but it gets worse!

    He advocates “defined-contribution pensions”, which have left workers bankrupt and without pensions.

    He advocates “looser permitting” — while this would have relevance in Seattle, it has no relevance in Detroit, where the city government is desperate enough that pretty much any reasonable development gets approved.

    Then he advocates “lower taxes” — the mark of a Republican shill with no intellectual value.

    This reads close enough to a Wall Street Journal editorial that I can’t even trust the claims of fact in it. (Remember, the WSJ editorial page lies without consequence, all the time.)

    Why did you print this, Aaron?

  28. Nathanael says:

    “Steve says:
    August 6, 2013 at 2:21 pm

    The title says “Root Causes of Detroit’s Decline Should Not Go Ignored by Scott Byer”. Apparently the root causes have indeed gone ignored by Scott Byer.

    Hee hee hee. Seems about right, though the name is spelled “Beyer”,

  29. George says:

    Aaron,
    have any cities with conservative histories gone bankrupt, or are in danger of going bankrupt?
    I’m amazed that people still defend defined benefit pensions. They certainly seem to be a significant part of the bankruptcy problem across the U.S. Cities need to stop them asap and put employee’s into social security and defined contribution plan. The cost of government should be transparent, and when politicians promise benefits that will need to be paid for 20-30 years down the road there is no transparency.
    We are the grandchildren that were sold down the river 30 or 40 years ago by vote buying politicians. Sorry, but working for 25-30 years and receiving a pension for 40 years isn’t sustainable.

  30. Norman says:

    “He advocates ‘looser permitting’ — while this would have relevance in Seattle, it has no relevance in Detroit, where the city government is desperate enough that pretty much any reasonable development gets approved.”

    You would think that, wouldn’t you? But I’ve heard the opposite, for instance here:

    “Detroit has been talking for decades about a one-stop shop for helping businesses through the permitting process, but it never gets done. Oakland County has one and is able to move a business from permit application to opening in less than half the time it takes in Detroit.

    “’Within 48 hours of someone expressing interest in opening a business here, he has all of the necessary paperwork in his hands,’ Patterson says.

    “So why hasn’t Detroit streamlined a permitting process that is so cumbersome many businesses just go ahead and open before getting approval from the city? ‘There’s never been a leader who’s said, ‘I’m going to do whatever it takes to make it happen,’ says George Jackson, head of the Detroit Economic Growth Corporation.”

    http://www.detroitnews.com/article/20130813/OPINION01/308130005/1008/OPINION01/Editorial-City-s-comeback-rests-jobs-Detroiters

    What, I wonder, is your actual knowledge of the city of Detroit that you make such confident assertions about complex issues very much in dispute among Detroiters?

  31. AIM says:

    Anyone comparing permitting in Oakland County to the City of Detroit is comparing apples to oranges. A business in the city will have to go through various building and zoning reviews, as it would in any suburban city. The only permitting the county does is related to business licenses, food safety, etc. If a business needs to go through the local permitting process, there’s no way for Oakland County to be able to promise a 48 hour turnaround for that business.

  32. Scott Beyer says:

    Hello readers, thanks for the comments! Let me address them:

    I don’t deny that job sprawl caused Detroit’s decline…but it was only a surface cause. The root cause for WHY jobs left was not exclusively, but largely, because of excessive governance. I defined this as Detroit’s high taxes, over-regulation, and entrenched unionization.

    Frankly, I’m surprised this proved so controversial. There is substantial economic literature (I used Dean Stansel’s) showing that poor tax and regulatory climates hurt growth rates. This makes sense, considering businesses consistently seek locales with low expenses, counting the “shadow tax” paid to government as one such expense. It explains why the U.S. South and Southwest have grown so swiftly, and in fact, why Detroit’s suburbs have also, while the city itself wallows. Their costs for doing business are more competitive.

    My pension claims were not meant to be ideological, but to channel basic arithmetic. Yes, Detroit’s pensions are relatively small. But if you’re paying out 20,000 of them, while also employing 10,000 current workers, then you may just have budget problems. $9 billion is $9 billion, and that is the estimated debt owed to Detroit’s pensioners, consuming half the overall burden.

    The most confounding point, made in several comments (including by the esteemed Michael Llewyn), was that the gravity of Detroit’s problems should be minimized just because other cities experience them. But does this not make the problems worse? Are they aware that other significant cities (Stockton, Harrisburg, Birmingham) have already gone bankrupt? That there is a watch-list for dozens more? And even that New York and Chicago have, because of their retiree benefits, worse per capita debt than Detroit? This is a huge national problem, and again, it is a problem of arithmetic and politics–under pressure from unions, city and state governments have promised benefits that they are finding they can’t honor. So they are filing for bankruptcy–and the pensioners themselves are getting shafted.

    There are two lines I regret, and was thankfully called out for. I regret my cheap shot at Krugman. And I regret saying that centralized policy was “more likely” than racism to have caused the riots. Both obviously contributed, and I had no business trying to quantify which was worse.

    Overall, though, I’m not terribly impressed by the critical comments. They deny basic governing problems that have existed for decades in U.S. cities. Without using the word conservative, liberal, Republican or Democratic, I was trying to explain objectively that such problems were more exaggerated in Detroit. But they exist across America, and if they aren’t addressed, many other major cities will remain bastions of unemployment, poverty, business flight–and perhaps eventual bankruptcy themselves.

    Respectfully,
    Scott Beyer

  33. Norman says:

    “Anyone comparing permitting in Oakland County to the City of Detroit is comparing apples to oranges.”

    Take that up with the Detroit News; my point is that Detroit does not have a streamlined permitting process that approves “pretty much any reasonable development” in short order. Rather, the ” permitting process . . . is so cumbersome many businesses just go ahead and open before getting approval from the city”, and this has been a constant complaint among would be small businesses in Detroit for as long as I can remember.

    I would note that L. Brooks Patterson does not claim approval within 48 hours, but that the relevant paperwork is given to prospective business owners within 48 hours of expressing interest in opening up shop in the county.

    The fact that Detroit has a negative business climate and a byzantine bureaucracy is not exactly in dispute in the Detroit area; from Archer on, each mayor has promised to change that.

  34. Alon Levy says:

    I don’t deny that job sprawl caused Detroit’s decline…but it was only a surface cause. The root cause for WHY jobs left was not exclusively, but largely, because of excessive governance. I defined this as Detroit’s high taxes, over-regulation, and entrenched unionization.

    Frankly, I’m surprised this proved so controversial.

    It’s controversial because it doesn’t explain why it didn’t happen in unionized New York, or San Francisco, or Chicago, or Honolulu, or Seattle. Nowhere did you actually show that Detroit had unusually high taxes when it started its decline in the 1950s and 60s. Hell, your only argument that it has an unusual tax situation today is that line about property taxes, which stops making sense when you think for five seconds how low property values in Detroit actually are relative to people’s incomes.

    Overall, though, I’m not terribly impressed by the critical comments. They deny basic governing problems that have existed for decades in U.S. cities.

    No, we deny that those problems are leading rather than lagging indicators. Did Detroit have a 4% property tax in 1960, or did it hike property tax as a percentage of property value when property values crashed? Did Detroit have a pension crisis in 1960? Does Metro Detroit have an unusual pension problem that explains why metro area incomes have crashed since 2000? Your entire post reads like the “soup kitchens cause depressions” theory. Yes, soup kitchens and depressions co-occur. Yes, if a city has a lot of soup kitchens, it indicates there’s a problem. But it doesn’t make the theory any saner. You’re not dealing with any of those criticisms of your story, you’re just restating your point.

    Without using the word conservative, liberal, Republican or Democratic, I was trying to explain objectively that such problems were more exaggerated in Detroit.

    So you didn’t use those words. Big deal. You invoked those tropes: charter schools, the defined-contribution subterfuge, pensions as a leading rather than a lagging indicator, tax rates. Racists have a long history of invoking racial tropes without mentioning race explicitly, complete with the complaint that their critics are playing the race card. The same could be done in any other direction, in your case a partisan one rather than a racial one.

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