By now I’m sure you have all heard about Detroit declaring bankruptcy. The city declared they are 18 billion dollars in debt and counting. The actual number isn’t important other than to say it’s beyond the cities ability to even pay the interest. Let’s take a look at the city and examine how they got into this mess.
Detroit was the home of the auto industry for several generations. The auto companies and all the spinoff industries were all union affiliated. In order for the city to compete for workers, they had to pay more, with better benefits to attract a workforce. With the auto industry booming, and paying a huge tax bill every year, everything was humming along nicely. Detroit grew to a population of 1.7 million people. That is when things started to hit the fan. Foreign imports invaded our shores and set up plants in the non-union sun belt. The Japanese culture was instilled into these plants to increase quality and reduce costs. Detroit auto makers found themselves uncompetitive and over priced. The U.S. auto makers started building plants outside of Detroit to get a better union environment. The plants were still union, but the workforce was not as demanding as the Michigan folks.
Naturally, the city income was reduced as operations started to leave. The unions continued to demand more and more. They pumped money into the campaigns of city officials who would continue to support the union demands. So we have city money paid to the employees who pay into the union by paying dues, and then is used to support the local pols who will give them more.
This is the same thing that happened in Wisconsin. The difference is that in Wisconsin Gov. Scott put a stop to it. There is no Gov. Scott in Detroit.
Detroit started out with 1.7 million people to support the tax base. Now only 700,000 remain. With the budget bloated and increasing each year, it just drives more and more taxpayers out of the city limits. Businesses are leaving also. No wonder there are so many boarded up buildings. Detroit is on a downward spiral that only bankruptcy can solve.
I am not advocating cutting benefits for retirees. Quite frankly, I don’t have the answers. I do know that current employees who are not near retirement should be part of the solution. Detroit needs to make many fundamental changes in its budget. Labor is just one of the areas that need addressing. Michigan should be part of the answer. The Federal government should not unless major changes are made on the spending side.