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In reply to the discussion: Weekend Economists Hit the New Year (and it hits back) Goodbye 2013 / Hello 2014! [View all]Demeter
(85,373 posts)4. How Detroit went broke: The answers may surprise you - and don't blame Coleman Young
http://www.freep.com/article/20130915/NEWS01/130801004/Detroit-Bankruptcy-history-1950-debt-pension-revenue
Detroit is broke, but it didnt have to be. An in-depth Free Press analysis of the citys financial history back to the 1950s shows that its elected officials and others charged with managing its finances repeatedly failed or refused to make the tough economic and political decisions that might have saved the city from financial ruin. Instead, amid a huge exodus of residents, plummeting tax revenues and skyrocketing home abandonment, Detroits leaders engaged in a billion-dollar borrowing binge, created new taxes and failed to cut expenses when they needed to. Simultaneously, they gifted workers and retirees with generous bonuses. And under pressure from unions and, sometimes, arbitrators, they failed to cut health care benefits saddling the city with staggering costs that today threaten the safety and quality of life of people who live here.
The numbers, most from records deeply buried in the public library, lay waste to misconceptions about the roots of Detroits economic crisis. For critics who want to blame Mayor Coleman Young for starting this mess, think again. The mayors sometimes fiery rhetoric may have contributed to metro Detroits racial divide, but he was an astute money manager who recognized, early on, the challenges the city faced and began slashing staff and spending to address them. And Wall Street types who applauded Mayor Kwame Kilpatricks financial acumen following his 2005 deal to restructure city pension debt should consider this: The numbers prove that his plan devastated the citys finances and was a key factor that drove Detroit to file for Chapter 9 bankruptcy in July.
The State of Michigan also bears some blame. Lansing politicians reduced Detroits state-shared revenue by 48% from 1998 to 2012, withholding $172 million from the city, according to state records.
Decades of mismanagement added to Detroits fiscal woes. The city notoriously bungled multiple federal aid programs and overpaid outrageously to incentivize projects such as the Chrysler Jefferson North plant. Bureaucracy bogged down even the simplest deals and contracts. In a city that needed urgency, major city functions often seemed rudderless. When all the numbers are crunched, one fact is crystal clear: Yes, a disaster was looming for Detroit. But there were ample opportunities when decisive action by city leaders might have fended off bankruptcy...
MUCH MORE AT LINK
Detroit is broke, but it didnt have to be. An in-depth Free Press analysis of the citys financial history back to the 1950s shows that its elected officials and others charged with managing its finances repeatedly failed or refused to make the tough economic and political decisions that might have saved the city from financial ruin. Instead, amid a huge exodus of residents, plummeting tax revenues and skyrocketing home abandonment, Detroits leaders engaged in a billion-dollar borrowing binge, created new taxes and failed to cut expenses when they needed to. Simultaneously, they gifted workers and retirees with generous bonuses. And under pressure from unions and, sometimes, arbitrators, they failed to cut health care benefits saddling the city with staggering costs that today threaten the safety and quality of life of people who live here.
The numbers, most from records deeply buried in the public library, lay waste to misconceptions about the roots of Detroits economic crisis. For critics who want to blame Mayor Coleman Young for starting this mess, think again. The mayors sometimes fiery rhetoric may have contributed to metro Detroits racial divide, but he was an astute money manager who recognized, early on, the challenges the city faced and began slashing staff and spending to address them. And Wall Street types who applauded Mayor Kwame Kilpatricks financial acumen following his 2005 deal to restructure city pension debt should consider this: The numbers prove that his plan devastated the citys finances and was a key factor that drove Detroit to file for Chapter 9 bankruptcy in July.
The State of Michigan also bears some blame. Lansing politicians reduced Detroits state-shared revenue by 48% from 1998 to 2012, withholding $172 million from the city, according to state records.
Decades of mismanagement added to Detroits fiscal woes. The city notoriously bungled multiple federal aid programs and overpaid outrageously to incentivize projects such as the Chrysler Jefferson North plant. Bureaucracy bogged down even the simplest deals and contracts. In a city that needed urgency, major city functions often seemed rudderless. When all the numbers are crunched, one fact is crystal clear: Yes, a disaster was looming for Detroit. But there were ample opportunities when decisive action by city leaders might have fended off bankruptcy...
MUCH MORE AT LINK
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