Should Detroit Get a Bailout?

Friday, August 02, 2013

City of Detroit skyline, taken from Windsor Ontario at dusk. (Ken MacDougall/Shutterstock)

In July, Detroit entered bankruptcy with more than $18 billion in liabilities. Since then, Congress has stuck by its promise not to bail the city out. It’s a position that has lawmakers Dan Kildee, a Democratic Congressman from Flint, Michigan, infuriated. 

During the recent financial crisis, the federal government spent more than $700 billion bailing out banks and the auto industry. So, he asks, why can’t it bail out Detroit? The Congressman feels that this isn’t just about the people of Detroit—that the stakes are bigger.

Guests:

Dan Kildee

Produced by:

Arwa Gunja and Mythili Rao

Editors:

T.J. Raphael

Comments [5]

Sally Edelstein from NYC

On the anniversary of Japans surrendering thus ending WWII it is worth recalling the contribution that Detroit played in winning the war .Obama may have bailed out the auto industry 4 years ago, reviving a once flourishing industry, but there was a time when Detroit basically bailed out Uncle Sam. During WWII Detroit was the place Americans knew as the "Arsenal of Democracy" with the auto industry's massive contribution to winning the war, breaking every previous production record, becoming the center of the greatest concentration of applied science and technology.

Although they had no new cars to sell, the automobile manufacturers continued to publish a profusion of full color ads to let the public know how busy they were supplying essential war materials. To learn more and view some of these vintage ads, visit
http://envisioningtheamericandream.com/2013/08/15/how-detroit-won-wwii/

Aug. 15 2013 10:21 AM

AIG had to be bailed out by the government because if AIG went bankrupt and not honor their insurance policies they would have brought down banks from all over the world that could have caused a world wide depression.

Aug. 02 2013 09:50 AM
Charles

There is one big difference between Chrysler and General Motors (Ford never needed any "bailout") and the City of Detroit.

The automakers make money. They are good businesses, that were very temporarily crippled by a financial crisis that they did not create. To take the automakers through a managed bankruptcy (remember, that is what the Obama Administration did; they took Chrysler and GM through bankruptcy, to shed legacy costs and financial inefficiencies) was a good idea. Because they would return to profitability. And they did; pretty quickly.

At the same time, there is one great similarity between the automakers and the City of Detroit. They both followed the same path of capitulation to the unions and their demands for wages and benefits. Unions, rather artificially, made Detroit the Number One per-capita wage earning city in the nation. And that led, inexorably, to Detroit being the at the bottom of per-capita earning. High spending, high taxes and lavish union contracts with gold-plated benefits and union rules. (Detroit has long had a special constitutional exemption within the state to levy an income taxes on all city workers, not just city residents, to tax suburbanites who work in the city but live outside it.)

That is how Detroit got to where it is. And it was happening for many, many years before the financial crisis in 2008. It was no natural disaster. It was the product of one political party, and was rolled out in the face of year after year after year of detailed warnings that this is exactly what would happen.

Aug. 02 2013 09:36 AM
listener

The history of the corrupt Democratic Party machine destroys what it touches from the segregated Solid South to the boss politics of northern cities.

Aug. 02 2013 09:29 AM
Charles

I am from Detroit.

I want to assure the listeners of The Takeaway, that Detroit's financial failure has nothing to do with vague notions like "industrial policy" or "the auto industry" or even "urban policy."

Detroit's bankruptcy is solely related to a political and social culture in which one party -- the Democrats -- have controlled all of the spending within their jurisdiction without regard to costs or generation of income and business.

If you want to get elected to public office in Detroit, you must be a Democrat, and you must first win a Democratic primary. The way that Detroit politicians win primaries is to align themselves with the public sector unions. What happens after that, when they are elected in general elections and take office, is all too clear from two generations of such activity in Detroit.

All across the state of Michgan, the dividing line is clear. Where Democrats own one-party rule, localities are failing. Detroit. The Detroit Public School system. Pontiac. Flint. Benton Harbor. Highland Park. Inkster.

Where Republicans have been able to weild some (but not all) influence, the state is recovering from the great recession. Oakland County, where the Chrysler Corporation is headquartered, has a AAA bond rating and has balanced every budget in its history. West Michigan and Northern Michigan are doing very nicely with growing and diversifying economies.

Don't blame "Detroit" on anything other than the incompetent, corrupt, short-sighted and self-interested Democrats who have ruled the city since the 1950's.

I realize that this comment is anathema to the credo of public radio, where soft liberalism is the daily theme. Sorry. Now you can go back to twisting the facts and contorting the story to try to blame the failure of Detroit on something other than one-party Democratic party rule.

Aug. 02 2013 08:57 AM

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