Washington Post editorial writer Charles Lane penned a column this week comparing Detroit's financial situation to Greece's economic collapse.
That seems like a plausible scenario. In their own ways, both are historically significant places mired in debt and seem to be lacking much of a functional economy . Unfortunately, to make his case Lane gets quite a bit wrong about Detroit.
Let's start with what Lane gets right.
Washington Post: Couched in the workmanlike prose of a bankruptcy lawyer — which is what Orr is — the document nevertheless tells a harrowing story of institutional rot and social collapse, brought on by decades of government of, by and for special-interest groups.
Very true. But here's a sample of the problems with Lane's misguided view of the Motor City. Just one sentence ahead of the above passage, Lane misstates the size of Detroit's unpayable debt.
Just read emergency manager Kevyn Orr’s134-page report on Detroit, which has $20 billion in unpayable debt.
While Detroit total long-term debt load may be around $20 billion, a good portion of that debt will be paid in full. According to Orr's report, the city has $11.449 billion in unsecured debt it can't repay and must restructure. Debt owed, for instance, to the Water Department and paid with water revenues and backed by physical assets will be paid in full.
That doesn't mean Detroit's finances aren't a hot mess -- they are -- but it does mean about $8.5 billion is secured debt will be paid in full.
Generous pension and retiree health benefits gobbled up tax dollars — more than 38 percent of the city’s revenue in fiscal 2012 alone — that would otherwise have paid for public services.
Small wonder that, per the report, the effectiveness of Detroit’s police force is “extremely low” and the city’s rate of violent crime is five times the national average; or that the average fire station is 80 years old; or that the number of city parks has dwindled from 317 to 107 in the past half-decade.
There's much that can be said for the city's long-standing failure to properly manage its legacy costs, but it's silly to blame Detroit's public safety problems on pensions. After all, legacy costs aren't the reason the city has had eight police chiefs in 12 years. Nor are they responsible for the long-standing federal oversight of the police department for civil rights issues. Nor that the reforms expected from that process were hampered by Mayor Kwame Kilpatrick's affair with the federal monitor. Take all the money spent on the city's legacy costs, dump it into the DPD, and law enforcement would still be an issue. The cop shop has been poorly run. Full stop.
Greece’s state-owned money pits include a railroad and ports. The political class in Detroit saw fit to own water works and parking garages.
I don't know how Greece's publicly owned railroads and ports perform, but it should be noted that both the Detroit Water and Sewerage Department and Parking Department are self-funded based on revenues collected for services they offer. Whatever else you might say about DWSD and Parking (Why can't I park at meter spaces on Randolph in the afternoon? Seriously.) neither one is responsible for the city's financial problems. If anything, they are the rare bright spot on the balance sheet.
Much as Greece ended up contemplating renting out the Acropolis, cheap, to foreign film crews, Detroit is pondering the sale of masterpieces in its art museum.
Holy hell, Detroit is NOT "pondering the sale of masterpieces in its art museum." Can someone maybe go back and reread what Kevyn Orr actually said about the DIA? Here's a quick recap: Orr said that, in the event of a bankruptcy, selling assets like the DIA's art collection could come up. In response to the reality, no one pondered anything other than how to protect the DIA collection from being a bankruptcy fire sale. There is even special legislation offered by Lansing (note to national reporters: that's our state capitol) to explicitly ensure bankruptcy doesn't threaten the DIA's collection.
Even now, with municipal bankruptcy staring them in the face, some of Detroit’s creditors are resisting Orr’s plan to restructure the city’s debt and devote $1.25 billion in savings over 10 years toward, well, saving the city — block by burned-out block.
Ok, this isn't so much as wrong as it is misguided outrage. Personally, I hope Orr squeezes every possible concession he can possibly get out of Detroit's creditors because the city can't reasonably pay its debt obligations in full. But let's also acknowledge that people who are owed a debt have the right and responsibility to negotiate for the most favorable outcome they can get. Detroit was lent all this money in the first place so it could "sav[e] the city — block by burned-out block." The only good reason for Detroit welch on its debt is that there is no plausible way it can actually pay it off in full. Hopefully, in or out of bankruptcy court, negotiations yield a favorable result for Detroit. In the meantime, let's spare the crocodile tears.
Of course, Detroit should never have reached the point where it needed an enlightened dictator. Motor City residents, public employees, financiers and politicians should have practiced the shared sacrifice Orr is belatedly attempting to impose.
Did the ghost of David Broder return to the WaPo newsroom and edit this to declare all sides are at fault? Because it should be noted that residents have been sharing in the sacrifices cause by dysfunction for decades. In fact, they've borne the brunt of the sacrifices. Public services in the city are miserable, taxes and insurance rates are high, and the cops don't often show up when Detroiters call for help.
To some extent, public employees have also sacrificed. They've accepted concessions including unpaid furlough days, layoffs, and deferred pension fund contributions that will never be repaid.
I know the "pox on all their houses" shtick is popular on the Post's op-ed pages, but when the blame is spread with such unfair equality, it kind of lets the real crooks off the hook.
