Thursday, July 25, 2013

Don't Make Promises You Can't Keep

It seems the songs we're singing
Are all about tomorrow
Tunes of promises you can't keep

Do you think I'm not aware of what you're saying
Or why you're saying it?
Is it hard to keep me where you want me staying?
Don't go on betraying it
Don't make promises you can't keep

- Tim Hardin, Don't Make Promises (1966)

Detroit has finally declared bankruptcy, driven by unsupportable pension obligations and a devastated tax base.  Creditors will bear some of the costs but those likely to be hurt the most are current and former city employees who believed the promises they were made about their retirement.  If you think this can only happen in Detroit, think again.  There are large unfunded pension and healthcare liabilities in municipalities and states across the country.  This chart from the Pew Center shows the situation at the state level; anything funded below 80% is in trouble and the 51-64% category is a disaster (oh no - just saw Connecticut is in that group - we better start packing!)

Private pensions have their own risks and shortcomings but are governed by Federal law and regulatory requirements while state and municipal pensions are not.  Private pensions cannot be legally underfunded to the extent government pensions are (for that matter, there is NO pension fund for Federal employees; their pensions are on a pay as you go basis) and they are underpinned by unrealistic rate of return estimates (8% yearly is common), which make it difficult for underfunded pensions to ever catch up.

The longer we go without reforming these pension systems, the greater the loss of benefits that will occur when the crash comes, as Detroit's current and former employees are learning.

Many cities have faced challenges over the past few decades, some have declined, other adjusted and rebounded, but there are good reasons why Detroit became a complete disaster.  The city itself has collapsed.  In 1950 it had a population of 1.8 million and had the highest per-capita income in the United States (today the wealthiest metro area is (surprise!) Washington DC) and by 2010 its population was reduced to just over 700,000.

As for the tax base - its size and value has declined, tax rates have skyrocketed, but only half of assessed taxes are paid anyway, so, to quote the former Secretary of State; "What difference does it make?"

Many reasons are given for the situation (with perhaps the best summary from Walter Russell Mead) but there are several consistent themes:
- One party rule for 50 years (the current Mayor, Dave Bing, is a good man and trying to fix things, but it was just too late)
- Widespread government corruption
- Uncontrolled spending and endless tax increases
- Billions in ill-spent government investment
- A leadership more focused on racial divisiveness than in growth
- A deteriorating education system  

Some facts and photos about Detroit today:
(via Predictable History)
There are approximately 78,000 abandoned homes in the city.

About one-third of Detroit's 140 square miles is either vacant or derelict.
(Via David Freddoso)

47 percent of the residents of the city of Detroit are functionally illiterate.
Less than half of the residents of Detroit over the age of 16 are working at this point.
60 percent of all children in the city of Detroit are living in poverty.
40 percent of the street lights do not work.
Only about a third of the ambulances are running.

Two-thirds of the parks in the city of Detroit have been permanently closed down since 2008.

When you call the police in Detroit, it takes them an average of 58 minutes to respond.

The violent crime rate in Detroit is five times higher than the national average.
The murder rate in Detroit is 11 times higher than it is in New York City.

What's firefighting like?  From the Toronto Sun, May 31, 2013:

DETROIT — Firefighting in Detroit is a whole different world.
In a city that once had a population of two million but is now at just under 800,000, the buildings, life itself, is decaying rapidly.
Street after street of storefronts, homes, churches, factories are simply abandoned.
The former Packard Automotive plant, which is reportedly the largest abandoned plant in the world, topping 3.5 million square feet, is eerily silent. The only people who visit the area now are tourists. There is a van offering guided tours around the gutted ruins. But not after dark.
It's also impossible to drive through the streets of Motor City for five minutes without seeing structures charred by fire. Arsonists are busy here.
So are firefighters.
One-third of the Detroit Fire Department halls have been shut down through budget cuts. Despite gunshots ringing out nearby and packs of roving wild dogs looking on, police rarely attend fires.
Mostly, firefighters simply do their best to make sure the flames from burning abandoned buildings don't damage surrounding structures. They knock down flaming walls, contain the heat, and douse their own equipment so it doesn't get damaged.
Fire just speeds up the course of the crumbling decay of Detroit.
"It's a city with no laws," admits seasoned fire photographer Ted Roney. "Nobody cares about anything."
Nobody but those trying to keep the remains safe for the remaining.
Then and Now

mich central[through-the-fields-to-michigan-centr%255B1%255D.jpg](via Dewey From Detroit)

No comments:

Post a Comment