That’s a lesson all municipal governments must learn.
Last Thursday, Detroit became the biggest U.S. city to file for bankruptcy. Michigan Gov. Rick Snyder, who approved the action, said the city’s sorry financial condition left him no choice.
And sadly, he’s right.
This historic move marks a new low for the once-robust Motor City. In the 1950s, Detroit was the nation’s fourth-largest city with almost 2 million residents. Its muscular automotive industry was the envy of the country and the world. Life and opportunities there were good. It shined with civic pride.
Today, the city is a basket case. Its population has fallen to 700,000 as people fled the city, citing deteriorating services, rising crime, City Hall corruption and other forms of urban cancers. Detroit’s city government faces $18.5 billion in total liabilities, including $11.5 billion in unsecured debt.
Detroit Emergency Manager Kevyn Orr said the city had filed for bankruptcy because it would take more than 50 years to pay off the city’s unsecured debt while not conducting even the most basic maintenance, such as filling potholes and plowing snow.
Michigan taxpayers have been floating the city loans to keep it from going under. But Mr. Snyder said it’s time for tough medicine, especially since Mr. Orr was unable to persuade unions, pension boards and other creditors to pitch in and do their part to help Detroit get back on its feet.
Such selfishness is a big part of the reason the city is in such a mess. It’s incredibly foolish that those who were partly responsible want no part of the cleanup.
Late Friday, a county judge ruled that the bankruptcy filing violates the state’s constitution — a sop to retirees who don’t want to give up their lavish pensions, which are inexcusable given the circumstances. But legal experts predicted it won’t have any bearing on the federal court proceeding.
Detroit’s politicians failed to understand that they can’t spend more than they take in, that high taxes drive away jobs and businesses and that buying votes through costly union contracts and pension plans has huge costs. Now it’s time to hit the reset button so the city can restructure its debts and get a fair shot at starting over.
If the unions are smart, they’ll be part of the solution.