Osler's Razor

As always, I read Ron Fournier with great attention and admiration. I don't disagree with any of his six main points of moral and fiscal bankruptcy.

I have two additions:

1. Detroit (and the impending American crisis of sustainability) is a crisis of self government. We no longer rightly understand our self interest; we no longer actively practice protecting and asserting our self interest rightly understood. We need to re-engage.

2. With all due respect to the Paul Krugman school of modern economic planning, some of the old ideas like basic math still apply. At some point, we cannot operate on the assumption that as long as we spend money we don't have we will always have enough money. Hard choices loom large in our future.

Partisan Politics Aside (which is not a shot at anybody, neither mainstream ideology addresses our problem): Detroit is a firebell in the night for the USA. We really should heed the warning.
 

We have read about all the economic failures in Detroit but no one talks about this one point. The physical size of Detroit. Detroit is 138 square miles ~ big enough to encompass Boston, Manhattan and San Francisco.

There are pockets of vibrancy within the city and then vast wastelands (with one home standing) in areas that best accommodate the large factories of a past area. The city must still provide services to this one taxpaying household.

Despite all the good I saw during my recent visit back to my hometown one image has been recurring in my mind. I saw so many people (in the City) pushing grocery carts full of bottled water from the store, presumably, back to their place of residence. Is the water unsafe to drink or are these people living without water services and therefore need to purchase drinking water. I don't know the answer.
 

Hi Christine. I am glad you made the point about square miles. I keep hearing that--and I assert that this point is rhetorical "leger de main." In fact, SF, Boston, and Manhattan are unusually small urban areas.

According to a quick Wikipedia check:

LA is over 500 square miles
Dallis is 385
Houston is 627
and San Antonio is 412

It seems like Detroit is NOT such an outlier in terms of area for a major American city.
 

AWF - not sure if those other areas are including the metro - suburbs or not. The 138 SM is Detroit proper. It is one of those things where seeing is believing.

Detroit's central business district is compact and very defined and then you "had" a layer of small manufacturing plants and workers lived in the area (gone - all of it) and then you have a band of housing - this was middle class ~ auto worker and I dare say, domestic help. Most of the current residential pockets are along the Detroit River (new development) and along the border with the suburbs and then very old established neighborhoods like Indian Village, Cork Town and Mexican Town (down near the privately owned Ambassador Bridge). There are more fringe neighborhoods - I just don't know the names.

Strangely enough within the city limits are a couple independent towns: Highland Park and Hamtramack. Hamtramack is primarily where the polish community settled and they all worked at the nearby Auto factory.
 

There is one key difference between the national government and the city, and it matters: The Fed can literally print money so long as it does not create inflation.
 

Kudos to Ron Fournier! He speaks with compassion, force and knowledge and points us to the real life consequences of self interest both in the public and private sectors.

Detroit was a richly designed city with Paris as its guide. Like Paris it has had it's ups and downs. The latest turn started with Henry Ford's determination to have the community of Dearborn house management, and the workers would live in Detroit. Without a stake in the city, those who were capable of creating employment and investments pulled out. This flight left the city without the tax base necessary to maintain services. Cities, like counties and states do not have their own currency. They, unlike the federal government, have only the options to raise revenue, cut services or borrow. This is why Paul Krugman is dead on.

We know going forward that there are few options , some will affect the most vulnerable the most. We hear stories about the $100,000 yearly pensions that have been doled out. These are the exceptions. The city managers followed the auto companies' lead of wealth transfer to the top.
These are the companies who preceded them into bankruptcy after sending jobs out the country.
The vast majority of pentions are $17,000 to $30,000 going to people who have little hope for new employment and may lose most of their pension. They will likely lose their health insurance also. These are hard working people like Ron's dad.

Metropolitan government works. Sharing works. These solutions seem unlikely as the same ideas of self interest that got us here still reigns.

WF: LA, Dallas, Houston, and San Antonio have people in their vast areas. I think that was Christine's point.

Christine: Phyllis will find the answer to your question about carts of bottled water when she goes to Crossroads.
 

I feel I have to add a piece of corrected trivia…total area of the city of New York is 302.6 square miles (double the size of Detroit) …Brooklyn, Queens, Bronx and Staten Island are not suburbs of Manhattan. In fact those four boroughs is where most working and middle class people of NYC live, work (not everybody works on Wall Street ) and take a subway which covers 722 miles of track.
Back to Detroit, thank you John and Christine for your additional input to Fournier’s article. My nephew is on his second year of internship at Midtown Detroit Inc. and I could not help but detect a quixotic tone in his voice this year, even as he spoke with great enthusiasm about his work and the people who work there. Last year he even convinced his parents to lend him $7000 to buy a house in Hamtramck and with his first paycheck this year he got a truck that looks so bad I doubt a junkyard would accept it (his argument being that it is the safest piece of property he owns, since fixed property is not really as safe as one would think…the pipes in his house were stolen when no one was there for a week). I like to hope against hope that Detroit will rise from the ashes, if not for the sake of my idealistic nephew.
 

A very interesting chart of Detroit's population growth and decline.

http://www.freep.com/article/20130723/NEWS01/130721003
 

Christine, when I was at Crossroads (a private social service agency) on Thursday, I asked two Detroiters who are on staff the bottled water question. They thought that the people buying so much bottled water have had their water service shut off for nonpayment or are squatters in abandoned homes. The water bill is usually paid for by the landlord, and many absentee landlords have simply abandoned their rental properties. It is evidently common for people to steal water from a neighbor's outdoor faucet or garden hose. There are many family picnics and reunions on Belle Isle in the summer, so lets hope that some of the bottled water is for that purpose. It's a happier thought.
Phyllis
 

Christine, I forgot to add that Detroit water is safe and of excellent quality. Many of the suburbs use Detroit water, including ours. I can vouch for the quality.
Phyllis
 

Perhaps I have said this already, but I probably wouldn't listen to me either if I were you.

An excerpt from the Economist today:
http://www.economist.com/news/leaders/21582258-it-not-just-detroit-american-cities-and-states-must-promise-less-or-face-disaster

"The Unsteady States of America: It is not just Detroit. American cities and states must promise less or face disaster"

"Americans in virtuous states and cities will be just as furious about their tax dollars flowing to Detroit and other distressed places as Germans are about euros going to southern Europe. But the truth is that America’s whole public sector still operates in a financial never-never land. Uncle Sam offers an array of “entitlements” that there is no real plan to pay for. Barack Obama is on his way to joining George W. Bush as a president who did nothing about that, while Republicans in Congress imagine they can balance the books without raising taxes. The government spends more on health care than many rich countries and still does not cover everyone. America’s dynamic private sector is carrying on its back an unreformed Leviathan. Detroit is merely a symptom of that."

 

WF I would like to listen to you.
"Detroit's demise is a symbol of America's dynamic private sector carrying on its back an unreformed
leviathan." Please explain.


 

Phyllis - thanks! I know the tap water is good - one reason I drink it instead of spending money on bottled water. A trend I have never understood. I to hope those bottles are headed to the picnic grounds.

 

Thanks, John.

Let me preface my comments with an admission that I don't really know much about Detroit. I have never been there. All I know is what I read in the papers. And I don't want to seem presumptuous in telling residents of this once and future great city what to do. I do not intend to do that.

I am more interested in the phenomena of major American cities facing hard times and tough decisions as a metaphor for the crisis facing the American project.

And, honestly, regarding that macro problem, I really don't have any definitive answers for that challenge either.

What I think I know. The "unreformed leviathan"is a problem. I believe in government. I believe in national, state, and "metropolitan government." These institutions have worked since time immemorial.

What is fairly new in the long span of human history is the Progressive Impulse. And let me say that I admire the Progressive Impulse, which, in its most basic form, boils down to the notion that we can and should use government to help people. On the other hand, there are limits and unintended consequences to a government big and powerful enough to solve problems.

I believe our governments, in general, are too big, too inefficient, too intrusive, too rigid, and too backward looking. We have a government that likes to party like it is 1959. And we need a government that realizes we are in the midst of a great economic transition, looking to the future, and making tough decisions that will allow flexibility to roll with changes that are as inevitable as they are impossible to predict.

Our current model assumes endless economic growth. I have called the neo-Keynesian approach (in which we spend money we don't have to ensure that we will always have enough money) and the supply-side theory (in which we perpetually lower taxes to increase tax revenue) twin heresies. They are both models that worked well for a season, but, in the end, I fear, unsustainable. They are both predicated on the premise that our economy can grow 3-5 percent per year forever. "Growth forever and ever, Amen."

Austerity has gotten a bad name recently. And it is true that practical budgeting based on real income and real expenses is a deterrent to "growth," but I think we will at some point need to reconcile ourselves to something less dynamic. Balancing budgets and "pay fors" are not fun--but, at some point, I think essential.

As Mark said, the current advantage of the national government is the ability to create trillions through the Fed with seemingly no consequences. BUt that great advantage is pegged to the dollar existing as the reserve currency of the world. This situation is unique in human history, and, unlikely, in my opinion, to last forever or even through the next generation. So, we need to go forward with a Plan B that imagines our options without the ability to borrow more money than there currently is in the world (thinking about our unfunded liabilities over the course of the next few decades).

As for a "dynamic private sector," this is an advantage that is probably more sustainable (and it really is the engine that drives the Progressive Impulse). Private enterprise, ironically, funds our (Progressive) impulse to do good for people.

Our amazing marketplace really is the goose that keeps laying golden eggs. Of course, the dynamism of the private sector is also driven by government largesse and "crony capitalism." If we reign in government, the private sector will actually be less dynamic in some areas (and probably more dynamic in other smaller sectors). But that is just one of the disadvantages we will need to factor in. One of the bitter pills we will need to swallow.