The Obama administration’s bailout of the autos did not help the city of Detroit. The bailouts made government officials complacent. Why worry when you think Washington’s got your back? As Investor’s Business Daily points out, there have been nearly 40 municipal bankruptcies since President Obama took office.
In denial, it kept 10,000 city government workers on the payroll, boomtown strength. The Detroit News found the city had more employees per resident — 55 — than any city in the U.S. except San Francisco.
Its failure to downsize left it with unfunded pension debt of somewhere between $3.5 billion and $9 billion.
Layoffs, though hard for workers, would have freed them to find jobs in cities that could keep their promises, and would have helped Detroit. But politicians had absolutely no connection with reality to do it.
They seemed to believe money was in infinite supply. The federal bailout of the Detroit-based auto industry in 2008 went a long way toward making the city think it too would get a bailout if it wanted one.
The problem here is that there have been nearly 40 municipal bankruptcies since President Obama took office, with more to come. If Detroit gets a bailout, they’ll all line up for one. Yet bankruptcy’s chief virtue is that it forces cities, and the voters, to reconsider bad decisions, to change their behavior and focus on recovery.
This happened in New York in 1975, when President Ford shocked the city out of its complacency by telling it to “drop dead.” It got some aid eventually, but the net result was the 1977 election of Ed Koch, who governed as a fiscal conservative. That’s the kind of tough love Detroit needs right now — not another bailout.
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