Posts Tagged ‘Detroit’

Shikha Dalmia on Detroit’s “Flashy Projects”

September 9, 2009

She won’t be fooled again –

In her latest column for Forbes, Reason Foundation senior analyst Shikha Dalmia includes a poignant, touching rendition of her immigrant’s-eye perceptions when she first arrived in Detroit 21 years ago, not long departed from her native New Delhi:

What was surprising was that there was no sign that the looters (of Detroit’s abandoned homes) were doing anything constructive with their ill-gotten gains. In India, the entire project of life can be conducted out of ramshackle structures erected on dirty sidewalks from scraps of discarded tarp, pilfered corrugated metal, bamboo poles and a few logs for fuel scavenged daily from trash heaps. In these filthy, exposed dwellings, families are raised, goods produced and sold (tandoori roti, dal, sabzi), services provided (ironing, shoe repair), and even animals given shelter. They are not ennobling or uplifting. But they are testimony to the powerful human need to survive and flourish, even in the direst circumstances. 

It didn’t seem plausible that this basic urge had somehow ceased to exist in Detroit. Hence, when Mayor Dennis Archer started talking in the mid-’90s about reviving the city by erecting new stadiums and casinos, his message resonated with Detroiters, including me . . .

Dalmia goes on the recap how these “flashy projects” from Archer and his successor failed to revive the city, and to express amazement at the latest credulous hype, this time fueled by misplaced faith that a handful of artsy-craftsy Bohemian-types buying some cheap houses will act as “first-stage gentrifiers, paving the way for the return of doctors and lawyers and other bourgeois professionals.” This notwithstanding out-of-control crime, a completely dysfunctional city government, and a fiscal black hole that threatens to further diminish an already meager and alienated remainder of a city that once claimed 2 million thriving souls.

The Mackinac Center’s Michael LaFaive has documented in more detail the rise and fall of some of those “Flashy Projects” Dalmia refers to.

Michigan’s Political Establishments Are Parasites Draining Enervated Hosts

October 27, 2008

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This weekend I was visiting in one of those older blue collar communities in Wayne County containing row upon row of small  homes that used to be neat and well kept. They still are – the ones that are still occupied, that is. On some blocks 10 percent of the houses are vacant, and some of these are starting to molder. The process appears to be accelerating – many of the empty houses are recently vacated; ubiquitous “for sale” signs look like forlorn hopes, especially for those structures that nature has begun to reclaim

 

In those neighborhoods you can buy decent houses for less than $30,000 – but no one’s buying.

 

Why not?

 

Yes, the area’s primary industry – domestic automakers and their suppliers – is in a severe decline, perhaps a death spiral (and largely brought down by regulatory burdens inflicted by state and federal political establishments). But with so many decent little houses available for so cheap why wouldn’t other employers want to take advantage of an opportunity to house their own work force at such a bargain rate?

 

This is the physical side of a political/economic phenomenon I’ve called “Detroitification,” which is the hollowing out of the private economy to prop up the unsustainable perks and privileges of the government establishment. At both the state and local levels, inbred, self-serving political establishments don’t view their role as serving the needs of citizens and businesses, but vice-versa. To them, the people and the private sector exist to serve the government.

 

The political establishment at the state level likes to blame Michigan’s decline on the woes of the big three automakers, but this begs the question of why almost none of the dozens of non-big three U.S. auto plants that have opened in over the past 20 years have located in Michigan. Or why the state didn’t get a proportional share of all the new non-auto jobs that were created this decade.

 

The answer to those questions also explains what I witnessed this weekend: No employer will locate in a state or community whose political/government establishment views them as “new meat” to be fed on until it dies.

 

So why don’t the people in these communities (and this state) change this? Sadly, they’ve been lied to for so long, and the local political game has been so rigged, that change becomes all but impossible. Individuals who have get-up-and-go, do so – to Texas, Alabama or some other place with opportunity. The alienated remainder becomes passive, lethargic and resigned. Or, they exhibit the symptoms described by Chester Finn in a recent article about Ohio, beset by the same dysfunctions:

 

“In both the public and private sectors, what one witnesses are the most senior employees clinging to what’s left of the economy, fending off change, demanding ever more burdensome contracts and costlier benefits. The ship is slowly sinking, but as the more agile passengers and crew take to the lifeboats and sail off, those who remain on board climb to the upper decks, determined to grab whatever plunder they can, confident that the rising waters won’t reach them.”

 

More graphically, public officials, public employee unions and industrial unions become like parasites sucking ever more of the lifeblood from a dwindling pool of increasingly enervated hosts.

 

Here’s the fundamental issue that underlies these dysfunctions at the local, state and federal levels: Representative government has been largely supplanted by the rule of an inbred, self-serving, self-perpetuating political class that has escaped the people’s control.

 

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Update: In today’s WSJ Arthur Laffer describes the effects of related phenomena on the national stage, “The age of prosperity is over.”

Thinking the Unthinkable About Detroit Public Schools

July 18, 2008

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Recently the Detroit Public Schools system uncovered (another) accounting scandal, and when the books were corrected the district found itself with a $408 million deficit, or more than a third of it’s annual operating budget.

 

Over the years it’s become painfully obvious that the DPS is a hopelessly corrupt and dysfunctional institution. The district’s obscenely-low graduation rate of 24.9 percent placed it at number 50 in a recent study of the country’s 50 largest cities school systems. As for financial management, an interesting article on a socialist Web site characterized both the city and school political establishments as follows: “. . . a layer of urban petty bourgeois view the city (and DPS- jm) and its largely working class residents as its own private cash trough.”

 

In short, the district is bankrupt by every measure but one – moral, financial, educational. Only legal bankruptcy remains – and that may be inevitable.

 

To be fair, there are some good people trying to turn things around, but such efforts swim against strong cultural and institutional tides. A new superintendant appears to be earnest in her efforts to bring reform (her capacity to do so is less apparent), and just this week the school board approved her proposal to bring in the highly regarded Institute for Student Achievement to reorganize five broken schools.

 

Even that modest reform has been delayed for a year, however, and in any event was mandated by failing school sanctions required under the federal No Child Left Behind law. The inescapable reality is that the tipping point for DPS was probably passed long ago. Another generation of Detroit children shouldn’t be sacrificed on the altar of propping up a corrupt school establishment for a few more years.

 

What’s the alternative? Perhaps it’s time to think the unthinkable. Bankruptcy. The real deal – not Chapter 11, Reorganization, but Chapter 7, Liquidation.* Shut the whole thing down, dismiss all the employees, and liquidate the assets.

 

Simultaneously, replace it with charter schools. Eliminate statutory restrictions that limit these in the city, and let 100 flowers bloom there. Authorize organizations like the Institute for Student Achievement to manage schools. Bring in for-profit entities like Edison Schools and Heritage Academies. There are a few individual Detroit schools that are thriving – turn over their ownership and management to parents and staff. Heck, even let neighboring public school districts “poach” into the city’s territory and open schools there.

 

This alternative is less radical than it seems, since 30 percent of students within the DPS boundaries already attend charters or neighboring districts under the state’s public schools of choice program.

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There’s an interesting angle on this idea, however, and one that makes it a little more challenging: Charter schools generally do not participate in the state-run school employee pension and post-retirement health benefit system (MPSERS). That system is already groaning under the excessively generous benefits and loose eligibility standards  perpetrated by successive legislatures. A recent projection showed that that in barely 10 years more than 30 percent of school payrolls would be needed to cover those benefits. The 30-percent figure was rolled back a bit by a minor eligibility reform adopted last fall, but the system is still far too liberal.

Question: What happens to that system when some 15,000 Detroit school employees are permanently pink-slipped, and the pension fund contributions made on their behalf stop flowing into MPSERS? The money for those contributions all comes from local and state property taxes under the complicated Proposal A formula, but most of it would now be flowing to charter schools instead, which (mostly) don’t contribute to MPSERS.

Could this trigger a domino effect, bringing about a general Michigan state and municipal pension system meltdown? Practically all of those systems are already actuarially unsustainable, with billions of dollars worth of unfunded health benefit promises.

Probably not, for this reason: Charter schools cost a lot less to operate than conventional public schools, and the revenue that currently props up DPS would still be flowing. So it wouldn’t be that monumental a task for the legislature to cobble together a fix that avoids a broad financial meltdown statewide.

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Of course, all this would require a huge measure of political will and goodwill – something sorely lacking in Michigan’s and Detroit’s political establishments. Frankly, the DPS is a genuine human tragedy that’s been allowed to fester for decades, and it’s shameful that nothing like this has been done before – and probably won’t be done in the near future.

 

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*Technically Chapter 7 Bankruptcy in the federal code applies to individuals and business entities including corporations. Chapter 9 applies to government entities, including a school district, but does not encompass liquidation. What would be involved with a DPS dissolution along the lines described here would probably be Chapter 9 filing combined with legislative action to perform actual closure of the institution and liquidation of its assets – a “virtual” Chapter 7.