Detroit crosses the Rubicon
Its bankruptcy marks a turning point in American governance, and a crisis for democracy.

Aerial photo of the Motorcity Detroit Michigan by Shutterstock.com

Article Highlights

  • Detroit's fold marks a watershed in modern American urban history, and has laid bare the unsustainable governing theories of the Left.

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  • The city has been functionally bankrupt and all but ungoverned for years.

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  • The city’s school system is a shambles, and businesses outside the city core struggle to remain open.

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This week saw the inevitable denouement of decades of mismanagement and incompetent leadership in Detroit, the country’s eleventh-largest city. Once one of the symbols of American industrial power, the city declared bankruptcy and is seeking protection from creditors in federal court. It is one thing for a smaller city, perhaps even a county, to seek bankruptcy protection, but quite something else for one of the country’s biggest and most iconic cities to do so. It marks a watershed in modern American urban history, and has laid bare the unsustainable and misguided governing theories of the American Left.

In reality, Detroit had already crossed the Rubicon back in March, when Governor Rick Snyder stripped the city’s elected officials of their power and appointed Kevyn Orr as emergency manager. Under Michigan law, emergency managers (EMs) have extraordinary powers, essentially ruling as modern-day dictators like those in republican Rome. When confirmed by the state legislature, they have the authority to rip up and rewrite city contracts, renegotiate agreements, and control the budget. In the words of one Michigan EM, elected officials of a city under the control of an EM have only the powers delegated to them by the emergency manager. It is drastic medicine for equally drastic failures.

Michigan’s laws authorizing EMs are perhaps unique in the country and have evolved as the failures of several Michigan cities have unfolded. When the most expansive version of EM legislation, Public Law 4, was rejected by voters last November, Republican governor Snyder simply reverted to the previous law, which still gave EMs sweeping powers. Lawsuits by citizen groups challenging the legality of even the less powerful EM laws are working their way through the Michigan court system.

Little of this matters for Detroit. The city has been functionally bankrupt and all but ungoverned for years. From a peak of 2 million residents in the 1950s, during the heyday of U.S. automobile manufacturing, the city has shrunk to 700,000. Mainstream news organizations were finally jolted into paying attention by the bankruptcy, and are reporting that only 40 percent of the city’s streetlights are working, while residents have to wait an hour for police response (compared with just eleven minutes nationwide).
Such figures barely scratch the surface of Detroit’s ruin. Over 75,000 structures are estimated to be abandoned, including some entire neighborhoods, and many city blocks have just one or two homes occupied in a sea of empty houses. Once-grand office buildings look like they belong in 1945 Berlin, not 2013 America. The Detroit fire department was forced to let abandoned buildings burn instead of putting out repeated fires at the same address; several firefighters lost their lives trying to contain fires in unoccupied buildings. The city’s school system is a shambles, and businesses outside the city core struggle to remain open.

The cause of this ruin is decades of mismanagement by the city’s elected officials. Detroit’s voters kept returning to office a city council and mayors who negotiated huge contracts with public-sector unions, so city employees expected lavish pensions. Fraudulent accounting almost certainly played a role as well. When Orr took over earlier this year, Detroit’s long-term debt was estimated at a mind-boggling $14 billion; Orr now says that the city’s books hid the real amount, which is at least $16 billion and perhaps as high as $20 billion. The city has a budget deficit of at least $380 million, and it is out of cash; the state refused to pay the later installments of a bailout plan when the city council refused to accept certain conditions. Indeed, it was the obstructionist actions of the city council in March, in the face of almost certain bankruptcy, that forced Governor Snyder to appoint Orr in the first place.

It is a grim testament to the failure of governance at the local level that a city of 700,000 people finds itself under the control of an emergency manager. In order to act, Snyder had to determine that city officials were unable or incompetent to solve the crisis. That is a damning indictment that strikes at the core of our belief that democracy, while messy and clearly less than perfect, nonetheless is the best system yet devised for politics. Detroit’s slide into “dictatorship” and bankruptcy raises fundamental questions about the health of American democracy, and whether there is any hope for realistic solutions to the endemic debt and deficits that poison every level of government, from small towns to the federal government.

Sadly, Detroit is far from being unique. Four other failed Michigan cities have been under the control of EMs, while in California, Stockton and San Bernardino, along with some smaller cities, have already declared bankruptcy. New reports estimate that California’s total unfunded pension obligations are an inconceivable $328 billion, and Illinois is not far behind. There are dozens of other large cities around the nation that face the same crippling trap of unsustainable city contracts, high unemployment, and hollowed-out tax bases.

Most dangerously, Detroit may be the harbinger of things to come. If local, state, and federal governments keep failing to act responsibly and to be stewards of the fiscal health of the nation, we may well see the rise of the emergency manager in many other places, perhaps even in sovereign states. After all, who wants to condemn innocent residents to the permanent mismanagement and decline of their cities or states? Of course, it is those same voters who heedlessly return incompetent officials to office in election after election. The rot is not just in the Detroit city council or the similarly bankrupt Illinois state legislature; it is in the voting booths of citizens who are all too happy to get their unfair share of the pie and pass the costs on to others (“soak the rich”) and to their own children.

As I wrote earlier on Detroit’s tragedy, our democratic tradition starts at the smallest, most local level, and works its way up to the federal government. Anything that undercuts our sense of personal and local responsibility is to be feared, just as the pathetic, corrupt, and incompetent failings of locally elected government are to be condemned. The demise of democracy is a slow thing. In Rome, it took centuries for the republic to exhaust itself and for the temporary dictator to become a permanent fixture. But when that became accepted, the die was cast and the dictator was merely a symptom of a disease that could no longer be cured. Detroit may have crossed a Rubicon not merely for itself, but for America.

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Michael
Auslin
  • Michael Auslin is a resident scholar and the director of Japan Studies at the American Enterprise Institute (AEI), where he studies Asian regional security and political issues.


    Before joining AEI, he was an associate professor of history at Yale University. A prolific writer, Auslin is a biweekly columnist for The Wall Street Journal Asia, which is distributed globally on wsj.com. His longer writings include the book “Pacific Cosmopolitans: A Cultural History of U.S.-Japan Relations” (Harvard University Press, 2011) and the study “Security in the Indo-Pacific Commons: Toward a Regional Strategy” (AEI Press, 2010). He was named a Young Global Leader by the World Economic Forum, a Marshall Memorial Fellow by the German Marshall Fund, and a Fulbright and Japan Foundation Scholar.


    Auslin has a Ph.D. from the University of Illinois at Urbana-Champaign, an M.A. from Indiana University at Bloomington, and a B.S.F.S. from Georgetown University.


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