Tuesday, April 15, 2014

July 25, 2013

Detroit is America

Why racial politics and bankruptcy will create more urban calamity

In 2007, durable-goods manufacturing in the Detroit metro area was worth $35 billion of the region’s $195 billion gross output. By the end of 2009, manufacturing dropped to $15.5 billion, and the regional Detroit GDP fell to $161 billion—a more than $34 billion drop. The location of the fall-off in manufacturing employment within that big region hurt its center most, but the trouble spread all over the region, which suffered one of the highest rates of home foreclosures, too.
Contrast this with the recession and its aftermath in the Buffalo-Niagara Falls metro. Here, notwithstanding a loss of more than 20,000 jobs since 2007, the regional GDP not only has not fallen since the crash but has inched above $45 billion, up from $41 billion in 2007. That $34 billion drop in output in metro Detroit is not our experience here. It’s a loss the size of three-quarters of the Buffalo-Niagara Falls economy. And compared to 2007, the Detroit-area workforce shrunk, too, greatly, from almost 900,000 to just over 800,000.
By population, output, influence, intellectual firepower, and rebound potential, Detroit is a much bigger region than Buffalo and, indeed, than every other Rust Belt town except Chicago. And because the centers of decision-making and design for General Motors, Ford, and Chrysler are still there, Detroit’s travails, and successes, shape economies like Buffalo’s that are tied to those corporations.
Nevertheless, the news today is not about Detroit’s “creative corridor,” or about the hundreds of millions of dollars in public and private investment that are flowing into the downtown and waterfront and center-city medical campuses of the Motor City, nor about the National Historic Register buildings that Quicken Loan has just moved into from its former suburban location, nor even about the $100 million in locally raised money for a new light-rail rapid transit line. The news is about bankruptcy.
And the frame of that news is that Detroit is somehow unique, while we here are somehow better. Buffalo opinion leaders and citizens alike still don’t understand that Buffalo has been insolvent—not technically bankrupt, but certainly unable to pay its own bills with its own local revenue from its own tax base—for a decade. Buffalo did not technically enter a bankruptcy process when Buffalo’s insolvency got it a state-appointed control board. (A fiscal oversight board was also appointed to oversee solvent, low-debt, low-tax-rate Erie County, but that enactment was all about politics, not fiscal imbalance.) Just this year, Detroit, too, got a control board, just as Buffalo has, but there is a difference.
Here’s the difference: The State of Michigan has no gushing fountain of tax revenue with which to bail out Detroit as New York State has the cornucopia of tax revenue, mostly from Wall Street, with which it bails out Buffalo. Use whatever metaphor you like: the horn of plenty, the Hero’s cup, the golden spigot. New York State government is like an aqueduct from the lush money-forest of Manhattan to the parched fields of Upstate. Wall Street pumps out so much tax revenue to the state that the state government can go to Buffalo, and to every other Upstate metro, and keep the lights on in cities, counties, school districts, and other government operations with nobody even noticing that we are on the dole, insolvent, dependent, and, though technically not in bankruptcy, essentially the same as Detroit.
Detroit used to be two million souls. Now it is 700,000. Buffalo used to be 550,000 souls. Now, on the same timeline as Detroit, it is 250,000. Buffalo has fallen by almost 75,000 since Anthony Masiello was mayor, and continues to shrink. As nice as our Garden Walk gardens look, as happy as we are to drink beer at Erie Canal Harbor, as glad as we can get about our culturals, our creative class, our medical corridor (Detroit has one, too), we are—but for the grace of Sheldon Silver, the high-wage union public-sector jobs, and retirement packages for public employees—a mini-Detroit.
But there is a difference. Detroit faces actual bankruptcy. The creditors are in line outside the courthouse door, just as if Detroit were a big furniture store, lumber yard, belly-up restaurant, or defunct factory. Creditors are waiting to see whose contract rights will be protected. There are people actually at work now sizing up the liquidation value of various assets—including Detroit’s art collection—just like at a bankrupt business.
Nobody outside Syracuse, or Buffalo, or Jamestown, or the other Upstate cities, except for wonks in the bowels of New York State government, thinks much about Upstate not being able to pay its own bills. But Detroit is different, and in that difference lies the potential that its bankruptcy could lead to a radical reshaping of national politics—because should Detroit’s bankruptcy go forward, there will be many more city bankruptcies to follow, as frightened politicians and bonus-hungry bankers seize the moment to walk away from paying pensions to the unionized public-sector workers in exactly the same way as the defunct Bethlehem Steel corporation walked away from paying pensions to unionized steelworkers.

Class warfare

If Detroit actually goes through bankruptcy, there will be a rapid and very disruptive escalation in the class warfare already under way.
The saddest fact about Detroit is that November 2008 gave this country a historic chance to undertake the hard and necesssary work of helping the Detroit metro, the Buffalo metro, the Syracuse, Rochester, Cleveland, Pittsburgh, and other metros evolve out of the structure in which Detroit and all the rest of them remain trapped. President-elect Obama, who personally saw what happened when union steelworkers at Wisconsin Steel on the South Side of Chicago got screwed by bankruptcy, pulled together the leading thinkers about urban policy in America. Every last one of the people who volunteered for Obama’s Urban Policy Advisory Committee—every one of us—signed on to a package of recommendations that could have been written by the famous regionalist David Rusk, whose book Cities Without Suburbs succinctly explained, decades ago, that “little box” governments, especially in the Rust Belt, spell doom for regional economies, and lock generations of poor people in isolation, and are bound for fiscal collapse because their tax bases shrink and shrink as sprawl grinds on.
But instead of moving boldly on a federal policy initiative to command regionalism, incentivize city-suburb consolidation, support metro-wide governance structures, or even thump the tub about the connection between economic recovery and city-suburban restructuring, President Obama, on the advice of the leadership group of these policy intellectuals, decided not to challenge the political-racial status quo that divides cities from suburbs. The result: This country is another eight years on the road to urban-suburban polarization.
Detroit is physically the same size as it was when two million people lived there. It’s just that it’s missing 1.3 million of them. Those people didn’t evaporate. They moved just beyond the city limits, abandoning vast swaths of the landscape—the vacant part of Detroit is about the size of the City of Buffalo. The tax base left Detroit for precisely the same reason the tax base left Buffalo, Gary, Syracuse, Cleveland, Flint, et alia: racial politics, and a Supreme Court decision that ended any chance of metropolitan-wide school integration (by income or race). Before the Milliken decision, Detroit and the other old industrial cities were losing people and tax-base to sprawl; after the Milliken decision, Detroit and the other old industrial cities collapsed.
But today, right now, we don’t get to discuss history. Today it’s a technical legal question: Does Detroit have to pay its retirees’ pensions or does it not?
The business press is convinced that this is the issue. Empowered voices in the local business community are absolutely convinced that only a Chapter 9 bankruptcy proceeding, which will wipe out pension obligations (about $3 billion of Detroit’s $18 billion debt), plus a renegotiation of all public-employee contracts, will help. Of course, the structure of Detroit won’t change: It will still be a government that administers only 140 square miles in a 2,000-square-mile metro; a government bounded by a tax base within a boundary that includes most of the region’s poverty, including a population of black men who suffer a 44 percent unemployment rate, which is even higher than Marc Levine of the University of Wisconsin at Milwaukee has found in his home city.
But if the judges decide that Detroit’s retirees have to accept either zero or even just a lot less than their unions negotiated for them, then the right wings of both political parties will seize the day—and we won’t see regionalism, or city-county consolidation, or tax-base restructuring. But we will see a renewed war on public-sector workers. If public-worker pensions can be busted in bankruptcy, then expect a nationwide campaign against unionized public employees to get underway, a campaign that will look a lot like the Wisconsin fight of 2011, when Obama stayed silent as Republican officials there effectively ended union rules for all public employees but police officers and firemen.

Bankruptcy politics

Getting out from under obligations to current and former employees, it is argued, is the only way cities can ever be solvent. So argues the governor of Michigan, a Republican. So argues the mayor of Syracuse, a Democrat. Neither of these people is willing to think outside the “little box” that David Rusk so aptly termed the historic boundary-lines of cities.
Harvard economist Ed Glaeser laments that places like Detroit are stuck in an economic paradigm of mass employment for low-skill work. The automobile industry today may be on the rebound, having added back 200,000 jobs since the nadir of 2009, and with Ford announcing that it is going to add another 5,000 high-wage white-collar jobs in 2013, some economists are convinced that Glaeser’s concern is obsolete.
And indeed, the inherent strengths of Detroit include a productive, even world-leading class of designers, engineers, researchers, and others in Robert Reich’s “symbolic analyst.” The Brookings Institution’s Bruce Katz and Jennifer Bradley cheer, too, as they lead the chorus of analysts who explain that it is the “metro” that we need to look at.
The Census and the Bureau of Economic Analysis, and the Department of Labor and every other federal office, recognizes that the metropolitan area is the true unit of analysis. We do not, should not, would be foolish to exclude Detroit’s suburbs when we talk about the Detroit metro economy. We do not excise Orchard Park, Tonawanda, or Cheektowaga when we talk about the economy here.
But here’s the rub: We do when we govern. The irreducible fact is that the little boxes inside these metros still shape lives and dictate outcomes. The City of Buffalo, the Town of Amherst, the Village of Hamburg, and all their school districts act just like their counterparts in the metro areas of Detroit: They act separately. And it is in this separateness that the cant about “metros” meets reality—because what keeps these “little boxes” separate and unequal, here and in Detroit, is racial politics enforced with municipal boundaries that the political class, from our progressive president to our most overtly racist town councilmember, leave utterly undisturbed. And what do our intellectuals and policy wonks have to say about this? Precisely nothing.
That’s the setup for what comes next. Should the legal issues in Detroit’s insolvency result in actual bankruptcy in which those inside-the-box union contracts are abrogated, politicians all across the country will try to do a Detroit, and pursue bankruptcy.
The geography of that prospective bankruptcy trail was published earlier this year: It will happen in all those cities identified in a recent Pew Charitable Trusts study of underfunded public pension systems. Even the overwhelmingly Democratic politicians in economically dynamic regions like Chicago, Portland, Philadelphia, and Omaha have avoided raising the tax dollars to adequately fund public pension accounts, even when they don’t face any threat from the rare city-based Republican. Thirty-three of 61 cities Pew surveyed have put nothing away for contractually obligated benefits including healthcare and life insurance. Urban Democrats have been avoidant—letting the public imagine that services don’t have to be paid for, channelling suburban Republican messages.
And now? Unionized public workers like teachers, who hold some of the last reliably, definitively middle-class jobs in America, should awaken to the new political reality, which is that they will either be skewered, or abandoned. Republicans, like Michigan’s governor, have been absolutely unequivocal in blaming public workers as major culprits in Detroit’s problem. Democrats, once the political backstay of union workers, are unwilling to act.

Beyond Detroit

The ethnic mosaic in the Detroit region is astoundingly complex and colorful. Some ethnic groups “own” municipalities. The Michigan dialogue about control boards seems never to have gotten to rethinking governance on a transcendant, regional basis, leaving the problem of bankrupt, insolvent, or soon-to-be bankrupt or insolvent cities and their structural obsolescence unaddressed—and, because of the poisonous combination of identity politics and of intellectual and political cowardice among progressives, politically permanent.
Effective regionalism—specifically, the amalgamation or merger of local municipal governments and school districts into unified regional structures that at least cover most of a metro area—has few advocates in the United States today. There is no government under the sun that will deliver perfection, but there is no question that fractured, duplicative, go-it-alone localism in public schools and in general services has wrecked America’s big cities. No city in the United States exists without separately governed suburban towns and villages and school districts right next door, right inside the metropolitan area once (and in many cases still) dominated by the city. Cities like Detroit, Buffalo, Chicago, Cleveland, and most others legal islands in most places—and strangely, despite the calamitous consequences of having left their boundaries intact, their boundaries are mainly the same as they were when they were founded in the 18th and 19th centuries.
Just a few big cities—notably Omaha, Indianapolis, Nashville, Louisville, and Miami, plus Portland, Oregon—have effective metropolitan-wide governance. If you live in a suburb of the old central city of Indianapolis, or eight miles from downtown Omaha, you still live in the city: You pay for city services and you get them.
But in every other metro area, cities and suburbs exist next to one another, and only collaborate in limited ways. They hire and pay their own employees, issue their own bonds, collect their own taxes, decide their own budgets with their own elected officials, appoint their own police and fire chiefs and planners, as if there were a gap of a hundred miles between Chicago and Evanston, or an ocean rather than a hash-mark between Buffalo and Cheektowaga, or a mountain range rather than a traffic light separating Cleveland and East Cleveland, or no shared border between Detroit and any of its adjacent suburbs.
Politicians of both political parties detest regional government, which is why it is so rare. Black politicians who have waited “their turn” in the racial-ethnic machine hierarchies pledge that they can do better once they’re in charge, and typically acquire and wield power precisely the same way as their predecessor cohorts of Irish, Italians, or Slavic machine pols. But when regions that function as an economic totality are governed such that individual areas within them act separately, great stupidity, inefficiency, cost-shifting, rent-seeking, corruption, and self-destruction ensue.
And now the fight shifts to court. While that fight proceeds, here’s a pitch to the next generation of would-be politicians: Try to get elected by running against the Boomers, and the Washington policy wonks, who quail from the metropolitanization of metros. America’s failure to regionalize the governance of its metro areas—mainly because of racialized politics—is an artifact of the era that gave us gated communities, fearful George Zimmermans with guns, dead Trayvons with Skittles, and an economic paradigm in which a few hundred thousand bankers prosper while 300 million Americans wonder if they’re going to have any economic security ever. In the next few months, we will see whether union pensions are obliterated, because if they are, pensioners will be obliterated, too. Paying off bankers before paying a couple of hundred bucks a month to retired cops, firemen, garbage men, teachers, nurses, and their colleagues will mean shrinkage in already-shrinking urban economies. A clever young political aspirant should be able to connect the dots: pensioners R the rest of us.
Should the bankruptcy happen, perhaps there be a response from pissed-off pensioners, and from those few intellectuals who really do mean “metro government” when they say the M word, and from a new generation of thrill-seeking politicians who just can’t abide the antique racialism of the urban-suburban split.
And therein lies hope. A governor recently agreed with the necessity of merging cities and suburbs, which a Canadian leader succinctly calls “stapling cities and suburbs together.” “But the politics,” this governor said, “are very difficult.” Yes sir, they are, right here where the streets are paved with rust. Right?
Bruce Fisher is a former deputy executive for Erie County and director of the the Center for Economic and Policy Studies at Buffalo State College. His recent book, Borderland: Essays from the US-Canada Divide, is available at bookstores or at www.sunypress.edu.

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